All Forum Posts by: Richard Benjamin Wilhite

I’m looking for a value add 2-4 unit property for a personal residence in the neighborhoods of Riverside, Murray Hill, Avondale or San Marco in Jacksonville. One unit in the building should be at least 1200 sq ft and a 2 bed/1 bath. Larger would be better. Could also do a 5 or 6 unit. Looking to close in the next 90 days. Under $600k. Send me what you have or if you’re thinking of selling soon.

Quote from @Cory Carlson:

Your basis is the value of the property at the time of inheritance. A broker will be able to help you determine the value of the land. 

It would be wise to ask your CPA the capital gains exposure once this strategy is being executed. For example, if the land was inherited with a value of $1,000,000 in 2017 and you split off 12 lots that sold for $200k each. What would the capital gains be on the sale of each lot? Sometimes it makes sense to pay the gains if there are not adequate replacements. Sometimes it makes sense to have a back up plan for a DST. Sometimes the long term capital gains are palatable and it may make sense for you to pay the tax rather than force a bad deal. That is subjective though - I just advise my exchange clients to understand that number and understand their exposure. I find it silly when sellers force their exchange for an underperforming deal just to avoid $25k of taxes.

Cory, I very much appreciate your response. You're right, I definitely do not want to force a bad deal just to avoid a relatively small amount in taxes.

This morning, I spoke with the property assessor’s office in the county where my property is located. The assessor was able to look up the market value of the land in 2018 when I inherited the property, which came to $13,500 per acre.

Today’s value is somewhere between $19,500 - $22,000 per acre.

I was planning on the selling the land in 5 acre tracts, so each tract would roughly sell for approximately $100k.

So the basis in each tract would be $67,000? And I’d owe capital gains tax on roughly $30,000?
Or would it be minus realty fees and closing costs as well? The tax rate would be 20%?

In any event, that would mean I’d owe the IRS approximately $6k on each tract of land that I sold?

It doesn’t seem like a large amount. If this is the case, perhaps a 1031 exchange wouldn’t be worth it. What are your thoughts?

I inherited 62 acres of land in Middle Tennessee back in 2017. I would like to subdivide the land into smaller 5 acre tracts, sell them, then complete a 1031 exchange.

My CPA asked me what the "basis" in the property is. I understand the concept insofar as if I'd purchased the property, the basis would be what I'd paid it. However, because it was inherited, I didn't pay anything.

So, I believe the basis would be what the value of the land would've been when I inherited it. How do I research or find sales comps from previous years, for example 2017-2018?

Is it simply that I find the average sales price of a 5 acre tract of land within a specific radius of my property in the year that I inherited it?

I’m about to list several vacant lots of land for sale. I hope to net around $800k after fees and closing costs. I want to do a 1031 exchange with the proceeds into one or more MF properties.

Assuming that I could get a property/properties at around $100k per unit, should I try to buy a single property of around 30-35 units? (With 25% down). Or should I buy several smaller properties? Or even 8 quads?

My current portfolio consists of 8 units, a fourplex, a duplex and two SFHs, in 3 different states. Some are self-managed, some are not. I hope to turn the self-managed properties over to a PM at some point in the first quarter of 2025.

I’d prefer to buy as large of a MF property as possible because of economies of scale and having to complete less transactions, but I haven’t closed or underwritten a deal that large before. So this is a concern I have.

Also, I’m unsure of the timing of the sale of my vacant lots and the gap of time in between closing. There will probably be 9 lots in total. So given the time constraints of a 1031 exchange, I thought I might have to buy several properties with the proceeds since there could possibly large gaps between the multiple closings.

I’m interested in hearing your thoughts and opinions. What else should I be working on in the meantime prior to listing the lots for sale to get ready for this sort of transaction?

I'm looking for advice on areas of Jacksonville or nearby to buy a 2-4 unit property for a personal residence with a small family. I'm familiar with Avalon and Riverside and would like to know if there are any other good areas to consider that are safe and have good schools nearby. My daughter will be school age a year or so after we move in.

I'd love if the property would cash-flow after we move out, but the neighborhood and appreciation potential is the biggest concern for me. This would be our second duplex house hack, and while it's been a great investment, the neighbor our current duplex is located in is not the worst, but not the greatest either, especially when it comes to school district.

Our tenant's lease is up August 31st. How many weeks in advance should I advertise the listing?

I did list it last night on Zillow, Avail, and FB marketplace and have already received about 8 inquires, which makes me think the price maybe a bit low and that six weeks in advance is too soon.

Thoughts?

I'm closing soon on a fourplex in Daphne AL close to the interstate and near the bay. Does anyone have recommendations for a local property manager? 

How should I set up my business structure so that income from my rentals doesn’t increase my personal income reported to the IRS?

I currently have three properties that I purchased in my name as personal residences. I lived in them each for one year and then rented them out. I collect the rent in a business bank account that I opened with a sole proprietorship.

I'm now buying a fourth property under a newly formed LLC.

Should I place the first three properties that I bought in this new LLC?

Should I change my business bank account to the new LLC?

Or should I open a new LLC that acts as a sort of "property management" that collects the rent from all of my other properties and pays out the expenses?

Do I have any other options?

Quote from @Kevin Sobilo:

@Richard Benjamin Wilhite, its unclear whether your expectations are reasonable.

For example, many pet owners allow their pet to run in a fenced yard or on a chain unattended. Then they periodically (perhaps weekly or bi-weekly) walk around the yard to clean up the poop. Unlike when walking a dog, they aren't present to see it happen or where so that is a common and practical approach to handling the issue for most people.

If the yard was to be shared as it sounds like maybe you needed a CLEAR rule to indicate that the dog cannot be left unattended and that any poop needs to be cleaned up as soon as it happens.

This may be more useful if you allow a pet with a future tenant as this tenant is already settled into what they are doing making it harder to change now. 

Yes, I've already drafted an amendment to include in the lease for my next tenant if indeed I allow pets again.

Quote from @Dave Meyer:

I had this issue once, at a property that was nearby where I was living. Weeks of poop in shared yard regularly not picked up. Other tenants were rightfully upset. Several friendly reminders were ignored. 

I didn't have a specific clause in the lease about dog poop, but the lease did state that I would charge $100/hr for any maintenance that was due to tenant negligence. I told the tenant I consider his dog poop situation necessary maintenance to keep the property in working order for the other tenants, and he was clearly being negligent. As such, if he wouldn't pick up after his dog I would, at $100/hr. With my 10 minute walk each way, plus 10 minutes there, I was going to charge him $50 3x a week to pick up after his dog. 

Of course I never had to do that, and he started picking up after the dog shortly thereafter. 

Thanks for the reply, Dave! I posted a "Quit or cure" notice on the tenants door with similar language and miraculously the poop has been picked up. Hopefully, it continues for the next four months she is on the lease.

Also, just want to say I'm a big fan of your "On the Market" podcast, and have been listening since it came out.

I have a similar goal of living in Europe, at least for part of the year, however I'm afraid I'd have to be a lot more hands off with my real estate investments. I'd like to reach my passive income goals here in the states first before making the leap. Cheers!