All Forum Posts by: Rob Hakes

@Patricia Steiner

Thanks for the response.  Working on finding a good attorney to help.

Hey BP!  Ive owned a property for 16 years with almost no problems.  Now in the last 48 hours I find myself in a total and literal quagmire.  I know I will need to get some legal advice, but I am really looking for some input on where I should even start.  Over the past 2 days i have discovered timeline of events that have occurred since I owned the property.  

Here are the players

Me - Owner

OG Developer - Original Developer that improved property before I purchased

New Developer - New Developer currently building a new subdivision

Water District - Own the vacant land that my sewer line runs across

City - Well, The city

Timeline:

2007 - OG developer purchases large 1 acre lot with an existing house with the intent to subdivide and create a small PUD.

2008 - Improvements are made (new street, sewerlines, storm, power, water) are brought into the subdivision.  Because the existing house was too low the developer followed the rough location of the old sewer line and installed a new sewer line to connect to the existing house.  This was not per plan.  Never noted on city plans.  City assumed it was tied into new sewer system.  This sewer line runs under 2 of the other subdivided lots that were intended to have houses on them about 400' away and ties into a city main 1 block away from the house

Oct 2008 - I purchase the home and everything is great, assuming all is per plan.

2010 - Developer sells one of the lots that my sewer runs under to the water district for a future clean water well site.  There is no sewer easement or anything recorded that my active line is there.  The developer is the only one that would know where the sewer runs as it was not per plan.  City has no record of it.

April 2024 - New developer starts a new subdivision 500' away from my property.  They excavate the sewer main for their tie in, while exposed they cut my active line and capped it.  City believes it is an old abandoned line.

August 2024 - first signs of backup in my house.  Poop filling my downstairs shower and utility room.  I hire a contractor to jet the line.  He doesn't have the capacity to make it to the end of the line but does his best.  He recommends that i get permission to add cleanouts on the other properties.  Sewer seems to work fine.  No more problems, no more action.  

Dec 2024 - Sewage backing up in the house again.  I hire a contractor to install a cleanout further down the line so we can discover what is going on.  City gets involved.  They find inspection pictures from April showing my capped line from the New Contractor but they are not totally sure.  They subtlety put the burden of proof on me to show that my line is capped so my contractor continues to install cleanouts so we can flush and scope

- cleanout has to be put on the Water Districts vacant property.  I call for permission.  They deny access and say they don't want any cleanouts on their property.  Contractor says we have an easement so we are okay to access.  Drama..... we pull off the property return it to existing conditions and the city allows me to install the cleanout on their property in the sidewalk area.  We cut the line and vacuum 8 months worth of poop, and prove the line was capped.

- City instructs the New Contractor the tear up the road and reattach and tap my line back into sewer main. (happening today)

-City informs me that i don't have any easement rights because nothing was ever recorded.  They also inform me that the Water District is planning to force me to vacate, and remove my sewer line off their property.

-I inform the Water district that our repairs are done.  After scoping we discovered that I do have a cleanout in the middle of their property that they buried when they graded the lot in 2010.  They respond thanking for me for keeping them informed.  

I am currently holding the bag with about 10k in repair work to get the line functional, but greatly fear the day the water district needs me to remove my sewer line.

What would you do from here?

Remember the 2% rule?  Its as dead as that

If somebody is giving you a quote for more than it may be worth, they probably just don't want to do the job.  Sometimes if it seems the customer is going to be more of a pain that we want to deal with, we can add significant amounts to the quote.  Then it is up them to decide.

Just saying

Run

2022 Update for year end:

Original Property (same section 8 tenant) - Cash on Cash return of 7% or 12% if i don't count principle paydown as an expense

2nd property - Cash on Cash of 13% or 19% if i don't count principle paydown as an expense.

Again - My COC calculation takes my all in (downpayment, closing costs, inspections, entity setup fees, everything) vs actual cashflows.

Not a bad year.  Home values holding well.  Very stable tenants.  Minimal maintenance.

Thumbs up for 2022

@John M Arnoldsen

I bought some out of state properties a few years back.  I used Clyde Jones CPA out of Orem and they seem to understand the out of state rentals well.  They came as a referral from the attorney that helped me set up the entities, Breglio Law.

@Nic S. I usually would say always use leverage, some of us my be coming to a spot where it may make sense to pay cash short term then refi later on.  Here's why:

If you are thinking buying turnkey, i assume you are looking for extremely passive ownership, as do I. From my experience a truly turnkey property from a full service provider is probably going to have an actual COC return of about 4-10% annual based on the actual year with a leveraged property. Un-levered may be a bit lower. Probably not the best idea to borrow at 7-8% while losing money in certain years. if you want to get a property during the high interest rate environment then i may look at paying all cash now, then refinancing as soon as interest rates made sense. The bigger return overtime will probably come from appreciation and you don't want to miss having appreciation on several leveraged properties. Just my two cents

@Dave Foster and @Chris Davidson  Thanks for the comments.  Basically instead of an ongoing lease with a term limit, it would be sold as an easement in perpetuity.  One lump sum payment up front and they have the easement forever.

I own a rental property.  I am under contract to eventually sell an easement for a cell tower on a portion of the property and receive a lump sum.  Just trying to find a way to reduce taxes on this unique situation.  Would it be possible to use the funds from the sale of the easement to 1031 the money into other rental properties?  I have heard differing opinions, but wondering if anybody has any thoughts or experience.