All Forum Posts by: Ryan Haley

@Ryan Thomas Based on your "quandary", which I can relate to, I'd consider an interest-only HELOC. The advantage of the HELOC is that you pay virtually zero closing costs/loan fees, and with an interest-only draw period (typically 10 years), you don't pay any interest until you need/want to use it (when you would-and should-ostensibly be making a much higher rate of return than the loan interest rate). If you have a defined capital need and don't mind paying principal and interest from the start, with less flexibility, then a cash out refinance may be a better option. In some areas, and with some lenders, HELOCs and cash out refi‘s on investment properties are becoming harder to find, but well worth it in my opinion if you can get a good lender with good terms. Good luck, happy to talk more offline if you'd like (I'm helping several other people navigate the same calculus right now). 

@Jessica Singh I did not, mainly because I want more active (vs passive) involvement in the process. I didn't do a 1031 Exchange either, because I'm waiting for better deals in the future and I was able to use prior losses to offset the capital gains. I wasn't able to find anyone who had invested w/ them, but they were willing to put me in touch w/ some of their current/past investors (if they can get their permission). Sorry I'm not more help, but good luck!

I've told my Realtor to keep me in mind for any good deals, but I'm probably going to wait and see how things develop over the next few months before I buy anything. I think there will be potentially amazing opportunities presented b/c of COVID, but it usually takes the RE market awhile to price things in, as it tends to lag the financial and other markets.

@Remington Lyman Through a local Realtor and my friend. It was in Whitehall.

@Ryan Mainwaring It was in the Whitehall general area

@Brandon Goldsmith Thanks! Columbus is definitely a solid market, but I did notice that it tightened considerably, even within about 6 months of my purchase. So, it was a good time to be a seller recently, but it's been tougher to find those really great deals in the past couple years as a buyer (and obviously now, COVID-19 could completely change everything). One of the biggest factors as an out-of-state investor is the local team on the ground (esp. Property Manager), since you're really at their mercy as an absentee landlord. One thing I really look for in my team is that they are all REIs themselves and own properties in that market. As I mentioned, the thing I learned is that tenant quality (and by association, location) is critical. A seemingly huge gross profit/rent-to-price ratio can be reduced significantly by an extremely high expense ration as the result of tenant behavior, vacancy, and completely unexpected "one-off" or "random" events, that somehow happen consistently. It's rarely the same thing, but it's always something; if that makes sense. 

When doing a top-down market analysis, you want to look at fundamental supply and demand characteristics: healthy and growing population base, demographic trends, diversified employment sectors (so if one industry goes down–like the auto industry in Detroit–the whole town doesn't go down with it), talented and educated workforce. Then, I look at places with high rent-to-price ratios with solid B or C class tenants. Personally, as a cash investor, I'm especially interested in places with low price points. Ideally, you want to ideally be in a landlord-friendly state regarding tenancy and evictions laws, as well as a generally business-friendly environment regarding tax laws and public policy. There's probably a whole lot more that could be said, but hopefully that answers some of your questions. 

Investment Info:

Small multi-family (2-4 units) buy & hold investment in Columbus.

Purchase price: $125,000
Cash invested: $125,000
Sale price: $175,000

All-cash, out-of-state purchase of 4-unit multifamily, intending to hold indefinitely, using a local Realtor and associated Property Management company. Rent-stabilized and improved tenant quality, with top-line revenue of $2700/month. Moderate CapEx and property improvements. Strong market conditions led to sale after 28 months of ownership, with the below returns:

-Total Return over 2.5 Years (Net): 43%
-IRR: 18%
-NPV: $54,000
-Cumulative Cap Rate: 11%

What made you interested in investing in this type of deal?

I wanted a high-cashflow rental property for passive income, in a strong market, and at a price point I could afford on an all-cash basis.

How did you find this deal and how did you negotiate it?

A mentor/consultant guided me through the process, after he had built a team and purchased many properties in that area.

How did you finance this deal?

I paid all-cash with a combination of savings, non-retirement investments, and cash value from a life insurance policy.

How did you add value to the deal?

Rent-stabilized the property, increased tenant quality, and made some moderate repairs and CapEx

What was the outcome?

A phenomenal net return over less than two and a half years .

Lessons learned? Challenges?

Cash is king, cashflow is queen, tenant quality is key, and a conservative margin of safety is the ace up your sleeve!

I'm looking to do a 1031 Exchange in selling my existing property, and I'm looking into capital redeployment opportunities. I just did some research online about a turnkey company called Hughes Private Capital. Specifically, they have a 1031 Exchange program that looks very innovative and appealing for many reasons. I'd be interested to hear from anyone who's invested with them and/or knows anything about them.

It also looks like they may only be open to Accredited Investors, which I am not; but I've heard sometimes there are exemptions for "sophisticated investors" that don't qualify as Accredited Investors. I'd be curious to learn more about that, and if I can qualify. 

Any information on the above, particularly for anyone who's actually invested with them, is most appreciated!

@Ashish Acharya Thanks. The $55k is net, after selling fees.

Is the cap gains tax progressive? That is, if I have a $55k cap gain, is the first $39k taxed at 0%, and only the remaining $16k taxed at 15%?

I’m selling a property right now for a long-term capital gain of ~$55,000. Am I correct in understanding that my 2019 long-term capital gains will be 0% up to $39,375 and my standard deduction (single) of $12,200 means that (assuming no other taxable income) I pay zero taxes up to $51,575 in LTCGs? I’m planning to use a 1031 exchange for all but $10,000 of the sales proceeds, which I would like to have available as discretionary cash immediately after closing. Will I pay any taxes on that $10,000 at all in this scenario: federal/state/local, and/or depreciation recapture taxes?