All Forum Posts by: Scott Trench

 Cheryl - I am facing a VERY interesting situation (not with Djuric family office / Blake Capital Group but with another sponsor). 

Basically, it is clear that this sponsor lost all of their investor's money, and multiple investors claim that the sponsor lost their money, ghosted them, and behaved inappropriately. 

But, none of them are willing to discuss the matter on the record. We put a journalist on a particular story, and no source is willing to discuss the situation publicly. 

To me, THAT is the story. LPs who feel mistreated/robbed/lied to are too scared to say anything. 

You are an extremely rare breed in being willing to discuss a sponsor in a negatively light publicly. 

How do we change this dynamic? We want people to discuss sponsors like they'd discuss plumbers - the good, the bad, and the ugly, with 5 star ratings. 

The only place we can get some semblance of this is on PassivePockets.com, where some sponsors are reviewed by LPs behind an LP-only wall. 

Why do you think folks are so afraid to speak up?

Hi Folks - I am fishing for more advice from the experts in the forums here. 

I am getting increasingly serious about purchasing an office building here in Denver in the next few months. 

My rationale: 

- Office is essentially not trading right now on the market. The locations I am looking at (suburbs reasonably far from downtown and the Tech Center) have seen 3 total transactions in the last year. There's a lot for sale as well, and a lot for lease. It's just not moving at all. I like this. I think that this is the "blood in the water" thing that investors talk about. 

- The examples have incredibly good math on paper. I believe that the spaces I am looking at would rent for $25-$30 per sqft. On a 4,650 sqft property listed at $1.1M, that's $116K - $140K per year in Gross Rents, and after NNNs, I believe I'm looking at a 10-12% Cap Rate on asking price. The property has been sitting for months. There are many like it. 

- Even if it takes me 6 months to find a tenant at $25/sqft + NNNs, I would still generate more NOI in year 1 than on a multifamily property with similar square footage. Even if I have to wait 6 months and spend $50K on a different buildout, I'm still doing better by month 15.

- I believe that companies and the economy as a whole have begun a long-term shift towards back to in-office. And, that this return to office will manifest itself first in suburban areas with relatively less competition and shorter commutes for local workers, and that re-absorption of inventory will take a lot of time in urban areas with tons of vacancies. Thus, I am interested in suburban space near major cities, not the downtown inventory that is trading for pennies on the dollar, but often involve massive office complexes that will have huge holding costs until they get leased up. 

I'd love to get beat up on this thesis. My worry is that while I am clear on the risks (extended timeline to get a tenant in, and expensive buildout) that I am not being nearly conservative enough - do I risk this thing sitting empty for a year, or years, and finally renting well below my implied rate? 

The market just has so little volume that it's hard to tell what's realistic or not in the near-term. 

But, this smells like a serious opportunity from where I sit. Things have to go really bad from here, as I see it, for the office to underperform alternatives in the next few years, from a cash flow perspective.

I know that a ton of people will win with the approach you are contemplating taking - in taking a HELOC out for the down payment on an investment property.

I think that the HELOC is a short-term tool, as you note. I'd encourage using it to fund a fix and flip or BRRRR. If you are going to be active, and have high conviction in a project with a clearly defined entry/exit strategy then using a HELOC is one of the better sources of capital.

But, I continue to have my stance that, on average, folks who use a HELOC to fund the down payment for long-term investments will eventually find themselves in a situation where their portfolios drain their personal financial situations, rather than fueling them.

I'd encourage you personally to either consider a strategy that allows you to add value quickly and get out quickly (a Flip or BRRRR) if the HELOC is your current only/best option for cash, and/or to simply save up. With a portfolio like this, and a good job, you could be able to save up $48K reasonably quickly - perhaps faster than the 2-3 year time horizon you post here!

 I completely agree with removing Reverse Trolling in a clearly defined form. 

I think that the team and moderators will all be aligned with this philosophically. 

But, I think in practice, "reverse trolling" remains ill-defined and a blurred line will rapidly begin developing. 

Any ideas on how to crystallize this? 

Any suggestions on what to update/populate in our "rules" section to help us make this clearer? 

 Thanks for the feedback here about the blog posts. I agree we should take them out of the feed. It was a test, sounds like not a successful one. Thanks!

Thanks! What is broken about the quote feature? Looks like it is working good for me.

 Super helpful explanation! Thank you Michael!

In your experience do you see people commonly attempting to offset ordinary income / W2 with syndicated losses, despite the above? How is this attempted by other, less informed, tax pros on the return?

Thanks guys - we will have our moderation team, including @Rene Hosman, take a look this week. And @Mindy Jensen - might like your eyes on this as well.

Hi tax pros - I have a question about REPS status.

First, selfishly, do you believe that my job as CEO of BiggerPockets, which I spend obviously spend essentially all working hours on, and dwarfs activities involving my real estate portfolio (which is managed via a property manager) qualifies me for REPS status?

Second, I have a question about REPS status in a longer term sense.

The primary benefit of REPS status, as I see it, is to take passive real estate losses, usually from depreciation and accelerated depreciation via cost-segregation, and use those losses to offset active income, reducing current or future AGI and tax burden.

I’m clear about this benefit, but what I’m unclear on is the consequence in out years.

For example, if I put $100K into a multifamily syndication, and the syndication does a cost seg, resulting in a $40K loss, I believe that a Real Estate Professional could claim that $40K loss against their other income and reduce their AGI accordingly.

From there, it gets murkier. When the syndication is sold in future years, are the gains, depreciation recapture, and distributions also taxed as active income? Could that bite our REP in year 5 when a big pile of ordinary earnings income is realized (if they don’t 1031 and defer it)?

Or, is REPS really a “free lunch” for those who qualify - they can claim an active loss reducing ordinary income today, AND get to claim passive and capital gains in the future on the appreciation?