All Forum Posts by: Amit M.

@David Charles Edwards  Hi, I did a similar thing 3 years ago. In my case I sold some properties that I felt didn’t have strong appreciation upside, and used the proceeds to pay off the few others I wanted to keep long term. So now I’m managing 4 higher end condos with class A tenants, and not the 9 others that were class C. In my case that made enough of a difference to make property management very light. And I get to keep prime properties with good appreciation potential. 

So a question you should ask yourself is if your condos have strong appreciation potential/future owner user, or are they more limited and seen as only rentals in the future? Also do your kids really want these? Or would they be equally content with paper assets in the future?

you do have the 1031ex as an option, but I passed on it for both NNN commercial and for DST. When I sold in latter 2021/early 2022 interest rates were super low (as well as cap rates). So I knew that once rates went up most commercial props would drop in value or go flat. Plus I dislike investing in areas I know nothing about. My properties are all in San Francisco proper which I know like the back of my hand, and I didn't want to exchange into a random NNN in middle America where I know f*ck all about the area. You don't know what you don't know, and that's risky dropping big cash on IMO ;)

I also couldn’t get on board for DSTs. Now THAT is where you pay fees up the wazoo, plus have zero control over your asset. I preferred getting rid of all debt (incl. on our primary and second home). Once you’re at zero debt it’s amazing how far you (more limited) cashflow can go. Remember, except for property taxes (in our case CA locked in super low) insurance, utilities and some maintenance, all other $ goes for the fun stuff in life. So I wouldn’t discount that approach, unless you really feel your units have strong appreciation potential (and in that case maybe a PM makes sense.) Best wishes.

@Becca F. if you add an ADU in San Francisco you change the status of the SFH to a 2 unit building, and then you're definitely under rent control. Not recommended IMO unless you have some pretty unique circumstances.

This is why ADUs have been a big fail is SF. Some apartment bldg owners added them (to an already rent controlled building), but few SFH owners have done it. Plus they are getting super expensive to build. Even the apartment bldg owners didn't make a killing in equity; they mostly added new income, as the build cost of +/- $250,000 per unit didn't provide much equity upside. Lots of hassle for so-so return IMO.

I'll reinforce previous poster's recommendation against aging an ADU, especially to a SFH. ADU was the biggest hype last decade and a huge disappointment for many, especially in CA.
1- big pain in the a$$ to get approved and then built. 
2- super expensive in CA.
3- often it reduces the value of the main home on resale, because most people want a normal private home and not some white elephant with a weird back cottage or no garage due to ADU.  

TLDR:

CA
legislative
fail
————-
3words

Hi, @Solomon Rosenberg a question for you: did you participate in any of the capital calls?

Regarding my initial question on capital calls, my reading of said tea leaves says that 80-90% of capital calls in this current cycle will fail.

LP’s out there: think things through carefully before agreeing to capital calls!

 Create 2nd BP account and post anonymously;)

@Jay Hinrichs regarding your point #8, what is interesting going forward is seeing how capital calls play out. What percent of GPs making capital calls will actually manage to minimize losses vs GPs that end up loosing all that money too for the LPs? 

Unfortunately LPs, in addition to being in bad deals are also deciding on capital calls. Personally I think more often than not it will be throwing out good money after bad, but seeing which capital call end up saving the day and which won’t will be interesting. 

Another good question is if the syndication failure rate will be lower or higher than during the Great Recession of 2008-2010. Of course we didn’t have as active of a BP, social media, etc. scene back then. But flipping SFHs was out of control during that time and got a lot of media attention. I think syndications were less known to the general public back then compared to this cycle  

Some interesting post-mortem analysis to be had for sure; I’m just relieved that I’m sitting on the outside looking at all this. But it’s times like this that create valuable investing lessons to be had nevertheless. 

It’s great for legacy investors. Much more challenging for newbies. 

The issue imo with DSTs is that you’re buying into a market where a lot of commercial RE is presently priced high, and some is going down in value too.

You should do a thorough analysis of the tax impact. 
1- definitely try to time sales into two separate tax years

2- I’m unclear why you expect 30% cap gain hit. Keep in mind: For the 2024 tax year, individual filers won't pay any capital gains tax if their total taxable income is $47,025 or less. The rate jumps to 15 percent on capital gains, if their income is $47,026 to $518,900. Above that income level the rate climbs to 20 percent.

But ultimately it’s  personal decision, loaded with plus and minuses. 
let us know what you decide to do!

As 1980’s legend blues guitarist Robert Cary aptly crows…the forecast calls for pain.