All Forum Posts by: Frank Jiang

One thing I've learned as I become older is that there is often little functional difference in terms of results between ignorance and dishonesty.  If there's one thing the wholesaling industry will never be short on, it's ignorance.

Many new wholesalers don't truly understand what it would mean if they lock up a contract and fail to procure a buyer.  They aren't thinking that far ahead.

Video games, board games, books.  You know, typical nerd stuff.

And cooking.

I think your question has been answered in this thread, but I'll submit a direct and succinct answer to your question:

- Debt Free DST PRO: you will not have a debt fulfillment requirement when doing your next 1031 out of the DST.

- 50% LTV DST PRO: the returns on this DST will likely be better. Just like with any other income producing asset, debt accelerates the rate of return and increases your equity share in the DST.

If your rate of return on both DSTs is expected to be equal even after this debt, I would choose the Debt Free DST for additional flexibility on your next 1031.

There's a debt fulfillment requirement for a 1031 exchange. If you 1031 a property that had a mortgage, you need to exchange that for a property with an equivalent amount of debt. DSTs are pass through entities, just like LLCs, meaning that if you have a debt fulfillment requirement, a DST can help meet that need. If that DST has 10M in assets and a 5M loan, it has an effective 50% LTV for the purposes of fulfilling the debt equivalent exchange.

Very simple example:

You sell a 1M rental with 50% LTV. You gain 500K in cash. If you want to 1031 this 500K, you need to purchase 1M worth of real estate and have 50% LTV on the repurchase. If you invest in a DST worth 10M with 50% LTV, you would receive a 10% equity share of the DST with 1M in assets and 500K in debt from an exchange perspective.

I would recommend having him generate an invoice for the services that he has provided.  You will also provide receipts for rent during the period.  This should look like two completely separate transactions (a tenant rented from you and paid you rent / you hired a person and he did maintenance work which you paid for).  Actual cash does not have to exchange hands.

This sets the incredibly important precedent with the tenant that rent is separate from capex improvements and these improvements must be handled with your authorization and in an official manner.  Otherwise, in three months when he can't make rent, he'll replace a bathtub without you knowing and start deducting this from rent payments.

Here is the spreadsheet I use.  Great for a small operation if you already understand how to manage a chart of accounts and book JEs.

This is not a question that you are responsible for answering.  This is his problem and no one else's.  That said, yes payment for child support can be collected from probate assets and has the position of a secured creditor.  You'll want to check state specific laws and also you'll want to check title on the property to see if a lien has already been placed on it.

https://budgeting.thenest.com/can-proceeds-inheritance-intercepted-back-child-support-owed-23605.html

Hello!  I live in San Diego and I have bought a few fixer-uppers to live in as my primary residence to create forced appreciation. I have bought out of state properties and had some success there, but I don't really think of that as a viable long term strategy and I've heard stories of other people getting absolutely hosed.

It's definitely tough to find something like a duplex to house hack in SoCal.  It's a lot easier to buy a 4-5 bedroom and have roommates. All I can say is be patient, the deals are out there.  Just pick that one run-down house no one else seems to want and put a lot of time and effort into it.  It's called sweat equity for a reason.

Owning your own home is preferable for the following reasons.

1) If the monthly amount is similar, that means the monthly cost of ownership is likely lower.  A portion of your payment goes towards the principal and you receive taxation benefits on the interest.

2) After living in the house for two years capital gains of up to 250K (500K joint with spouse) are exempt from taxation upon sale.  This is one of the best ways to increase your net worth as a young person.

Real estate is not inherently riskier than stocks.  Buying a stabilized multifamily unit in a nice area is, in fact, safer than buying an individual high deviation stock such as Tesla or speculation stocks.

The fact that real estate is leveraged actually does not make it any riskier than stocks imo, because the equity you see in stocks in the stock market are themselves already leveraged.  What company out there doesn't use leverage?

The reason real estate can be more dangerous than stocks is that there are a lot more opportunities for you as the investor to make glaring mistakes.  There is less hand-holding.  When you invest in a company, a person with theoretically excellent pedigree is getting paid an exorbitant amount to make sure that the company is not overleveraged, that the company has liquidity, that the company is deploying its capital appropriately, and that its operations are running smoothly.  You get to own all of these aspects as a real estate investor and you are thereby appropriately compensated for that additional risk.