All Forum Posts by: Stan Kaneshige

@Kadeidra Honey-Brooks Great idea! Which noise monitor are you using?

@Kadeidra Honey-Brooks ! I am also in California and investing in Northern Indiana. I was wondering if you would be willing to share your thoughts on how STR was in Michigan City over peak season and what your plans are for the offseason? I was curious if the peak season more than covers the slower period? Thanks!

@Drew Reynolds Nice to meet you and thank you for the contact request!

So has your group confirmed that apartments or MFH in residential zones will or will not qualify as a "business property" in regards to satisfying requirements 1400Z-2? Can a developer build brand new apartment buildings in commercial zones and qualify? 

Because if it does I can see @Ashish Acharya's point about some QOZ Funds focusing on buying land or existing apartments and renovating. I would imagine they would push the funds to sell after 10 years to get the permanent exclusion on the further gains if there are any.

Depending on the area I don't know how much of a long-term (past the 10 years) positive community impact that would provide as opposed to actually starting new businesses that encourage jobs, growth and revitalization.

As far as your concluding statement of how "these investments must be made through a Qualified Opportunity Zone Fund", that is my understanding as well. I just think it's a bit comical how there is no outside/governmental certification required. The IRS FAQ page states the following:

• "To become a Qualified Opportunity Fund, an eligible taxpayer self certifies. (Thus, no approval or action by the IRS is required.) To self-certify, a taxpayer merely completes a form (which will be released in the summer of 2018) and attaches that form to the taxpayer’s federal income tax return for the taxable year. (The return must be filed timely, taking extensions into account.)"

Now obviously we will have to wait to see what is on that form to be released this summer, which is already here in LA :)

It makes it sound like anyone can start a Qualified Opportunity Fund. So investors send me your money! I'm Qualified!!! I can guarantee I will defer your Capital Gains!! Which property I can scrounge up in a designated Zone and how I manage that for you over 10 years - don't worry about that! Just pay me my fees up front and we are all good. lol

If apartments are allowed as “business property” that would make this program more attractive. I have inquired to the EIG regarding this but did not receive an answer. Have you found any definitive clarity on this, hopefully citing  code or some type of similar precedence with NMTCs that might lend to apartments or residential housing units being accepted by the IRS as business property? 

It is true that the code in 1400Z-2 says "business property" as opposed to "commercial property". But from everything I have read, it seems the code is excluding any form of residential housing, whether single or multi. So if an investor were to purchase an SFH in one of these mixed use OZs, could they run a Day Care in it for the duration of the investment, fulfilling the "new business or trade" requirement and then try to exit after 10 years, marketing it as a rehabbed SFH? What about properties not zoned "mixed" but straight "residential"?

I think once the Treasury Dept and/or IRS releases clearer directions on these types of situations and whether they will be recognized or not as making a Fund qualified for OP Tax breaks, there may be as you say many qualified organizations putting together funds. How much those organizations will be charging investors, along with how much investors will trust these Fund runners over the course of 10 years with their money will be very interesting to watch. 

I thought one of the more surprising aspects is the self certification for the QOF vehicle (partnership, corp, etcJ. This would allow an investor to technically avoid having to trust an outside entity with his CG funds for 10 years, if his strategy were to maximize the benefits.

It's also important to note that according to Sec 1400Z-2 (D) the property must be used in a trade or a business. The investor must start or have an "original use" of the property, which most likely means the investor will have to start a new business on the property or get a tenant that is starting a new business.

If the investor is purchasing a property that already has a business on it and chooses to either buy and continue that business or continue renting out the property to that existing business, they then have a 30 month period over which they must invest an amount that exceeds the adjusted basis at the beginning of the 30 month period for "substantial improvements". So for example, an investor buys a storefront property with a tenant in it for $500,000, continues to rent it to that tenant for a year and then decides to start his 30 month investment. Let's say the adjusted basis of the property is now $600,000. The investor now has 30 months to make at least $600,000 worth of improvements to the property.

Another factor to consider is that some businesses are disallowed, not unlike NMTC eligibility. For example an investor cannot have a business on the property that engages in any of the following “sin” businesses: any private or commercial golf course, country club, massage parlor, hot tub facility, suntan facility, racetrack or other facility used for gambling, or any store the principal business of which is the sale of alcoholic beverages for consumption off premises.

With these factors in mind, I would think caution would be in order for any investor looking to defer taxes through this program. There are still many gray areas for which the Treasury and IRS have not made clear regarding documenting and guaranteeing that the actual deferrals, cost basis reductions and permanent exclusions will be honored in any given business and property combination.

This alone has tempered my interest in Opportunity Zones. To think of what types of businesses and which specific areas within the LICs designated that could actually help defer investors CG taxes without actually becoming a loss seems daunting. 

I feel the only way to success would really be to devote oneself to the altruistic intent of the Opportunity Zones program by making meaningful connections to the community and learning what the biggest needs are, finding sponsors or organizations willing to run a business for profit or non-profit that would really be accepted and welcomed by the community. Partner with them to acquire an acceptable property within the designated areas that would house that business or organization.

It would require a lot of time and work, but would probably be the best way to avoid losing money on a property that would house a failing business or worse yet sit vacant and cause further blight to these already struggling communities.

@Jason Gines @Greg Moss Thanks for taking the time to share these details. I am looking into my first property to buy and hold and was wondering about roofstock. Seems like a good solution for those of us without any experience. Was thinking about using Morris Invest but roofstock sounds like a better staffed option that is more willing to help through the entire process.

@Vera Herlihy How did your visit to Indy go? Did you meet Morris Invest team? Others? Anything you can share would be great!

Thanks for the updates @Ian E. ! Researching Morris Invest as a newbie and appreciate all feedback on their experiences using this TurnKey service.

Hi Everyone!

I just wanted to say thank you to @Tyler Jahnke and all that have contributed to his excellent documenting of his journey with Morris Invest and his Indiana property.

MY EXPERIENCE SO FAR (For those with time to burn)

I made a reservation online with Morris Invest on June 30th of 2016 and received a phone call appointment for October 6th - an almost 3 month wait.

On that day I got a call from a 727 area code which turned out to be a gentleman named Dave Koehn who said he was an associate of Clayton's. We talked briefly, he filled me in on the broad strokes and it sounded good to me in concept. 

Later that day he sent me an email with an example photo and details of a property similar to what I would presumably purchase from them or with their help? That part was not exactly clear. Does Morris Invest buy houses and resell them? Or do they just facilitate the sale and take a cut?

It was such a long time ago I don't remember our conversation in detail but I do remember him saying they get a lot of calls and are very busy. The basic idea I came away with is that if you are serious buyer they want you to buy quickly without fussing over too much as it is a hot market and asking for too much in the way of info, pics, updates, etc. gives someone else time to buy it before you, thus wasting Clayton's (or his team's time and effort).

$40k is more than I can come up with so I asked a good friend if he would like to partner up and go on this adventure with me. He took awhile to watch Clayton's videos and we talked and eventually decided we could do it together.

My friend got busy, I got busy and here we are 1 year later. I decided to check here at BiggerPockets and search "Morris Invest" to see if I could find any testimonials and or tips on if and how we should go about getting our first rental property with or without Clayton's service.

After reading this thread I will have to discuss the pros and cons of going this route again with my investor friend/partner. Tyler's recent post saying he will try to get a second property without using Clayton's service, in addition to his frustration with lack of communication is honestly making me rethink the path we should take.

Once again, thank you everyone for contributing your voices on this subject! Any lurkers out there that have dealt with Morris Invest, please share your experiences, positive or negative! I am sure that other newbies as myself will appreciate it very much :)