All Forum Posts by: Steven Embree II

Thank you for the replies! I will absolutely be in contact with various lenders to make sure that my interests are maximized. It's also reassuring to get confirmation from professionals such as yourself that I'm on the right track!

I would also like to inform you for future reference that I was able to speak to a representative of the VA this morning and he assured me that the VA is indifferent to the tax code and that there are no such restrictions as laid out in the VA documentation. This is also my understanding. I've been able to track down the lender's documentation as provided with the Veterans Affairs, in case any of you or anyone else could be served by reviewing it.

Thanks again!

VA Loan - Lenders Handbook - Pamphlet 26-7

Here’s the skinny:

I am a veteran with a VA loan for a fourplex in which I reside in one of the units. I have lived here for three years, meeting the 2/5 year requirement for Section 121 Exemption. I am considering the sale of the property to partially fund the purchase of another fourplex (like kind).

There seems to be confusion with my lender on the following points:

1. I live on the property, so a 1031 Exchange may not apply. (I am not sure why it wouldn’t apply to the 75% of the property that is being used as investment property.)

2. The other units are investment property, so it wouldn’t qualify for Section 121 Exemption as that is only for a primary residence. (I am not sure why the 121 Exemption wouldn’t apply to the 25% of the property I live in.)

3. Moving away from the property may be an issue because, according to an underwriter, the VA requires primary residency for the property. (My understanding is that the VA only requires the property to be my primary residence for a year. I have been here three years.)

Am I in a no-man’s land where the tax gods can come and take money or is there some kind of special lamb’s blood I can paint over the four doors to get the IRS to pass by?

Absolutely, let's grab a coffee soon. I'll go ahead text as I got your number from your message!

That is great to hear about our rental rates. It validates our research in the area. Glad to know I'm doing something right!

@Michael Stanfield - Hi Michael. It was the same for the renovation here. It took nearly three years on my part as well, though that’s the unit I rent out.

Do you plan on reinvesting into the city again? I’m currently exploring the option, but it’s pretty tough.

I’d love to talk and get your thoughts, especially as someone who’s taken a similar path as I have.

@Jonathan Aversano - My two bedroom, which is small, pulls in about $2,275/month. My other two-bedroom, if vacant, would likely pull in approximately $2,500-$2,700/month. The one bedroom I currently reside in would likely pull in around $1,700/month.

 If this is the only way you did things, I would agree. However, if you have higher cash flow along with a portfolio of properties that are in different stages of being paid off, they could help pay the property off faster, reducing the delay along with the interest paid.

Investment Info:

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

Purchase price: $750,000
Cash invested: $150,000

Officially a triplex, unofficially a fourplex consisting of three separate structures on one 10,000sf property in the hidden valley of El Sereno in Los Angeles. Two structures are single-family casitas on a hillside with the main structure being a two-bedroom home downstairs and a one-bedroom apartment upstairs.

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

The idea of a fourplex allowing me to live in Los Angeles "rent-free" was considerably appealing.

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

I found the deal on Realtor.com and negotiated via a real estate agent. This was probably my biggest fail of the deal, however, because I think a better negotiator may have been able to get a better deal.

How did you finance this deal?

I live on the property, so I was able to finance using the VA with no-money down.

How did you add value to the deal?

One of the single-families, a two-bedroom on the hill, was in bad shape, heavily settled and leaning on the hillside. I was able to have the foundation completely rebuilt and I successfully remodeled the interior.

What was the outcome?

The interior of the two-bedroom is, if I have to give myself a subjective grade, a B+ but is upgraded with quartz counters and new appliances. The property is now fully rented, apart from my unit, and I'm successfully living in Los Angeles for "free."

Lessons learned? Challenges?

Honestly, I messed up at nearly every angle of this situation. I tried doing a lot of the repairs in a DIY manner, but I ended up wasting way too much time and money. It would've been cheaper to just contract out the start to finish on the deal and would've started earning money back faster.

Thanks for the input so far. I’m absolutely interested in other options as well. The plan for me is to, after I sit down and compile a list of options I think are reasonable, creative (or common), ethical, and legal, I will consult a local real estate attorney and come up with an order of operations, much like the manner in which Nathan has presented his.

Other options I’ve thought of:

1. Related to cash for keys: Providing some sort of guidance/assistance for my tenants and using the cash for keys as a contribution to a down payment or closing cost for them.

Investing in today’s market likely looks much different for many of us than it did probably even three years ago. I’m looking for new investors, those with 0-2 properties would probably be best, to network, work together to bounce ideas around, encourage and support one another, and hold each other accountable. The idea is that real estate isn’t a zero sum game. We should all be able to try and benefit from real estate. By working together with other people who are trying to push through in the same market, we can try and find our way through together and maybe pull others up with us.

First, I should say that this isn’t a marketing call. I don’t want anyone’s money but my own. The only thing I would like from you is to connect and to introduce ourselves.

I hope to hear from you soon!

Steven

I live in Los Angeles and, as most homeowners working in rent-controlled areas can relate to, having renters in a unit paying excessively low rent can be a pain. While I want to be fair to my tenants, I didn’t sign up to subsidize their housing. So my question is as follows:

What are some of the individual tactics that you’ve used, or would potentially use, to induce a vacancy?

I have some examples listed below:

1. Eviction

2. No Fault Eviction

3. Cash for Keys

4. Just ask?

Are there any other recommended ways that have worked for you or do you have a creative alternative that is legal and points ethically north?

Thanks for your thoughts, everyone.