All Forum Posts by: Ed W.

@Cole Puterbaugh I concede I will be in the minority but I believe you are making a huge mistake to make this investment regardless of loan type.  To find and control a truly good, honest and honorable property management company is not easy and with your lack of RE investment background you don't have sufficient experience or context by which to vet them or control them or to gauge the quality of the properties you will be presented by agents.  You have a wealth of free information on BP which might help mitigate some of the problems (something us geezers who started in the 1980's didn't have) but, in my humble opinion, your lack of experience and the distance make this dicey at best.  There's an old saying - a largely true statement - that you make your money in real estate when you buy; i.e., you buy with equity built in and with cash flow built in (or easily obtainable by better managing a property that is not doing well).  By both knowledge and distance, you are poorly positioned to be certain you are getting either.

If you choose to ignore this advice, I hope that you find what I've written here doesn't apply to you for some reason unknown to me.

@Thomas O'Donnell

There are a number of good suggestions within the replies you've received.  One caution.  While I like the "roommate" idea (and one or two others) you are feeling some pressure and, between that and a lack of experience vetting tenants, you have an increased possibility of being too hasty and allowing the "wrong" tenant in.  Make getting a good tenant the priority.  There is a lot of good landlord-tenant advice on BP.

"I think if you underwrite a deal to the most taxes the government could charge you for property taxes then you will never buy a piece of Real Estate. Maybe that is not what you meant"

@Remington Lyman

I was not suggesting that investors should always base their decisions on the most the taxes might conceivably be. I do believe that the amount the taxes can be reasonably expected to be should be used and in the case of the OP by @Trent Williford, I believe the projected amount was the prudent way to fly.  FWIW, I have literally purchased hundreds of properties and took a conservative approach to each and profited on each and every one except 2 (and the total combined losses on the 2 was under $10k).  Has my conservative approach caused me to leave money on the table for those properties that didn't quite fit my criteria? I'm certain it did but I took the approach that was comfortable for me, did a lot of business, and slept at night.  I don't say it's wrong for you to take on more risk if you are comfortable doing so, I've just never felt the need.

"You said I am not doing anyone any favors by pointing out the positives. I just pointed out ways to avoid a step up in property taxes. I probably should not have even said anything since I am not a CPA"

I see a whole lot of problems to reply to this.  We'll just have to agree to disagree. 

@Trent Willifordundefined

@Remington Lyman

As I've said in other posts, you appear to be a knowledgeable guy.  I have no bone to pick with you.  That doesn't mean we always have to agree with each other's business philosophies.  Because what I just wrote is true, I have to believe that I am far from understanding how you could take what I've written as an "extreme" way to invest.  I believe what I wrote is pretty conservative, could you please be more specific?

@Remington Lyman   

@Trent Williford

Remington, I agree 100% that taxes can be disputed and that there are attorneys who handle cases, not only on the higher end of property values but on the lower end as well, and those negotiations are, at times, successful.  Now that the school boards have had their reign of tyranny stopped (perhaps an exaggeration, perhaps not) most properties are in less jeopardy of unjustifiable increases (but not of justifiable increases based on solid comps).  

But can the line on taxes be held close to the level they are at the time of purchase is, in my humble opinion, not the right question to ask.  The questions to be determined are, if the worst realistic scenario comes to pass (take the time to fight the increase and lose and have a significant increase and pay the attorney fees), will the numbers still work for a worthwhile, solid, and prudent investment?  I'm going to assume you would agree with that premise but, if you happen to not agree, would you be willing to have your brokerage fee held in escrow until the issue is settled and return them to the buyer should he lose the tax challenge?

@Trent Williford  This is a very unforgiving business.  The mistakes are almost always measured in thousands of dollars, tens of thousands of dollars, or more.

While the proposed method of purchasing the entity, rather than directly purchasing real estate, is likely not illegal (I'm not an attorney and, additionally, I haven't checked to see if Ohio law has addressed this in some way), it is not only a sale that triggers re-valuations.  I concede they take longer to catch up but sooner or later they will be substantially higher.  Both the agent and the seller have a lot to gain by telling you to take the control of the owning entity, you take all the risk.  BTW, what if the entity they want you to buy is the subject of pending (or current) litigation or some form of governmental disapproval or other problems which you will then own.

I bought a package of 30 condos in a condo association that was in very serious financial condition.  Not a penny in the coffers, many thousands of dollars in arrears on utilities, significant deferred maintenance, etc.  I bought them knowing I didn't have control (they represented less than 50% of the ownership) but I was quite confident that between me and one other owner of multiple units, we could control the board and right the ship (he and I had never done business but we had known each other for years and both had solid reputations).  I was quite certain - with the other investor's help - the financial problems could be handled.  What I was far less certain of were pending lawsuits (if any) and other matters that could affect me.  The broker handling the sale just happened to be the managing agent of the association.  Shame on him that the association went so far downhill.  He had a lot to gain by being less than accurate and truthful.  My attorney and I put together a 5 or 6 page estoppel agreement that covered a ton of problems that could be financially very costly to me if the broker had misrepresented answers to the questions I had posed to him.  He refused to sign and asked me when I wanted to close.  My answer?  Never.  It took him 2 months to sign, but he finally did.  

Agents never claim to be attorneys (except in the rare case that they actually are) and don't have any particular obligation to look under the rocks to see what's lurking.  The buyer has to cover his/her butt without relying upon agent/seller representations.  I think @Remington Lyman is likely a good agent but he does no one a favor by pointing out only the positives and not the negatives.  A lot of agents suggest something and then say "but check with an attorney".  While the referral is necessary, I'd rather they be more knowledgeable about what they suggest and - even better - have something to lose if they are wrong.

@Jimmy Lieu  There are lots of ways to buy property - at prices below market, full price but with exceptional seller financing, etc.  To base a decision on something that may or may not happen - even if the odds are with you (and the general sense of it is that Columbus will prosper but who really knows what will happen because of forces outside of Columbus) - is definitely unnecessary and, in my humble opinion, unwise.  That's simply not a good business decision.  Any deal that (not said literally ) requires you to go to church every Sunday and pray for a good outcome is a deal that's not good enough.  This business is hard enough as it is and not having a good margin for error is simply not wise.  I respect your opinion but we'll just have to agree to disagree.

@Scott Allen  I've invested in Columbus Metro for over 30 years.  The truth is that I'm retired and have lost some of the "pulse" of the neighborhoods.  I had a lot of rentals in the blue collar areas and did very well with them by careful screening up front but I've also had rentals and rehabs (not to the studs) in Hilliard, Clintonville, Westerville, Grove City, and a couple of areas that are not quickly coming to mind as well as Dayton, Newark, New Lex, Reynoldsburg, Connecticut, NJ, IL, and Vegas and some other areas that, again, aren't quickly coming to mind.  I've purchased packages of properties of various sizes up to about 35 and multi-unit properties of various sizes up to around 30 units and I had modest interest in a 200 unit in TX.  

A caution, particularly for newbies.  What the real estate agents have said about Central Ohio growth is true - it looks very promising.  There is another truth - one that is notable and longstanding.  The core truth of real estate investing is that you should make your money when you buy.  That means that you should not buy a property based on the promise of future appreciation (or future growth, etc.).  Get solid cash flow and, preferably, a truly discounted price.  I've never met the agents who have contributed to this thread and they have all been solid contributors to this site in terms of the number of posts, questions answered, etc. but I don't know what sort of deals they propose to their clients. They may be the best deals on the planet.  The bottom line is that far too many agents propose deals that are very good for earning commissions but are marginal - at best - as investments and, at times, poor to very poor as investments. Again, this caution is not agent specific.  Don't be over-eager to do your first deal.  Learn the business (this site is a great place to start along with local real estate investment organizations), make sure what is proposed is sound, and make thoughtful investments.

@Scott Johanek

"Before I would sell I would try this:I would post on FB in that town stating that I'm looking for someone to help fix up and manage properties for equity or a portion of the rents/ future sale price. This provides upside for you and them. You'll most likely find a young hustler who works for some construction company/trades."    "Worst case scenario you have what you have now so not much to loose in my opinion."
@Ashley N Tauriac

Scott, I've never claimed to be the most knowledgeable investor on the planet but, with all due respect, I have to strongly disagree with your 'not much to loose (sic)" assertion.  Your suggestion actually has a lot of merit for someone with good knowledge and experience and, preferably, living reasonably close to the property.  Ashley simply does not have the experience to properly structure and document that deal and, likely, doesn't have enough knowledge (and, perhaps, fortitude) to control the deal and the buyer. The fact that she lives a fair distance away, is the other significant problem to control the buyer.  Lots and lots of downside in my book.  Again, it's an idea of merit for you and for me but the odds are pretty strongly against Ashley and she'll have to get very lucky to find a buyer of sufficient knowledge and skill to properly handle the properties AND also have a strong dose of ethical character and integrity - not an impossible combination but certainly not a common combination.