All Forum Posts by: Tony Kim

Well, the protection from liability will now be the fact that the buyer's agent commission can no longer be listed on the MLS. There will no longer be an official buyers agent portion of the commission. But that doesn't mean selling agents will not give any commission to the buying agent. Instead, it will have to be negotiated outside the MLS between listing agent and buying agent.

Hey, if this helps filter out some of the pretenders in the industry or folks to want to try being an agent because no other company will hire them, then that's great. I get really frustrated dealing with folks to don't know WTF they are doing. The buying agent when we sold our home two years ago was about as incompetent as I've ever seen. She even sent a long-ranting letter to our listing agent, screaming about how lucky she didn't recommend her clients from breaking escrow, etc, etc. About as unprofessional as I've ever seen.

As someone who is currently relatively active in purchasing properties overseas, I really have to bring up the fact that the system here in America is typically unique. But then, it wouldn't be American if our system was totally different from the rest of the world, right?

Where I purchase, there is no such thing as a 'buyer's agent". 1% or 1.5% max commission to the agent and that's pretty much it. You do a search online, find what you're interested in and set up a viewing with the agent. Do you really need a buyer's agent to do something like this? I certainly don't. If you like it, you buy it. Hopefully you are sensible enough to evaluate the property and run comps yourself. Closing fees are much lower also. Buying a property in California leads to two-inch thick binder of paperwork you have to sign (in fairness, in places like Ohio, the buying process is pretty easy). What value does a buying agent really provide? Is he or she going to protect you from making a bad purchase? Maybe, but some agents will actually push you to make a less than ideal purchase. This NAR settlement is a step toward the right direction.

We are in the market to purchase a new property in SoCal... it'll be interesting what the listing agent I'm working with has to say about this ruling. Is she in the James Wise camp? Or is she in the other camp.

 OK, appreciate the insight.  Thank you!

Hello,

Sorry if this has been posted before, but I wasn't able to find anything while searching for an admittedly short period of time.

If I rented a SFR that is currently below fair market due to rising rent and the fact that I haven't raised rent for a good amount of time (around 7 years), will the IRS consider that failing to rent at fair market value? When the lease began, the rental amount was only a few hundred below market. Now it's around a thousand below market. (asking for a friend, not me)

I also have several units that I am renting to Section 8 tenants which were at the max payment standard when the lease started, but are now several hundred dollars below the max payment standard. Started the units around $1,500 but now the payment standard for the same unit is around $2,300, thanks to the City of LA dramatically increasing the amounts on their vouchers and me simply not being able to increase rents due to rent control, Covid causing the Section 8 program to not respond to any of my rental increase requests.

And finally, I have an additional 4 unit, each tenant paying below market rent, but these were inherited tenants. I've implemented a few increases, but still they are subject to rent control and I had a skip a few years due to Covid restrictions. Does the IRS consider these below market rent and thereby losing the tax benefits of a rental?

Thanks!

Wow, if that's the case, I wouldn't send her anything. But to answer your question, of course it's within your legal rights to send her that text. But keep in mind, you're in NY, which probably isn't as landlord friendly as other states (I could be wrong about that). Also, if you don't have any other issues with her, just count your blessings and just continue sending her monthly reminders. 

I send out a lot of texts as well because I like to acknowledge receipt of payment via text. I find that it's easier to send texts by linking it up with your PC (and if you're a Apple user, I'm sure the process is even easier).

Wow, that looks fantastic! Congratulations! Can I ask how long the project took? I'm interested in a garage conversion also, but more for my Mom as I know we will eventually need to take care of her. I might hit you up sometime for the contractor you used. 😀

Rental income from LTRs and income earned from STR's are both taxed at the standard income tax rate. Rental income from LTRs in only classified as passive income by the IRS for the purposes of separating it from non-passive ordinary income. The rate is pretty much the same. And since we are talking about either directly held investments and one person brought up HML, the rate charged on dividends would not be relevant.

I have found that a lot of the wealthiest folks who park their money into real estate often do not use any leverage at all. Mind you, I'm referring to folks who are truly wealthy and generally got their money from outside of real estate. I face a similar problem competing against cash buyers here in SoCal...though I'm sure the situations is much more extreme up in the Bay Area. 

However, for ordinary folks like me who have to plan and work hard to gain FI at a reasonable age, @Joe Villeneuve's system is very effective and definitely makes the most use of the capital we have.

Regarding the OP's question (@Sarah Jukes), I think speaking to a tax or financial adviser will really be hit or miss. They may or may not understand your situation as their training is more along the lines of mainstream planning.  And as for running the numbers, I feel that you might do a better job than they would. I think it would be much more effective speaking to folks who have goals similar to yourself. I think some of the responses you received in this thread have been excellent. 

I'm in a similar situation as you (no mortgage on primary, approx. $2M in rental debt, very small 401k/IRA). We struggle with the same question ourselves. If we work hard and pay off all debt on our rentals in the next 5 or so years, we would have a very comfortable retirement with very little to worry about. Ultimately we decided not to try and pay things off early. We acquired these properties well before the recent rate hikes and so it would be difficult to justify it from a NPV perspective. Instead, we are working to build up our public REIT portfolio for now which is relatively liquid while providing nice cash-flow as well as flexibility for us down the line. Our plan is to see what the market is like 5-10 years down the line and then decide what to do with our REITs.

Good post.

I've been slowly building up my REIT portfolio as they've really taken a beating the past few years and so I consider them to be pretty substantially undervalued. But even for the folks that were in REITs before the rate hikes and suffered big declines in value, their dividend payouts have been largely unaffected. At the end of the day, what I'm looking for as I transition away from my W-2 is reliable, passive income and modest increases that will provide a decent hedge against long-term inflation. I do my best to try and ignore the daily fluctuations in trading price. As publicly traded stocks, my REIT portfolio is subject to some strong scrutiny under SOX and hopefully a competent BOD. I love private investments, but the temptation for shenanigans will always reel a few sponsors in when things go south, so I limit those to a few that I really trust and with whom I have a long history of investing.

With that said, for someone who is in a different position and is looking to aggressively build their portfolio, hustle and sweat equity in real estate, VC, growth stocks, real estate developing, etc are the ways to go.

Amazingly, my hotel syndications have performed admirably through the pandemic. There was a period where distributions were halted, but they've since resumed and are in the post BOV stage and looking for buyers.