All Forum Posts by: Trevor Dominique

I have one bank account for all my properties. Even with 9 properties, it is fairly easy for me to go through all the transactions at the end of each month and remember what each transaction was for. I created my own P&L in excel, so I can just manually add all the expenses to each property so that I can isolate the profitability of each rental. 

I personally would not create a different account or card for each property....I could see that becoming overwhelming pretty quickly. 

What specifically attracted you to this house vs others in the area? Do you think the ask price is below market value? Do you think its in a location that will appreciate above the rest of the local market over the next few years?

To me, since the listing shows an fairly updated home with the DOM creeping up, that would be a red flag that the ask price is high. 

HOWEVER, if you are just looking for something to get your foot in the door in real estate investment and you would like to live here for awhile, then probably not a bad option. 

Hey BP,

Reaching out to get some advice from a tax strategy standpoint. 

I currently have 13 units and am looking to aggressively grow my business over these next couple years. I have one property that was a complete failure from day one. I feel like I have two options here:

Rent the property:

Downside: Significant capital tied into a deal that loses about -$200/month in negative cash flow. Upside: Area is growing rapidly, so my losses will be mitigated over time. 

Sell the property at a large loss:

Downside: Large loss shown on my tax return, potentially impacting ability to get future financing; Upside: I can redeploy some capital into higher performing projects immediately; 

After running the numbers on my side, it feels like it makes way more sense to sell the property at a large loss. Here is my justification....let's say I have $350k into this property and when I sell it, I net $300k, so I take a $50k loss. Lets say if I hold the property as a rental, it is a 2.5% cap rate. Now, let's say I sell this and purchase a property for $300k that is an 8% cap rate. If I add the $50k in losses, maybe this 8% cap rate goes down to 6% (I realize it would not actually work this way from an accounting perspective). So essentially I just repositioned $350k in debt from a 2.5% cap rate to a 6% cap rate, which is why I am leaning towards taking the loss. 

Worth noting, the debt behind the property I want to sell is a private credit line that is not attached to the property itself. So I can reuse the debt however I want to. T

Final question, and I a IMAGINE there is no legal options here but want to ask anyway. Are there any strategies so that when I sell I can keep the losses from appearing on my personal tax return? 

Thanks everyone. 

Trevor

Hey BP,

I am hoping to get some input from full time investors, specifically those who are very "hands-on" with your own investments. I currently have 12 units, with a SFH home and 2 lots under contract, in which we intend to develop duplexes. With things growing, I really want to leave my 9-5 job to focus on my investing business.

I currently live a pretty cheap lifestyle, so I only need about $30,000 annually to live very comfortably. So, where my head is at, let's say I do 4 BRRRR projects in a year where each project is a $50,000 renovation, or $200,000 in renovations for the full year. Let's assume $100,000 of that is labor cost, and let's assume half of that is stuff I could do myself instead of hiring an outside contractor, or $50,000 worth of labor. This would be more than enough for me to live comfortably, and then the rest of my time can be spent managing the rentals. All of the rental profits could then still be reinvested since the payment to myself would be a part of the capital investment (rehab), and not expensed against the rental income once the project is officially in service.

However, I understand that with me being structured as a single-member LLC, I cannot pay myself an hourly rate for the work I do, or in other words have my LLC send myself a 1099-NEC at the end of the year. The money I pay myself would have to be through a draw from the LLC to myself. This is a little tough for my brain to process. Basically, here is where I am getting messed up:

Scenario 1: All renovation work hired out

Purchase: $50,000

Renovations: $50,000

Total Investment: $100,000

Liability: $100,000 (private credit line)

Equity: $0

If the property cash flows $2000 and I pay down $2000 in principal after the first year, I have $4,000 in equity on my balance sheet after year 1. 

Scenario 2: $20,000 worth of renovations done by me

Purchase: $50,000

Renovations: $30,000

Total Investment: $80,000

Liabilities: $100,000 (private credit line)

Equity: -$20,000 (negative due to draw to myself)

If the property performs the same as in scenario 1, I have -$16,000 in equity on my balance after year one. 

This makes it feel like it is disadvantageous to perform the work myself, when in reality the investment is in the exact same spot regardless. 

I know this is just accounting and bucketing of costs and that its just the framing of money. But again, just trying to figure out the best way to pay myself here and still keep my financials straight. 

Curious to get your thoughts!

Thanks for the feedback everyone.

After thinking it through, we are going to go ahead and replace the fence with a new wood privacy fence.

I dont agree with "waiting for lumber prices to go down". The materials cost for wood fencing right now is about $12/linear ft in my area, so the total materials cost for this 150 ft fence is about $1,800. Even if lumber prices go down 35%, that's only saving me about $600 which is pretty insignificant. The main cost here is the labor to install. Doing a new fence will add value to the property and my rough estimate is about $50/month in rent or $600/year. I ended up getting a wood replacement quote at $5300, so $600/$5300 would equate to a 11% ROI for me.

 Thanks for the feedback. Doing the work myself would not be an option as this property is about 600 miles from where I currently live. For each quote we get, we are getting prices for both chain link and wood, but I have been very surprised by how expensive the chain link is (only slightly cheaper than wood) which has made me want to do wood since it looks better and creates a private backyard. 

I will add that the tenant has a new born baby and is usually home along during the day, so she wants to be able to let her dogs out without having to leave the house. So if we do not act fairly quick she will likely be angry with us. 

What's up Landlords out there. 

Making this post to get some feedback on what you guys would do to address a situation I am in regarding a single family home rental property I have. 

We purchased the property back in October of 2020 and had it listed for rent by November. The property has a good sized backyard with a private wood fence, however, the wood fence is very old and rotted, and it also appears to have been poorly installed. 

When we listed the property for rent and found our tenant of choice, we told the tenants that we would repair the fence prior to them moving in (they have a large dog and wanted to ensure it would be safe for the dog to run around). We sent in our maintenance guy to fix the worst of the fence spots, which at the time seemed to have solve the issue.

However, the fence has continued to deteriorate in the past 9 months and at this point our only option is to do a full replacement, as the rotting is just about everywhere. Our tenant is angry and is telling us that per our original agreement, that the fence problems would be taken care of. 

I have started collecting quotes and a full replacement of the fence will cost us about $5-7k. Part of me wants to do this to keep the tenant happy, but my gut tells me that the tenant will only live at the property for another year or so before purchasing her own home. I am having a hard time justifying spending $6k to keep the tenant happy for a year, especially when we could just rip the fence out without it really impacting the rent we get on the property.

What would you all do here? Pay the $6k to replace the fence, or do nothing and just deal with the pissed off tenant?

Hey BP,

Curious to hear your flip staging tips! What are the best ways to do it cheap and effectively?

I am currently doing a pretty simple flip, and while I have done a few, this is the 1st where I think the home will certainly need staged. I have a tight $45,000 budget and want to use as much as that as possible on the rehab. 

Excited to see what you all have to say!