All Forum Posts by: Victor B.

Looking to understand some of the bigger problems people face in the real estate industry. This isn't limited to those with large portfolios, but I suspect people with smaller portfolios will have less cashflow available for something like this.

Please refrain from answers with little detail (ex. "deal flow") or answers where the value doesn't line up (ex. "I have a portfolio of 100 doors, I'd love to only pay $1000/month in PMC fees"). If possible, explaining why this is a big problem would be very interesting and much appreciated.

Thanks!

@Julio Gonzalez Thanks for the links; they confirmed my current understanding. In your second post, you give the example of a $5M building with the study showing that $1M of that falls under the bonus depreciation category. Do you have an estimate/rule of thumb of the approximate ratio of what does and what does not fall into that bonus category?

In your example, 20% of the purchase price falls into the bonus category. In practice, do you feel that is a representative ratio, or is it closer to say 50%? 80%?

Obviously I understand there are a lot of factors at play here and it would be impossible to give a number for every case, I'm just trying to get an approximate sense (even bucketing is useful, for example, maybe commercial is usually 20%, MFH is 40%, and SFH is 60%, or something).

Thanks!

@Michael Plaks Thanks for the link! You were mostly right; I got to about 30% of the way down the page before skimming the rest (and then read section (i) on the $25k offset for rental real estate activities in its entirety, before realizing that it likely isn't what I was looking for). I did find this IRS page though that had a good summary: https://www.irs.gov/newsroom/n...

I asked for more resources because I think it is important to draw wisdom from multiple sources (or one primary source from the governing entity). Greg helped clarify a lot, and I felt well prepared to take another swing at fully understanding this ruleset. That said, you have another very good point (that I hadn't considered), that any non-primary source has to themselves understand what they're talking about, and before this exercise of reading the Cornell interpretation of the law, I assumed the average person stood a reasonable chance of understanding it, but I don't think that's the case anymore, unfortunately.

Yes, thank you. The information I was missing here (or that didn't click for me) is that the accelerated depreciation is not a real estate specific bonus, though I should've realized that based on the cost segregation study.

Thank you both very much for your time and expertise! :)

Thanks Greg, that was incredibly helpful! I really greatly appreciate it.

I've got two quick follow up questions:
1. You said that it will start phasing out - is that to say that there will be parts of the bonus depreciation benefit that will persist past Jan 2023?
2. What happens if I were to replace something, say a washing machine or similar appliance - can I only claim the bonus depreciation in the year of purchasing the property?

   To give a concrete but hypothetical example, suppose I am considering purchasing a property, and I know that I will need to replace this appliance. I assume that if I purchase the appliance "at the same time" as the property (ex. get the previous owner to do the replacement, and pay the extra cost as part of the purchase price of the property), then I can claim this bonus depreciation. If I first purchase the property, and then a short period thereafter do the swap (say a month after closing, but same calendar year), can I still claim the bonus? What if I purchase the property in say 2022, and then swap the appliance in 2023 - can I claim full depreciation on the appliance for 2023, or does it all have to happen at the same time?

I hope you don't mind the specific hypothetical, I'm just trying to get a better understanding of how the rule works. Any other resources you can point me to would also be very welcome.

One thing often mentioned on the BP podcasts is benefiting from accelerated depreciation for tax purposes (specifically, I'm talking about taking a 100% depreciation in the year of purchase). I recently reached out to an accountant and they gave me a very different picture than what is often presented by BP (or at least, my understanding of it), so I'm hoping people here can help clarify how exactly this works and share some resources (ideally including links to the specific parts of the tax code that allow for this).

My understanding is that you need to do a segregation study as certain parts of the purchase (such as land and structural elements) cannot be depreciated, but everything else is pretty much fair game. However, that accountant I spoke with said the following:

- The special depreciation only allows the 100% deduction in the year the asset is placed in service (sounds like this disallows repurchasing?)

- The special depreciation generally (only?) applies to property with 20 years or less useful life (how is this determined?) and that it must be placed in service before January 1, 2023 (is this exemption being removed?)

Given the above, it sounds like most buildings are not eligible, however the BP podcast makes it sound like this is the standard approach. Would love some help filling in the blanks of my knowledge/correcting my misunderstandings.

Thanks!

@James Carlson Wanted to piggy back on this thread and ask if you could elaborate on what running a STR looks like, especially if you AREN'T self managing. I'm sure there are PMCs focused on STRs, but how good are they? If everyone is using one, how do you differentiate yourself?

I've also heard that 10% monthly gross rent is a good baseline for LTR PMCs, but since there's more work involved with STRs, I would imagine the costs for that would be (much?) higher.

@Peter Mckernan That's a fantastic idea - thanks!

Awesome, thanks @Peter Mckernan! As someone starting out (and still considering several markets), do you have any advice on how to filter trusted realtors? I'm unfortunately limited to out of state investing due to prices in my area.

Bump. (Let me know if bumping is considered poor etiquette on these forums - sorry and thanks)

Hi BP,

I was wondering if people that have gone through multiple deals could help paint a picture of what the offer writing process looks like. A lot of postings on, ex. Zillow, don't have nearly enough info (in my opinion) to comfortably make a hard offer.

Do you reach out and ask for more info first? Do you make a best estimate based on the info available and make an offer at that price (even if its somewhat below asking) and ask for more info then? I'd appreciate help understanding the process of going from "property looks good on Zillow" to "signed and closed the deal".

Moreover, I'd like to know at what point you get "locked in", either fully or you lose your deposit.

Lastly, any comments about general etiquette around writing offers would be really appreciated!

Thanks,

Victor