All Forum Posts by: William Hochstedler

The instruments needed for the transaction will be state specific which means you should have someone from California chime in with resources who can provide low cost documents (as these will be boiler plate).

@Bradley Buxton makes a very good point to make sure to do your due diligence as you won't be an owner occupant like your in-laws.

Last bit of advice: Because this is a friendly deal, you want to take your time to make sure you structure it in a way that maximizes tax and cashflow benefits for both parties.  Your father-in-law will want to minimize his tax liability on the capital gain and think about how the sale fits into his estate planning strategy. You will want a payment low enough that it makes sense for you.  Remember you can structure this any way you want to accomplish those goals.  (eg: installment payments over 50 years, having the balance balloon upon his passing, etc).  So it would be best for him to first understand how this would impact his taxes and estate planning then structure the sale based on that.

We're definitely feeling it.  We're getting nailed in auto insurance too.

Any ideas why these states? Is it because of state level controls?

I'd love to learn more about what's going on here.

Welcome to the wonderful world of real estate!

It sounds like you've absorbed a bunch of problems already and a new sewer line and the current basement situation will cost you way less than the $50K in fees to sell it.  You have a decent loan on the place that you won't be able to replace from a cashflow standpoint.

So keep at it.  In my estimation it takes 2-5 years before a rental is broken in and feels like a good investment.  Until then it can be really stressful.  Everyone who has done this for a while has had a property or two like this one. 

Write it up to an education, spend some time sharpening your support team (particularly in the trades) and start thinking about how you can do it again!

It may feel like a kick in the head, but you're on the right track.

This post is my official pivot on Ogden.  I've been a long-time Ogden bull with posts like these:

https://www.biggerpockets.com/forums/12/topics/882817-local-...

https://www.biggerpockets.com/forums/586/topics/785294-who-h...

But, like a January 2022 study determined, Ogden is overvalued.  The study from some Florida Atlantic University took historical price change data from Zillow and compared it to current trends.  It showed the upward trajectory in Ogden to be among the most deviated in the country from historic market data.

At the time, I thought this to be an interesting and coincidental statistic because Ogden's upward prices were a function of the entire Utah trend and the laws of conformity.  It had little to do with Ogden itself.  In my view, if there was a reason that it was overpriced, it was that the ancient inventory was not being fully upgraded when flipped to owner occupants.  If the rising values had reflected property improvements and upgrades (rather than massive profit taking) the rapid rise in prices would have been justified.  The methodology of the study would not have been able to capture that nuance.

Unfortunately, for the last few years, there has been a missed opportunity for Ogden to take advantage of the comparatively lower price points and really cater to smaller pocket books with energy to rehabilitate the old houses.  Now, big multifamily projects are going up everywhere (possibly entitled years ago).  But there is little evidence of small, conscientious operators.  So neighborhoods haven't improved noticeably since they were half the current price.  Ogden has done nothing to provide for mom-and-pop landlords who might have brought stability to neighborhoods where owner-occupants aren't quick to adopt.  

Right now, the ROI isn't terrific (I have a handful of properties which I could sell for $250K-350K that I struggle to rent for $1400/mo). And the market conditions are unwelcoming (physically distressed inventory, difficulties with Ogden City, and poor tenant pool). As a result, many investors (including myself) are either spending a very small premium for way fewer headaches in other markets or moving farther afield to more promising opportunities.

In other words, Ogden failed to ride the gentrification wave that buoyed the REI landscape everywhere around it. Now it's just expensive for what it is. (I guess that's what overpriced means).

Because of all this, I'm still holding my Ogden properties.  But don't see enough near-term or mid-term upside to keep them if something better comes along elsewhere that I can transfer into.  Right now I'm doing better with my return on equity elsewhere. 

Hope this helps and I'm very interested to hear what others are saying these days.

The BRRR method is not about "numbers working" in a given market. It's about finding a situation where you can force enough value to create a 20%+ equity position. This way you can refinance out all of your cash and hard money positions.

Whether or not it will "cashflow" has nothing to do with BRRRR (except for maybe "repeating"!). That being said, it's very difficult to get rents to even cover PITI payments at 80% loan-to-value in Utah these days. Utah is one of the most expensive states in the country.

Not only that, but there's a robust wholesale community here which makes finding distressed and discounted deals hyper competitive. I get a dozen post cards a week! Moreover, wholesalers have cultivated lists of retail cash buyers who don't need the type of value-add opportunity you would to BRRR.

Bottom line is that you can BRRR anywhere just like you can make money in real estate in any market. But you have to be very creative and understand that if you're seeing deals from industry professionals (rather than sourcing them yourself), there's probably not enough meat left on the bone for a good opportunity to create value.

Good luck!

You know the joke, right?

"It only takes a decade to make a million in real estate.  But you never know which decade!"

Do not put rental properties in an S Corp.

Generally, you should have an S Corp for flips, property management operations, commissions and any other activities that generate ordinary income.

Passive investments should be held in pass-through entities like partnerships.

I'm not an accountant, but I have clients and personally had to pay taxes to move long-term holds out of S Corps just to change title (e.g. for refinancing).

Quote from @Tim Ryan:

Long story short, they ended up buying two duplexes. Once they got pregnant with twins they decided to move on from the managing and they bought their primary home.

This is an excellent point.  A local broker made all of his kids buy fourplexes as their first home.  Needless to say, that's treated them very well over the years.

Quote from @Tim Ryan:

What did Kiyosaki say? Your home is a liability and an investment is an asset.

Interesting.  This is a mindset argument, not a financial one.  It falls apart completely if you think of yourself as as tenant and pay yourself rent (that you would otherwise be paying someone else).

https://www.richdad.com/your-house-is-not-an-asset

I prefer the quote from The Richest Man in Babylon, "Make of thy dwelling a profitable investment."  In other words, take advantage of all of the benefits granted to home owners including lending, zoning, and taxes.  But treat it like an investment.  House hacking is just planning to repeat this process.

Also, learning home ownership on your own house is much more forgiving.  Houses are complex systems where lots of stuff can go wrong and there are lots of opportunities for improvement.  Experiencing these first hand in your own home provides greater flexibility while you figure this whole racket out.

Thirty years ago, I was fascinated by real estate opportunities in an emerging market (Brooklyn) and spent lots of time looking at cool warehouse space in places that are now 30-50 X the price.  But I never acted because I didn't have the money, knowledge or confidence to pull the trigger.  It was only after I got to Utah and purchased my primary residence (and got a real estate license) that it all started to click.  I had to have the visceral experience of committing to a 30 year obligation was 5 times my annual salary and then watch it work out relatively risk free (because I have to live somewhere) to feel comfortable making multiple six-figure commitments.  So I advocate home ownership as the first step.

The most important thing is action.  The best time to buy real estate (and plant trees) is 20 years ago.  The second best time is today.

If you're serious about this, you should definitely consult an attorney.

I am not one, but here are some things I've learned from playing around with these types of things:

--Trusts are excellent vehicles for anonymity

--You can hire a professional fiduciary (like an attorney) to act as trustee so the public contact is not easily affiliated with you. 

--Understand the issues that might arise from LLC's formed in states other than where the property is located.

--There are other public records where your identity may be discoverable including mortgages (trust deeds), utility bill guarantees, and property tax payment records.  So you really need a robust strategy.

Most states only publish the registered agent for LLC's and have a paywall to find out actual ownership. So if you are just trying to avoid showing up in broad searches, it's not too hard. Just create an LLC and have a corporate registered agent.

True anonymity is possible.  But it's expensive and takes meticulousness to make sure all of your records that could be made public are consistent.