All Forum Posts by: William Jenkins

On flips I tend to be very conservative, so for the most part flipping is dead to me.  In general the margins in my area are not where they need to be to make it worth my while.  The risk of a market turn during a flip(s) is also concerning.  We are simply at a point in the cycle where there are too many people chasing too few deals.  At some point the cycle will turn and things will change.  I don't like trying to pick up pennies in front of a steamroller.       

@Brandon Sturgill - Great point that many overlook!!  I feel like many don't factor in the tax consequences of a flipping business and simply focus on their pre-tax profit.     

If you are BRRRing things could get real ugly real quick in any sustained downturn....especially for some of the investors out there on $100 door margins.  

First risk is financing... Unless you have long term fixed financing you face (1) rate risk and (2) refinance risk.  Second risk is revenue based (i.e. declining rents).  There are many out there that can't even fathom that number 2 would be possible but that risk is real.  

I am not good at calling tops or bottoms, but things are looking much more like they were before the last bust.    

@Dave Foster , I think you misunderstood my point.  1031s can be very powerful but it is not some panacea into never paying capital gains.  

I am simply pointing out that it is very RARE for a great exit to line up with a great acquisition in the time frame allotted for in a 1031.  I have personally seen people get so caught up in a 1031 that they sell an asset, scramble to find a replacement, and then overpay on a purchase to avoid paying taxes.... 

Where I see the most success in a 1031 is where a seller holds a VERY liquid asset where he/she can control the timing of the sale.  

I am not a big fan of 1031s. In theory they are great, I mean who wouldn't want to defer capital gains. In practice I always feel like the transaction is forced (either or both asset sold and the asset bought). I have seen many peopole get into a 1031 and end up in a worse position (asset quality, ROI, etc.) then when they started just because they "had to do something." Your best deals are made when you don't have to buy or sell anything. The ability to walk away is key and a 1031 in most cases (not all) hinders that. 1031s have a place, but they are not the end all be all that some would like to claim.

The best tax move you can ever make is to die!  Sad but true.   

Answer to your question... I don't think I will stop acquiring (good deals only) until it is not fun anymore.  In terms of a 100% cashing out, that question is tougher to answer.  Real estate is hands on regardless of what anyone says and leaving RE assets to family that does not know anything about them is a recipe for disaster.  Later on in life, if I believe my heirs would be able to responsibly manage my estate then I will likely never sell 100%.  If the opposite is true then I will try to pair my holdings as best as possible to leave the smallest mess possible.  I am hopeful that this decision is a long time in the future for me.  

At the begining stage you shouldn't even be worrying about this, but there you go.  

Many reasons to put a property in an LLC but the avoidance of capital gains is not one of them.

What size deal you looking at? I am currently developing a 154 lot subdivision. Depending on your deal size and location there can be a lot of moving parts.

Looking for a little advice on climate controlled storage from the self storage experts out there.....

I have an old five story freight elevator served 36,000SF warehouse building that I have listed in a large Midwestern city.  The building is located in an old industrial area that is quickly gentrifying due to the development efforts of a nearby major university.

The building is very visible from a major interstate and all of the major arterial roadways (due to height) although it is tucked back into a developing industrial area.  

Admittedly I know nothing about storage, but I have a market study that was done about 1 year ago for climate controlled storage (heated and cooled) and that report made it sound like a solid deal.  Assuming the deal is truly solid as is, I know know how to bring in public development funds to make it a home run.

Tell me about climate controlled self storage....  What does the operation look like, what are the expenses, any major things to look for, etc., etc. 

Just trying to get a feel to see if it should be investigated further.....  

I have a VA out of India that has been working for me for a number of years. I think you need to define your expectations first. In my experience they are very good with defined remedial tasks. I would not have them do any higher level tasks. I am sure there are some out there that can but at that point I would just hire and train someone local.

This is a general zoning/subdivision answer so take it at that and do jurisdiction specific research. First step is that you need to investigate the feasibility of the rezoning R2 to R1. What is the property next door zoned? It is very unlikely that you will get "spot zoning" which would be an R1 parcel in a sea of R2 parcels. If you were to get zoning approval then your next step is to go through the subdivision process which involves a survey a plat and going through the administrative procedures to get it approved and recorded. A variance was mentioned. It is very unlikely that you will get a variance for another home on the same parcel unless a precedence has already been set in the neighborhood. Oh one more thing... when you are talking to the jurisdiction keep in mind that they don't care at all about your ability to profit from the deal and they look at it from a very sterile land use viewpoint. Don't go in arguing for approval with the simple argument that it will allow you to make more money.