All Forum Posts by: Aaron S.

@Jaysen Medhurst, yeah, I figured that might be the case. But the partnership route won't work, as discussed re: the exchange. Seems like your original idea of paying cash or mostly cash for a smaller building, then taking out a loan to invest in other free and clear properties might be the best way to go given I'm just starting out. Good problem to have I guess! 

Thanks @Dave Foster, that's my understanding as well. I'm still not totally clear on why a 1031 has to remain in my name. Forgetting the TIC or Syndication route for a minute, even exchanging into an LLC where I'm the sole owner apparently is not allowed? I'm asking mostly because of the personal exposure I'd have if say, I did buy a 3.6MM building with multiple units. Do you know the reason we aren't allowed to create a new LLC for liability reasons, etc?

@Stanley Bronstein Thank you. It seems a TIC would be the only way to do that and your advice RE: lawyers / CPA is duly noted.

@Jaysen Medhurst, thanks for those insights. Yes, I realize both my cap rate and ROE are terrible right now, the only benefit has been the appreciation and the small amount of cash flow after expenses. In your above point bullet 4, you're basing that on a 25% down payment on a 3.6MM property.  I defer to you and the forum but is it feasible for a 1st time investor to get a 3.6MM property? Seems overwhelming, given that might mean up 10-15 units, etc.? 

@Jaysen Medhurst, are you sure about that re:1031? I’ve always heard that you have to invest the full sale price, not just the gains. 

Going back to your earlier point about taking out a loan on the 900k new property, in that case, why not just keep my current property and take a loan out against that? I’m assuming it’s because I still have debt on the sf prop (300k) so taking out a loan on it might not generate enough if any cash flow? Or is there another reason? 

@Jaysen Medhurst, thanks for that response. That’s an interesting approach, I hadn’t thought of that. In my market (Denver) it’s hard to find that kind of cap rate. Not sure I want an out of town investment for my first property but I’d be interested in your experiences. 

Also, one thing your numbers didn’t account for is that if I sold my property for 1.2 M, I’d have to reinvest that full amount into a new property (s). So if I bought just a property with cash for 900k, I’d have to pay the boot on the remaining 300k. I could buy a 1.2 M property but would then have 300k in existing debt.  Am I thinking about that right? 

Another question for you / the community: since a 1031 has to stay in my personal name and not an LLC, does this leave me exposed personally in terms of liability? It seems like a strange rule to force an investor to be personally liable. Seems like that would discourage investment.

Anyone know if I can refinance my current personally -owned property as an LLC? Then when I go to do the 1031 I could keep it an arms length away in another LLC?

Thanks in advance! 

Hi, I'm new to BP but have been listening to the podcast and reading up quite a bit that past few years. I'm seeking advice and clarification on a potential 1031. The details are as follows: 

I bought and lived in a condo in SF when I was single. I now live in a different market and have been renting the unit out. I've owned it for about 15 years, therefore I have a lot of equity in it and it has appreciated like crazy. 

I'm considering doing a 1031 and buying a bigger multi family. I have a friend who has a large multi family investing company and does pretty big deals. He suggested I do a 1031 and go in on a large property with his company (as an investor).  In other words, getting into a bigger building than I could on my own. The other benefit is that I'd have an experienced, well regarded company in on the deal whereas otherwise I'd just be a no name, inexperienced investor. 

My understanding is that I can't do a 1031 from a personal ownership into an investment where I am only an investor/ partial owner, or if the new business is an LLC. Is that correct? Are there any ways around this?

A related question -- I know that some people say to identify a property you are exchanging into before you close on your current property. But in a hot market, the likelihood of a good deal staying on the market while I wait to close seems, well, unlikely. How is someone supposed to identify a property and secure it before you have the 1031 funds in escrow? Maybe I'm missing something. 

Excited to be on the forum and look forward to any help! 

I should note that the equity / potential capital gains are not insignificant: I have about 900K in equity on a property valued close to 1.2M. (Current cash flow is about $1,100/mo.)

Aaron

Thanks @Jason D., I’ve been looking into potential 1031 properties, but I feel like there’s more risk given the time limitations. That aside, assuming for a moment I am going to refinance for the near term, would an interest only loan make sense? 

Hi All, I’m new to BP and appreciate any insight from the community. I own a rental in San Francisco which I bought and lived in for a few years starting in 2003. I’ve been renting it since 2006 and watching it appreciate from 560K purchase price to an estimated 1.2M today. After the initial 5/1 interest only loan, I’ve been riding the adjustable since rates have been so low the past 10 years. Currently it is 4.375 adjusting yearly based on LIBOR. Now that rates are rising, I would like to lock in a longer-term fixed rate loan. My Mortgage advisor is suggesting taking out an interest only loan which would provide the maximum cash flow. But because I am not sure if I want to hold on to this property long-term I am also considering a 30 year fixed which would lower the payments also, but extend out the amount of time it would take to pay off the property. I have about 300K principal left. That leaves me with an insane 850-900k dead equity. I’d love some advice from you all as to what you’d do to refinance or to leverage that equity. Of course, I’m also considering selling it and using the equity to purchase more rental properties but because I am new at all of this I am a little bit gun shy. I no longer live in the Bay Area, I live in Denver. Thanks advance!