All Forum Posts by: Alan Grobmeier
Alan Grobmeier has started 19 posts and replied 900 times.
Post: Property Manager charges Owner non-collected late fees
- Rental Property Investor
- Phoenix, AZ
- Posts 919
- Votes 911
Another reason to never use a PM. If YOU can’t PM your own property, you seriously need to ask yourself why.
Post: Refi a rental to cash out but go negative cashflow?
- Rental Property Investor
- Phoenix, AZ
- Posts 919
- Votes 911
@Ryan McCook, I don't ever look at 'forever'. I look at 20-30 year timeframes.
If the property is no longer desirable, I would consider doing a 1031 exchange vs. an outright sell. I can trade 2 or 3 properties for 1 (consolidate) if I wish and have no recapturing of depreciation.
Otherwise, I plan on DYING with the properties. My heirs will have a new cost basis AND the depreciation will be wiped out. They will love me FOREVER. ;-)
Alan
Post: Refi a rental to cash out but go negative cashflow?
- Rental Property Investor
- Phoenix, AZ
- Posts 919
- Votes 911
@Syed Z., you forgot the depreciation recapture. That’s worse than cap gains! ;-)
Post: BRRR & IRS Tracing Rules
- Rental Property Investor
- Phoenix, AZ
- Posts 919
- Votes 911
@Michael Plaks, thx for a great response. And thx for pointing out that the 100k home equity option is no longer.
I was looking for tracing with regards to cash out refi of rental properties. It was a site where I found the most information & examples. There doesn’t seem to be a lot of information on it.
I have seen a bunch of BRRR stories that go something like this: I paid 60k, put 20k into it, house appraises for 150k and got a loan for 100k (or more). Based on tracing rules, these investors would either have to separate this $20k cashout from other funds or show where it went. I sincerely doubt, based on many posts I've read, that it is happenening that way. It seems like it is being treated as ‘free money', when it is far from being free.
Thx again!
Alan
Post: BRRR & IRS Tracing Rules
- Rental Property Investor
- Phoenix, AZ
- Posts 919
- Votes 911
@Ashish Acharya, I am looking at doing a cashout refi on my rentals. I’ll be sitting on the cash for awhile as I don’t see anything to buy.
It appears, according to the link I sighted, that only part of the interest is deductible. Depending on what is done w the money.
Is that so?
Thx,
Alan
Post: BRRR & IRS Tracing Rules
- Rental Property Investor
- Phoenix, AZ
- Posts 919
- Votes 911
Has anyone run into irs tracing rules when doing a Brrr or cashout refi on a rental?
Here is a link:
https://borelassociates.com/wp...
Thx
Alan
Post: First Deal Flopped...Now What?
- Rental Property Investor
- Phoenix, AZ
- Posts 919
- Votes 911
@Renee Yarbrough, yes. ;-)
Post: First Deal Flopped...Now What?
- Rental Property Investor
- Phoenix, AZ
- Posts 919
- Votes 911
This is an easy answer: if your flip ‘flops’, go into teaching. ;-)
Post: Yield Curve Inversion, Buyers market around the corner?
- Rental Property Investor
- Phoenix, AZ
- Posts 919
- Votes 911
The worst part is that the next recession may not be a ‘quick one’ like 2008. The first ‘hit’ on the stock market will be quick, but I believe the real bottom will be worse than when many start buying. Imho it will be a long & slow bleed.
Besides the items that @Calvin Lin stated, we have a serious pension crisis. Many pensioners are going to get a fraction of what they were promised. This is after working 40+ with certain expectations. The millennials can’t afford to buy the assets of the baby boomers. That means PRICE has to fall. The govt will respond with helicopter money. Because the last thing they can ‘control’ is deflation. So, instead, we will have runaway inflation.
it won’t be pretty. :-(
Originally posted by @Calvin Lin:
A few things I have been seeing:
1. Not just that yield curve inverted, look at the broad spectrum of bond maturities and see what message is saying to you. Right now, 70% of yield curve is inverted. That is a very strong signal something is not right.
2. Outside of US, something like 50% of sovereign bonds have a negative yield, which means you pay the government to lend them money, ie I give you $100 now and you give me back $98 1 year from now. Who makes this type of deal in a normal situation? Answer: no one.
3. Gold is screaming higher. This is a risk off indicator.
4. YEN is screaming higher. This is a risk off indicator.
5. Overnight swap lending rates (inter-bank lending rates to each other) is now negative for the first time in history. This is not normal.
6. Check the price action of European banks. It's in a death spiral.
7. Check the price action of commodity index. It's screaming deflation.
Fed needs to cut 50 bps in the Sept meeting, they have no choice. Right now I am not doing anymore RE deal but focus in preservation by keeping my capital in US short-term bonds which will benefit as the Fed cut rates down to 0 in the next 1-2 years. It is not inconceivable that bonds in both Treasury and US corporate rated AAA have a negative yield in a couple of years just like the rest of the world is heading. How would that impact RE prices in the US? I am not sure because this has not been contemplated before as a possibility in the US. I don't want to be overly negative as Japan saw waves of deflation but RE price in good locations like Tokyo actually have risen the last 5 years. It's possible RE will become the inevitable choice of investment for those who want to avoid negative yielding securities as they have no other alternative. Let's see how all these forces play out but buckle up as it is going to get rough.
Post: Refinance cashout and sell?
- Rental Property Investor
- Phoenix, AZ
- Posts 919
- Votes 911
@Kamal Pandey, you will be taking off depreciation expense every year. If you sell and do NOT do a 1031 exchange, you will have to pay tax on depreciation recapture. It doesn’t matter if it’s 1 year or 20 years.
But there is another way out: Die and leave the property to your heirs. Depreciation expense is wiped out and a new cost basis is created. ;-)