All Forum Posts by: Ann Seffens
Ann Seffens has started 5 posts and replied 7 times.
Post: DSTs - How much time involved?
- Investor
- Meridian, ID
- Posts 7
- Votes 3
I am contemplating a 1031 into a DST. I have been watching videos & reading lots of posts, but one thing I haven't seen covered is how much time, after a DST is invested in, do you spend 'managing' the DST? Meaning, do you continue doing 'due diligence' analysis after you have the DST? And, how much due diligence analysis did you do prior to investing in the DST or did you just leave the analysis to your financial advisor &/or the DST sponsor?
Quote from @Dave Foster:
@Ann Seffens, Delaware Statutory Trusts are the easiest way to deal with debt in a 1031 exchange. We have lots of clients who use them to absorb excess debt they do not want to leave on their balance sheets. Each DST comes with it's own institutional debt. This debt is represented as a % for instance a $ 1 mil building 50% leveraged has $500K of debt. You have 50% equity so if you sold your property for $500K then you would end up with $250K of proceeds and the need to buy $500K of real estate.
You can buy the DST mentioned above because your $250K of cash is actually buying you $500K of the DST. And best of all the assumption of that debt is non-recourse to you personally. But even better would be to buy a DST that may be 75% leveraged. So a cash investment of $250 buys you $1 mil of the DST. You get the amortization, depreciation, and appreciation (all IRR numbers) on $1 mil. And you get the cash flow (the other IRR number) on the cash you put in. Then frequently makes the DST much more attractive than when just looking at cash flow off your equity.
Thanks for the info Dave! I'm still doing research on DSTs. So far, I'm not impressed with the projected returns and have to pick my jaw up off the ground regarding the fees.
Quote from @Joe Villeneuve:
Sell it, take the equity out, and move forward. Right now your equity ($400k) is only buying you a property worth $800K. That same equity should be buying you a property worth $2M...and the CF that goes along with it. You're losing money...fast.
I would love it if I could find properties with 80% LTV that cashflow, but I have scoured Zillow/Redfin to find properties that cashflow, and have come up empty handed. Thoughts on finding cashflowing 80% LTV properties?
I have a SFR that I bought 25 years ago and have refi'd a few times, pulled money out over the years, so my basis is low but my mortgage isn't as low or as paid off as I'd like. That said, I do have a good interest rate on my mortgage (3.625%) and I have about 50% equity in the property. It is currently rented and is cashflow positive.
Because it has appreciated and I have a good amount of equity in it, I'm debating my next steps. I'm researching 1031 exchanges and Delaware Statutory Trusts (DSTs), but because I have a mortgage on the property, that seems (to me) to complicate things a bit.
If you were me, what would you do?
Specifics: house is in the SF Bay Area, bought for low $200k, mortgage is low $400k.
Post: Primary Residence Turned Rental Property
- Investor
- Meridian, ID
- Posts 7
- Votes 3
Investment Info:
Single-family residence buy & hold investment in Concord.
Purchase price: $219,500
Cash invested: $75,000
Ranch-style SFR, 3 bd, 2 ba, semi-open concept for a 1955 built home. 1796 sqft on 0.25 acre lot. 2-car garage was converted into what could be used as a bedroom because it does have closets, but it also houses the furnace and water heater. 1-car garage was added on. Has 2 small decks out back - 1 from the living room, 1 from the master bedroom.
How did you add value to the deal?
I have remodeled both bathrooms and did a small remodel on the kitchen - cabinet refacing and slate tile floor.
Lessons learned? Challenges?
1. Screen tenants well. Make sure they have plenty of income - I require 3xs the rent. Check references.
2. Inspect regularly.
Post: Primary Residence Turned Rental Property
- Investor
- Meridian, ID
- Posts 7
- Votes 3
Investment Info:
Single-family residence buy & hold investment in Concord.
Purchase price: $219,500
Cash invested: $75,000
Ranch-style SFR, 3 bd, 2 ba, semi-open concept for a 1955 built home. 1796 sqft on 0.25 acre lot. 2-car garage was converted into what could be used as a bedroom because it does have closets, but it also houses the furnace and water heater. 1-car garage was added on. Has 2 small decks out back - 1 from the living room, 1 from the master bedroom. I have remodeled both bathrooms and did a small kitchen remodel (reface & new floor). Beyond that it's just been general maintenance and 'lipstick & mascara' (new paint & carpet periodically).
I did have 1 long term tenant that did not treat the house very nicely, so there was a bit of cleanup after they vacated, but beyond that, I think my screening process has provided with, if not totally stellar, at least decent tenants over the last 20 or so years.
How did you add value to the deal?
I have remodeled both bathrooms and did small remodel on the kitchen - cabinet refacing and slate tile floor.
Lessons learned? Challenges?
1. Screen tenants well. Make sure they have plenty of income - I require 3xs the rent. Check references.
2. Inspect regularly.
Post: Primary home turned rental
- Investor
- Meridian, ID
- Posts 7
- Votes 3
Investment Info:
Single-family residence buy & hold investment.
Purchase price: $219,500
Cash invested: $75,000
Ranch-style SFR, 3 bd, 2 ba, semi-open concept for a 1955 built home. 1796 sqft on 0.25 acre lot. 2-car garage was converted into what could be used as a bedroom because it does have closets, but it also houses the furnace and water heater. 1-car garage was added on. Has 2 small decks out back - 1 from the living room, 1 from the master bedroom.