All Forum Posts by: Brian Schmelzlen

Yes, that is tax deductible. Depending on the cost it may need to be capitalized and depreciated. For the most part, if it is reasonable for the rental it is deductible (technically the rule is ordinary and necessary, but for practical purposes it is that the expense is reasonable).

If you have a partner, it is irresponsible to operate as a general partnership (the default if you are partnering and did not formally create an entity). The legal liability is not worth it.

Consider trying to get a seller chargeback.

I am not a financial advisor but here is what I would do based upon my own risk tolerance. 85% stocks 10% fixed income 5% real estate and commodities More specifically: 30% large cap etf 15% mid cap etf 15% small cap etf 15% developed market ex-us mutual fund 10% emerging market mutual fund 5% us fixed income mutual fund 5% developed and emerging markets mutual fund 4% REIT 1% commodities etf

Winter can be tough (I imagine) in cold weather states, but most likely you are only dealing with very motivated sellers. Make offers that are embarrassingly low, and see what they come back with. You may get deals you could never get in May or June.

Both real estate and retirement plans have the potential to grow tax-free (with real estate that depends on how it is structured). For me, a lot comes down to whether or not your employer matches. I would put enough into the 401(k) to get the match. I would then focus on reducing your expenses or increasing your income (maybe side gigs) enough that the retirement plan contributions don’t slow down your real estate goals. It depends on your personality and goals, but I think in the long run you will appreciate having both.

Hi James.  Always nice to talk to another San Diegan interested in investing.

I think the next step is to put together your team.  You will a good Vegas real estate agent as you mentioned, but you will want to start forming relationships with lenders, a CPA, probably a good real estate attorney, and a Las Vegas property manager.

I think it would be a good idea to have those in place as you are putting together your first deal so you don't have to scramble for them later, and more importantly so you don't make a costly mistake.

I think I would use an LLC. I would structure it as 50/50 after he gets his money back; before that I would think maybe 70/30 him. However, if you are going to be handling the day to day, I would ask for a guaranteed payment that gets paid before distributions.

Given that i would be structuring it 50/50, all expenses not paid out of cash flow would be 50/50.

I think that is fair.

Hi Johnny,

Thank you for the feedback. 

At this point everything is hypothetical.  I want to solidify an idea of what I am looking for in a property, and what I am willing to offer/give up in terms before I start looking seriously.  However, I would be looking for ways to increase value.  Even if its adding a vending machine, in a 5 cap market that can add value.  Also, from what I have seen a 3% raise in rents annually seems common in my market (built into most leases).

I agree with you that the scariest part of the deal is what would happen in 5 years if the seller decided not to hold the note anymore. I would be negotiating for a 10 year note, but I think 5 is more realistic. I would start negotiations for the seller to continue to hold the note well in advance of it maturing. I believe the worst case scenario (outside of acts of God or a major market meltdown affecting commercial real estate) would be that the seller would not renew, and after owning the property for 5 years my partners and I would have to pony up the additional funds to refinance with a bank at an 80% LTV amortizable loan.