All Forum Posts by: Bill Devola

@Roger Pokorny its hard for me to add much to what Richard Recuset said, but I agree and would push the issue as well.  I should probably be downvoted for saying this, but the reality is in most (if not all states) the courts are really looking for violations to security deposits, inappropriate living conditions, illegal stacking.  Even if its not legal to 'backdate' the start of the lease, I'd bet you wouldn't have any issues doing so.  I'd actually bet its not even illegal, but can't say for sure since states vary so much.  

All in all, if you're just upfront with the tenant and tell him you like him, but the property is in demand and you were counting on the start date of the 1st, and you have to stick by that, you probably won't have problems.  In my GENERAL experience legal situations and bad feelings arise when you aren't upfront and try and sneak in language or go behind someone's back.   Even if you may be asking to do something in a grey area legally.   Which to reiterate, I doubt this is. 

Someone please downvote me for such bad advice.  

We took in a good amount of foreign capital by selling performing notes to overseas entities and individuals, then managing the cash flowing asset.  Unfortunately, we weren't especially diligent in compliance regulation wise.  Nothing has come back to bite us, but we only did some cursory research. 

You should narrow your investment vehicle scope: are the investors going to be lien holders? Members/Partners of an individually formed LLC for each investment? Will they have equity in their personal names?

The answers in terms of legality will probably vary a bit depending on how the investors and their funds are going to be treated.  Most times people want to know the basic structure anyhow, so this should be a natural step in your process. 

There's more in the details someone should know before they answer intelligently.  Such as: how good is the tenant?  How bad is the property (ie difficult to rent and keep a tenant)?  If the tenant is nothing special and the unit has steady applicants, I would ask them to keep to the agreement of starting the lease on the 1st.  

If they are resistant, you have to decide based on factors not made known here (how bad you want someone in, how long it would take to find someone else, etc...)

@Russell Brazil makes a good point.  I will take one of his points one step further:  what would you do with the money?  People are throwing out figures of 5%-15%.  Which is possible.  But how much time per week or month do you have to devote to a new investment?  Is a 1031 to a larger unit something you want to even do?  For someone going in guns blazing it might be the right move.  For someone just looking for a little passive income that has a full time job/life already it might be different.   

I agree that the 3.25% your getting now is low, but it sounds like its damn near passive.  Lastly, if your place rents within one week consistently you might consider raising the rent.  Might be a telltale sign its under priced.  

LOL.  Upvote for the comedic and succinct demonstration.  When getting advice or facts, always consider the source! 

@Malik Cole Its going to sound harsh, but remember, I came to help. 

Agents don't normally "partner" with people.  They might partner with other agents to sell a property here and there.   Your post needs to say more.  

To begin, I suspect your an investor who is looking for distressed homes.  I'm guessing.  If I'm wrong, you've proved my point.  If I'm right, you still need to write more and and write it more clearly.  

You don't want to partner with an agent.  You want an agent to work with.  Its only lingo, but its a dead give away you don't know what you're doing.  Agents will avoid that like girls avoid the boy with bad B.O. at the school dance.   I'm being serious.  Talking the talk matters.  

The "much more" part of your post makes you sound like you want to be a mogul.  Its ambitious, but my advice is tone that down.  Figure out what you want from one person or group, and ask them to provide that.  Remember, I said it would be harsh.  But the "much more" makes it sound like you want to fix-n-flip, and be a landlord, and be a developer.   One thing at a time.  

Finally, go offline with this type of request.  Contact agents in the DMV area by phone and have some parameters (location, price range, SF vs Multi, etc...)  Be prepared to answer questions regarding your funding source.  My guess is they will come up.  

Finally, keep educating yourself and narrow your focus when building a business relationship.  

You're going to have a hard time soliciting quality answers on your situation because, although you've given a nice broad outline, there are many other details that should influence your decision.

1.  How hard is it to rent out and manage your would be flip?

2.  Is the rental break even cash flow, or better? 

3.  How much in taxes will save by getting out of short term cap gains status?

4.  How much are you going to pay in interest on your next flip (I usually calculate 10% of repairs+renovations for cost of hard money.  Ballpark figure.)?

You could break all these numbers out and do a true apples to apples, but you'll never be able to quantify how much you think the property will increase in value over the year you hold it, or the trouble it is for you to manage the rental.  

Many times when you do these numbers, its a crapshoot either way, and your decision is going to be based on your gut.  No clear cut right or wrong.  Thats not to say 2 years from now there won't be a decision that clearly would have been better than the other.   But hindsight, as they say, is 20/20. 

As a cash buyer, I can tell you that schmoozing with people and being added to a 'list' is not high on my list of priorities.   

That sounds harsh,  but the reality is you'll get further when you actually have a deal to shop around.  Its true you run into a chicken and egg phenomenon  (ie, you don't want to start building your list of buyers when you have a deal already locked up and the clock is ticking), but the reality is, even on your end, its hard to know who's serious and who isn't until it comes time for action.  

Unfortunately, there are lots of talkers in this business.  

 @Russell Brazil makes a good point.  For example, my answer was clinical and technical in response but took none of your goals, limitations, strengths, likes, etc in to account.  You can ask 20 different investors and you'll get lots of different takes from their points of view.   

But the above just sounds crazy.  A ground up build might make financial sense, but it has serious down side.  Your investments will need your time and attention.  But don't let them cripple you by monopolizing your time and finances.  I've made this mistake.  

I won't reply to the funding side of your question as the best way to that is talk to multiple brokers. 

But as for option 1 versus 2, be careful as looking at them as purely numbers.  There is a skill and big learning curve in investing 1,000 - 3,000 miles away.  Be careful about glossing over that.  

That said, I think you have a flaw in your logic.  It seems like a given that real estate in NYC is going to appreciate more than property in FL or AZ.  But are we sure?  We know San Fran is through the roof.  But will the bubble burst if something happens in tech?  if the foreign money that's been driving up NYC, Vancouver, and Miami dries up what happens to values in those areas?

All I'm saying is don't take it as a given that a brownstone in Brooklyn is going to significantly out appreciate a little stucco ranch in Scottsdale.  I know it seems intuitive and it feels like it.  But I'd look at that harder at the data from the past 20 or 30 years.  

And I'm sure this is obvious to you (but for the lurkers reading I will say this anyway) don't forget to control for gentrification.  If you own in Williamsburg for instance, the price pop from gentrification came and went.  Ship sailed.  So take into account the skew in th data when you compare appreciation in Willaimsburg versus Orlando for the last 20 years.