All Forum Posts by: Chris K.

@Brittany H.

Depending on your network, it may make sense to partner up on a deal. As @Jason Lee mentioned, architects can be very valuable on many projects due to their expertise. And the fact that you work for a development firm means you could be in a great position to get access to vendors, subs, investors, etc. My guess is that you may already have co-workers who are investing in real estate. Many of my contacts at GCs and Development Firms often work on smaller side projects. 

Disclaimer: While I’m an attorney licensed to practice in PA, I’m not your attorney. What I wrote above does not create an attorney/client relationship between us. I wrote the above for informational purposes. Do not rely on it for legal advice. Always consult with your attorney before you rely on the above information.

@Brittany H.

Here's a very simplified example of how investing in NYC can be very lucrative. Let's say you invested in a 20 unit apartment back in 2010. Each unit rented for about $2,000 a month for an annual gross scheduled revenue of $480,000. Let's also assume that the NOI is about 50% of the gross revenue ($240,000) and that your all-in amount for the project was equivalent to buying it at a 5 cap ($4.8 million). My guess is that you won't find 5 cap properties in NYC now but we all thought the world was ending in 2010.

Let's look at the property in 2020. From what I understand, the average rent in the NYC market has increased around $1000 per unit since 2010. So let's say your NOI is now about $360,000 instead of $240,000 (3000 * 20 * 12 * 0.5). And because it's now 2020, the market cap rate is around 3.5% (no idea if this is true but sounds about right). So now your building is worth around $10.3 million. So just by the simple fact that you bought a building in NYC, the value of your building increased by about $5 million.

The above is a very simple analysis with perhaps unrealistic assumptions. But that's the basic idea. Essentially, investors are betting on the fact that NYC will always be a desirable place to live. 

My guess is that the above example applies to smaller investors as well. For example, I would guess that folks who bought an apartment unit in 2010 will likely find that it's worth more in 2020. Again, this is by the simple fact that NYC is a cool place to live. 

That said, it's hard to predict what will happen in the future. Maybe we will have another crisis in 2030 and real estate prices tank again. Institutional and larger investors can offset this risk by diversifying their investments. And they may have enough cash to withstand the storm for decades. But in your situation, you are going all-in on this one apartment unit.

Cost segregation just refers to something you can do to accelerate the depreciation on a building. Instead of taking the depreciation over the standard number of years, you send in an army of qualified professionals and they go and look at each part of the building and make a guess at how many years each component has. For example, they may look at a doorknob and say "it looks like this knob has 2 more years left"). In the end, they tally up all their findings and give you a new depreciation schedule. So you now could potentially depreciate the entire building in 5 to 10 years. 

Disclaimer: While I’m an attorney licensed to practice in PA, I’m not your attorney. What I wrote above does not create an attorney/client relationship between us. I wrote the above for informational purposes. Do not rely on it for legal advice. Always consult with your attorney before you rely on the above information.

@Brittany H.

Welcome to BP! 

I'm a believer that you can make money in all real estate markets. As you alluded to, the challenge with NYC is that you are dealing with major competition including institutional investors. Depending on your financial situation, you might still be able to find deals at your price range. But you likely cannot play the long game that institutional investors can. 

And as you probably know, a lot of development projects in that area are tied to tax credits, grants, and other strategies (e.g. cost segregation and 1031 exchanges). So many projects that may not make sense at first glance may start to make sense once you factor in the tax savings. You may struggle to pull that off by yourself. 

So the short answer is that you can make money in real estate in markets like NYC. The proof is in the sheer number of development, new construction, and renovation projects in the area. But you really need to understand how the numbers work and have a game plan to deal with all the risks. Institutional players can wait years for the market to improve. You probably cannot. 

Disclaimer: While I’m an attorney licensed to practice in PA, I’m not your attorney. What I wrote above does not create an attorney/client relationship between us. I wrote the above for informational purposes. Do not rely on it for legal advice. Always consult with your attorney before you rely on the above information.

@Shane Ward

Are you looking at short sales? Just note that for residential properties, lenders often have restrictions on the amount that they can approve. And it's often a long process where the lender needs to get permission to do so. 

Disclaimer: While I’m an attorney licensed to practice in PA, I’m not your attorney. What I wrote above does not create an attorney/client relationship between us. I wrote the above for informational purposes. Do not rely on it for legal advice. Always consult with your attorney before you rely on the above information.

@Patrick Liska

Interesting question. My gut instinct is that it won't be a valid basis to pierce the corporate veil --- at least on its own. But I'm not really sure if there is a caselaw on point. 

Disclaimer: While I’m an attorney licensed to practice in PA, I’m not your attorney. What I wrote above does not create an attorney/client relationship between us. I wrote the above for informational purposes. Do not rely on it for legal advice. Always consult with your attorney before you rely on the above information.

I agree with @Nathan Gesner on this. Lenders are still lending. I can't help you with lender contacts in OH but I may be able to help in PA depending on the location of your properties. 

Disclaimer: While I’m an attorney licensed to practice in PA, I’m not your attorney. What I wrote above does not create an attorney/client relationship between us. I wrote the above for informational purposes. Do not rely on it for legal advice. Always consult with your attorney before you rely on the above information.

@Michael S.

What state is the property located in? What does your insurance broker say? 

Disclaimer: While I’m an attorney licensed to practice in PA, I’m not your attorney. What I wrote above does not create an attorney/client relationship between us. I wrote the above for informational purposes. Do not rely on it for legal advice. Always consult with your attorney before you rely on the above information.

@Mary Jay

I'm not sure what difference it would ultimately make. While you could argue that the LLC needs to "clear the mess," you are the owner of the LLC. So it's still ultimately on you to fix the mess. And the title insurance will only cover the items that it is required to cover. I'm not sure what benefit you are getting out of it.

Disclaimer: While I’m an attorney licensed to practice in PA, I’m not your attorney. What I wrote above does not create an attorney/client relationship between us. I wrote the above for informational purposes. Do not rely on it for legal advice. Always consult with your attorney before you rely on the above information.

@Rick Ortiz

In Pennsylvania, there is a realty transfer tax exemption for certain trusts. BUT you want to make sure you do it correctly. It's an area of law where things can get complicated. There's a fairly recent case that went all the way to the Pennsylvania Supreme Court due to the wording in the trust. The person ended up having to pay a few thousand dollars in realty transfer taxes on top of all the legal fees. 

For the due on sale clause, you could fall under the Garn-St Germain Act as @Mike S. mentioned. But you just have to confirm that your property qualifies for it.

I suppose another question to ask why you want a land trust in the first place. Some people are really into the concept. I'm not one of those people. Just curious why you think you need it. 

Disclaimer: While I’m an attorney licensed to practice in PA, I’m not your attorney. What I wrote above does not create an attorney/client relationship between us. I wrote the above for informational purposes. Do not rely on it for legal advice. Always consult with your attorney before you rely on the above information.

@David S.

Based on what you wrote, probably syndication deals are your best bet. But there is some prep work you would need to do to invest in syndication deals as a US Citizen. Perhaps you can find syndication deals in Canada. 

Disclaimer: While I’m an attorney licensed to practice in PA, I’m not your attorney. What I wrote above does not create an attorney/client relationship between us. I wrote the above for informational purposes. Do not rely on it for legal advice. Always consult with your attorney before you rely on the above information.