All Forum Posts by: Chris K.

@Marky Suazo

I don't think it is any more difficult for Scranton than any other area. The main restriction is that you'll need a contractor that is licensed with the City of Scranton (at least the last time I checked). Other smaller municipalities may not have similar requirements. 

The main challenge will be finding the right contractor for the right price. If you invest in a "local" project, you can reduce some of the costs by being more "active." That's generally not an option for out-of-town projects. 

Note that Scranton requires a local property manager if you live out of town. I cannot recall if the City requires a licensed property manager or just a contact person. 

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.

@Whitney Stanley

Aside from what @Dave Foster already wrote, Zero Cash Flow Properties ("ZCFP") + Accelerated Depreciation + 1031 Exchange is a tried and true combination. It's very attractive for certain types of investors since you get a lot of benefits (e.g. higher LTV rate, get "higher-grade" investment for less cash, non-recourse loans, lots of depreciation, etc).

In this context, "Phantom Income" generally refers to the situation where the investment starts showing a profit. This is especially a concern when you accelerate the depreciation. So when people invest in these deals, they generally have to think about how to exit before you start getting whacked with taxable income. 

I'm not 100% sure what you are asking about leaseholds. In most of these ZCFP deals, the lenders require a long-term NNN lease with a national tenant with a good credit rating. The investor would still own the underlying real estate as fee simple. But the "value" of the investment comes from the long term lease.

So in this context, "Joe's Liquor Store" is not really an option for these deals. But maybe I'm just misunderstanding the question. 

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.

Are you looking for brokers that focus on traditional loans or portfolio loans? Also how big are 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.

@Andrew Brown

On the new construction side, it's a very hot market. We work with many major developers and GCs in the area. They literally cannot build fast enough. 

The problem is that you can't really compete with those institutional investors. So I don't know how an "average" investor makes out in that market. Many folks I know did well in the past decade or so thanks to their owning properties in the surrounding boroughs before they got hot. But again, there's a big element of luck counting on such appreciation. 

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.

@Marky Suazo

BRRRR should work anywhere in the Scranton market and also the Wilkes-Barre market. It's arguably the ideal strategy for the area since we don't have much of "natural appreciation." Of course, you will need to ask whether you want to deal with the logistics of an out-of-town rehab. Even as a construction company owner, out-of-town rehabs are not my cup of tea unless you are working on bigger projects.

In terms of bureaucracy, Scranton itself arguably has the highest-burden in the Northeastern Pennsylvania area ("NEPA"). But you could look into the surrounding municipalities as well. While we do have public transportation, most people in NEPA drive. So the rental market is more spread out than what out-of-town folks may be used to. 

In terms of success, many folks who do well in the area. Maybe @Adam Guiffrida and @Marc Winter can chime in since they are very active in that market. 

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.

@William Ritter

I cannot think of a 1031 QI specifically located in the Lehigh Valley area. But you don't generally need your QI to physically be located in the area where you purchase or sell the property. I would instead focus on working with a good QI like @Dave Foster. 

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.

@Stelljes Tate

There's really no "best" way to do it. I would get a simple agreement of sale signed, go to a title company, get title insurance, and close. Depending on the relationship between you and the family member, you might be able to avoid transfer taxes. But it's really standard stuff.  

A quitclaim deed won't help you reduce the costs. I guess you could risk it and not buy title insurance. But I personally would never do that. 

I typically like working with attorney-owed title companies. But it's up to you. The ultimate costs are about the same.   

Feel free to PM me if you need contacts. 

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.

@Steve Babiak

You are absolutely correct. That was a mental typo! So it should've read: 

"As for title companies, the general custom in Pennsylvania is that the BUYER should choose the title company. Now if the SELLER suggests a reputable title company, I have no problem using them." 

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 Lowe

I have never pitched anything like what you are doing. So not sure what I do is relevant. 

But I would note that you are not really pitching a traditional investment. It sounds like you intend to enter into a long term lease with the landowner and build these guys on top. That's fine but you need to convincingly state what the market value of that lease is since I assume that's one of the secured assets you will offer to the investors. 

With that in mind, the target return of 10% is probably not going to be enough. One reason why you could get real estate investors for that low return is that you can offer security to the investor. Here, I don't see any meaningful security that you can offer. Sure, you can offer a security interest in the building and the lease. But that's not as stable as an asset as real estate. So the returns you need to promise most likely have to be in the "Shark Tank" range than a traditional real-estate deal. 

Just my thoughts. 

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 Lowe

That's a difficult question to answer without knowing all the details. I guess look at the deal from the investor's perspective and ask what the target return should be. And then ask yourself what it would take to make it profitable for you as well. 

For what it's worth, shipping container projects are very popular nowadays with folks doing pretty impressive looking projects. But one of the biggest issues I've seen with them is dealing with all the red tape. I know many "big boys" who tried developing properties using this idea on a massive scale. But many gave up on it because of all the hassle involved. And once they factored all those factors in, the overall cost saving wasn't that impressive compared to say just going standard modular construction. 

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.