All Forum Posts by: Charles Carillo

@Brandon Montgomery

Find out what is most important to the seller and structure the deal around it. If they want more cashflow; possibly give them a higher interest rate and lower the down payment and/or purchase price.

@Michael Gallagher

Usually, the fees generated will be shared across the GP using the percentages you have determined each GP member to have. For example; if a partner has a 10% share of the GP; they will receive 10% of fees that are generated. I believe what you need to determine is what the GP percentage is for each partner. 

Typically, the person running the deal (asset management) gets about 40%-50%, person sourcing/underwriting/due diligence on a deal gets around 5%-10% and signing on the loan about 5%-10% and providing risk capital is about 5%-10% of the loan. 

Seasoned operators will be giving away smaller amounts of the deal for; sourcing, signing on debt and risk capital.

@Aaron Shade

Typically when house hacking you are purchasing the property yourself (possibly with a spouse) and utilizing FHA financing to minimize the down payment. Many investors will then quitclaim the property to a LLC. You need to speak to your attorney before doing this.

If you are purchasing an investment property to rent out along with 3 other investors; you might want to get an investor mortgage instead of a personal mortgage so that you can close in the LLC. The rates and terms will not be as favorable. If one of the members lives in the property; you would just charge them rent that is paid to the LLC.

Is there a reason that 4 people (3 others) are purchasing your house hack with you?

@Mo Khidir

That seems pretty competitive. The 10-year is at 2.4%.

@Rick Wiggins

We have had this happen a couple times before with older properties. I would reach out to several independent agents and see what companies they work with that you can apply to. Make sure they are not applying to the same companies. I would also speak to other property owners/investors in your area with similar properties and ask them who they use for insurance. Referrals are always the best.

@Kelsey Rhea

I would give her a 60 day notice, possibly find her a new place to rent, help/pay for her move and possibly offer her additional funds once she is out.

This was a situation when I bought my first rental; the previous owner however, moved the guy out, found a new apartment and paid to have him moved.

You are going to make the money back in a couple months; I would just give them a good heads up and assist them along the way.

@Sam Runge

Yes, he does sound like a great candidate for seller financing. When I am assessing a potential seller financing deal; I speak to the seller and find out what they are most concerned about. It usually is one of three things; down payment, interest rate or purchase price. You can then skew the deal because of that point.

For example; if he really wants $265k; great, propose a lower down payment of say 5%-10% and an interest only mortgage rate of 5% paid monthly. I would also remind him that he is saving 5%-6% by selling it without a broker. 

Side note; he probably doesn't have trouble keeping tenants because he never raises the rent (much).

Want to defer or reduce capital gains? Charles discusses what investors should know about the tax benefits of investing into opportunity zones.

Links Referenced in Episode:

• https://www.wellsfargo.com/the...

• https://badermartin.com/want-t...

Talking Points:

➡ First off, always consult a tax professional before investing – especially in Qualified Opportunity Zones

➡ The 2017 Tax Cuts and Jobs Act established the Qualified Opportunity Zone program to provide a tax incentive for private, long-term investment in economically distressed communities.

➡ Investors in these programs are given an opportunity to defer and potentially reduce tax on recognized capital gains.

➡ Tax savings are only available when investors retain the investment in a Qualified Opportunity Fund for the time frame stated.

➡ How this may help you? Are you facing a significant tax liability because of capital gains? Investing into a Qualified Opportunity Zone Fund may be a viable option for you.

➡ What is an opportunity zone?

o An Opportunity Zone is an economically distressed community that provides preferential tax treatment to long-term investors under federal tax rules.

o For an area to qualify as an Opportunity Zone it must be characterized by either of the following:

➡ a poverty rate of at least 20 percent, or

➡ a median household income that is less than 80 percent of the median household income of its neighbors.

o There are more than 8,700 certified opportunity zones. They are located in every state; Washington DC and 5 US territories.

o Not all locations are rural or inner-city.

➡ What are the federal tax benefits? The 2 main benefits are:

o Number 1 is the deferral of the capital gain reinvested into the opportunity zone – until 2026; payable in 2027

o Number 2 is if the qualifying investment in the opportunity zone is held for more than 10 years; its tax basis increases to fair market value as of the date you sell it; in other words, the qualifying investment in the opportunity zone appreciates tax-free; so there will be no capital gains when you sell it.

o Check with your tax professional about state tax implications.

➡ What are the requirements for a Qualified Opportunity Fund?

o A Qualified Opportunity Fund must invest at least 90 percent of its assets into Qualified Opportunity Zone Properties

o These can be indirect or direct investments

➡ In conclusion, if you have capital gains and you are able to reinvest them; investing into a Qualified Opportunity Zone Fund might be a great solution; to reap the full rewards; I would keep your funds invested for over 10 years so that the gains from the fund are not taxable.

➡ One thing that was not mentioned in my research was inflation. If you are deferring taxes for several years; you are paying with dollars’ worth much less. Just figure out from the time you invest in the Qualified Opportunity Zone Fund to early 2027; what will inflation be and you can see the additional hidden discount you are receiving.

➡ Where do you find a Qualified Opportunity Zone Fund? Speak to your financial advisor and they should be able to direct you to a firm that offers them but, going direct to the actual fund operator; will dramatically reduce fees. A financial advisor of mine introduced me to a firm that connects you with an operator; and the fees were upwards of 8-10% vs. going direct to fund operators where the fee was only 1%-2%.

➡ Always consult a tax professional before investing

Listen https://podcasts.apple.com/us/...

Watch 

@Account Closed

Possibly refinance with a commercial/investor loan. Yes, the rates/terms will most likely not be as competitive but you can use it with a property in a LLC.

@Anthony Liston

Typically, you would request the current rent roll and the T-12 (trailing 12 month financials). This should provide enough information to underwrite the property and possibly submit a LOI. Properties that are self-managed (if this is) typically have less than perfect financials so be prepared to re-assemble their financials so that you are able to perform the underwriting.