All Forum Posts by: Chase Gochnauer
Chase Gochnauer has started 33 posts and replied 367 times.
Post: Apartment Complex Financing
- Investor
- Des Moines, IA
- Posts 380
- Votes 201
My quick numbers using my terms above:
Annual cash flow - $29,471
Mortgage paydown in first year - $124k
Mortgage paydown at end of 5 years: - $685k.
Total first year return = $153,471
First year return on down payment of $1,000,000 = 15.3%
This does not include the minimum $145k or so tax deduction you'd get for depreciation each year, or the huge tax deduction you'd get with the new bonus depreciation tax laws if you did a cost segregation.
Post: Apartment Complex Financing
- Investor
- Des Moines, IA
- Posts 380
- Votes 201
Also, that cap rate is 6.7% which is a little bit on the low side, especially if there is no way you think you can improve it with higher rents or lower costs. It may be on par for your area, but it is a little bit lower than I would look for.
Post: Apartment Complex Financing
- Investor
- Des Moines, IA
- Posts 380
- Votes 201
I have a similar deal at $4.25m that I am closing on very soon with a local bank @ 20% down. Personal guaranty
Terms:
0.5% loan fee
4.61% interest
5 year fixed
20 year amortization
The Freddie Mac Small balance loan looks like the best deal, but I think can be more challenging/time consuming to get the loan. I may look into refinancing into this a year or two down the road
http://www.freddiemac.com/multifamily/product/pdf/...
Local banks can be negotiated with on a deal like this, don't immediately take what they offer you. Loan fee and interest rate are negotiable to a point.
@Tom S.
That seems a bit high for a rate for something like that. All my stuff is at 4.75%-4.85% or so with 20-25% down.
Post: Emotions, Work/Life Balance: Transitioning from Agent to Investor
- Investor
- Des Moines, IA
- Posts 380
- Votes 201
I've been an agent, and an investor. I've also worked a W2 job and currently have my own business with 15 employees. Unfortunately, I feel like the inability to maintain a work/life balance is more a personal issue than it had to do with what role you're currently in. Even at my 9-5 W2 job, I found myself reading and doing things in the evening, just because that's the kind of person I am. I'm always wanting to do better, do more, etc.
I think unless you can figure out how to have a good work/life balance as an agent, it will not be any better with an investor. I think delegation is a huge piece that people struggle with and will be no easier as an investor. As an agent you can pay for an admin assistant, have buyers agents do your showing, etc to help with your work life balance. Often times a person will not want to do these things because it's cheaper to do it yourself, but in the end it's not worth it as you lose out on potential business and burn yourself out. As an investor/lanlord it will be the same kinds of dilemmas, why hire a plumber to come out and fix a 5 minute issue for $100, when you can go do it yourself, etc.
Post: Having tenants pay for small maintenance issues?
- Investor
- Des Moines, IA
- Posts 380
- Votes 201
If you want to actually have a plumber do the work, then no I doubt this will work. They will call their buddy that thinks he knows plumbing to come do it for $20 instead.
Post: Illegal immigrants as tenants
- Investor
- Des Moines, IA
- Posts 380
- Votes 201
Originally posted by @Account Closed:
@Tom Gimer I am quoting your last post to many of my friends via social media. It makes me laugh to say I am aware of Texas Dept. of Housing and Community Affairs vs Inclusive Communities Project. I am in a group picture on the Inclusive Communities Project website. LOL
I never said that "all foreign-born applicants" are a protected class. I said there would be a disparate impact on people who are in protected classes. In short... it will tend to make the residents tend to be more Anglo than they would be without the policy. It would also tend to make it be less Asian because foreign students tend to be Asian. 77% of foreign students are from Asia if anyone is interested.
I also said Experian will say exactly what they say on their website. You do not need a social security number to run a credit report. You also do not need a social security number to add something to someone's credit report.
Believe me when Experian says that and you say it is a "creditworthiness criteria" the courts will say it is arbitrary at best.
This could be argued for any policy. You could say that setting an income requirement is discriminatory, because men make more than women as a whole.
Can you let us know what the ideal requirements would be for a tenant, to not be discriminatory?
Post: Tax reform Q&A Thread 2 - Depreciation and Section 179
- Investor
- Des Moines, IA
- Posts 380
- Votes 201
Originally posted by @Yonah Weiss:
@Michael Plaks You're right on about the IRS not requiring cost seg, even though it correctly submits the depreciation the property according to the IRS guidelines. They don't require it because they get paid less when cost seg is done.
Cost seg reports done by CPA estimations are notorious for not passing audits.
We have found that a professional, engineer-based study can identify up to 30% more than an estimation, no matter how good.
@Chase Gochnauer In the past cost seg has not been worth it for most people on SFHs worth under $500,000. Of course, everyone's financial situation, and every property is different. I don't know if this will change based on the new tax reform.
Regardless, on a small property, a full cost seg study could run you around $3-4K depending on size, location, and scope of work.
Thanks for the info Yonah. If a cost seg could identify $40k worth of <20 year items, it would represent at least a $16k cost savings on this years taxes with the new retroactive bonus depreciation, even at $3-4k it might be worth it. I'm not sure what percentage of a home ends up being allocated to <20 year items. Would 20% of the cost of the property be adequate, or even higher?
Post: Puerto Rico real estate
- Investor
- Des Moines, IA
- Posts 380
- Votes 201
I'd be interested. I had looked there in the past in Palmas Del Mar, it sounds like they got hit pretty hard, but it was a nice community. I was just in San Juan about a month ago for a couple of days.
Post: Tax reform Q&A Thread 2 - Depreciation and Section 179
- Investor
- Des Moines, IA
- Posts 380
- Votes 201
Originally posted by @Michael Plaks:
Originally posted by @Chase Gochnauer:
With the 100% bonus depreciation, could this make cost segregation on even a $100k single family a reasonable idea? Example, I purchased a $200k house about 60 days ago, if I could come up with $40-50k in <20yr items in my cost segregation, that would save me a considerable amount on taxes. But, I've never gotten a quote on a cost seg for a SFH to know the cost.
Yes, as I mentioned, cost segregation becomes much more important under the new rules. Here is the dilemma. Technically, the law does not require a cost segregation report. But the burden of proof is on you. If you pay for a professional cost segregation study, their report will not be challenged by the IRS if audited. Your own or your CPA's rough estimates might be challenged. Plus, a professional study may identify more items to segregate.
So it's up to you to decide whether the additional safety and additional savings from a professional study warrant paying for the study. Assuming that the cost segregation companies agree to service SFHs. What do you say, @Yonah Weiss?
Apologies, I realize now my post was a bit gibberish towards the end, thanks for deciphering :)
Post: City Rent Certification?
- Investor
- Des Moines, IA
- Posts 380
- Votes 201
Cities will typically have an inspection process whereby they do an inspection of the property to make sure it's safe and things are up to code. Very location specific and usually towns under certain sizes don't require them.
Here, they're not too bad, but there's always little things that we'll get dinged on that we may overlook, such as a handrail having a return, a smoke detector in just the right spot, a hole in a screen, etc.