All Forum Posts by: Costin I.

@Robin Castillo Here is my 2¢ FYI:

1. You shouldn't do business with family or friends. Or generally, folks you can't afford to lose your relationship with them.

2. If you are looking into setting up JVs or partnering, it would be good to get first on the same page with your potential partners. Before you can start to set up the legal framework, various issues need to be addressed. These can be summarised as follows:

What are the objectives of the joint venture?

- general trading principles

- what will the business actually be doing

Who puts what in?

- cash

- other assets

- services

- are any existing contracts of either to be taken over by the joint venture

- who actually does / will do what

Will any external funding be needed?

- who will it be raised from

- who will borrow it

- who will guarantee it

Who gets what out?

- sharing of revenue profits or losses

- sharing of capital gains or losses

- is any payment to be made to either other than as a share of profits, eg for ongoing services

- will the participants be operating a ‘salary/dividend split’ – ie taking their month-by-month requirements by way of low salary, balance as dividends?

What, otherwise, will be the policy in relation to dividends – to what extent is it intended to distribute/retain surplus profits?

Who controls what?

- responsibilities for day-to-day running, in all relevant areas of activity

- tactical decision making (day to day)

- strategic decision-making (longer-term policies)

- what things can only happen if both parties agree

- what will happen if you can't reach agreement on some major issue - ie deadlock

What happens if either party 'wants out'?

- on what kind of notice will this be permitted

- does the other have 'first refusal' to take over the whole venture? - if so, on any favourable terms?

To what extent will the parties be free to carry on other businesses

- while the joint venture subsists

- if one party pulls out

Is it intended that spouses/partners should also be shareholders, to allow for tax advantages from a broader split of dividends?

Is there a vision that any others will become shareholders (or be granted grant options to acquire shares) in the company in the future?

- Who?

- Staff?

- Others?

- On what terms?

Participation in dividends?

Voting rights?

Are there any offshore angles:

- Is there potential for overseas sales or operations?

- Does anyone involved in the venture have any overseas connections?

- Does anyone involved in the venture have any plans to live overseas in the future?

Is there yet any written:

- business plan?

- marketing plan?

- cashflow projection?

Is there an ‘exit strategy’? If so, what is it – which of the following most closely hits the mark?

- ‘lifestyle’ business – ie simply intended to be run by and to provide an ongoing source of work and income for the proprietors, no clear vision for the long term future?

- possibility of future sale at some point?

A core object of the venture is to create an asset with a view to sale or flotation in 5 years?

Which aspects of the above do you feel most important at present?

Which aspects concern you most?

(NB each of you may have a different view here, the question is asked to help understand where each of you is coming from)

More info:

How to Effectively Conduct Joint Venture Agreements as a Real Estate Investor

https://www.biggerpockets.com/renewsblog/effectively-conduct-joint-venture-agreements-as-a-real-estate-investor/

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https://www.biggerpockets.com/forums/48/topics/596231-how-do-i-properly-construct-a-purchase-with-a-partnership

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https://www.biggerpockets.com/forums/51/topics/591376-create-an-llc-for-first-partnership-best-way-to-do-so

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https://www.biggerpockets.com/forums/51/topics/526244-taking-on-partner-s-and-limiting-our-liabilites

Partnerships and joint ventures are tricky. So, my first suggestion is...don't do it.

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https://www.biggerpockets.com/renewsblog/2014/03/05/questions-for-capital-partners/

https://www.biggerpockets.com/renewsblog/2006/11/16/real-estate-partnership-questions/

https://www.biggerpockets.com/renewsblog/questions-ask-investment-partners/

3. Plus weekend bonus - check out my “conversation” around crafting a partnership agreement - https://chatgpt.com/share/6724065a-5b98-8000-a466-d42087bfc2f9. Not a substitute for a lawyer, but you can use it to flesh out a lot of details and get pretty close to the target agreement.

Good start, but also very basic. The OP should be expanded to include details on how one can determine the land value, as well as the various pros and cons of each method (e.g., lender appraisal, property tax assessment, insurance policy, etc.), and whether to use the highest or lowest value. 

@Matthew Waggoner - study this diagram to find answers to your questions and questions you have yet to think about.

ISSUE BREAKDOWN + PRIORITY SCALE

1. Basement Water Penetration & Foundation Concerns (High Priority)

• Seriousness: This is your biggest concern. Water in the basement is never a small issue.

• What it could mean: Future mold, foundation deterioration, ongoing repair costs.

• Fixability: Yes, but potentially expensive ($5K–$20K depending on scope).

• Must-do: Bring in a basement waterproofing contractor ASAP for a professional opinion. If they suggest French drains, interior sealing, or major sump pump work—those are major costs.

• Red flag: Sump pump discharging into town sewer is usually illegal and a code violation.

💡 Ask for:

• Credit at closing for repairs or price reduction

• Professional fix before closing (less common with estate sales, but ask)

2. Plumbing Issues (Moderate to High Priority)

• Seriousness: Not critical today, but very important long-term. Cast iron pipes = 50-100 yr lifespan, and these may be nearing end of life.

• Concerns: Corroded waste lines = leaks, backups, expensive fixes. Poor water line support = potential bursts.

• Fixability: Yes. But replacing waste stacks or long runs of pipe can get really pricey (think $5K–$15K or more).

• Must-do: Licensed plumber evaluation before closing.

💡 Ask for:

• Concession or credit

• Specific inspection follow-up

• Repair priority for safety issues (like unsecured/unused water lines)

3. Condensate Leak (HVAC) (Low to Moderate Priority)

• Seriousness: Mild compared to other issues. Could just be a simple clog or failed pump.

• Fixability: Yes, usually <$1K.

• Must-do: HVAC pro should confirm there’s no water damage or mold as a result.

4. Wall Staining in Bedroom (Medium Priority)

• Seriousness: Possible past leak, but if roof was replaced in 2014 and there’s been no issue since, you’re likely okay.

• Fixability: Yes, but cutting open plaster to inspect isn’t cheap or easy.

• Must-do: Ask seller for documentation or evidence roof leak was resolved. Consider camera moisture inspection in wall if possible.

5. Garage Roof (Detached) (Low Priority)

• Seriousness: Low unless garage is being used as a workspace or finished area.

• Fixability: Easy roof job, probably $3K–$7K depending on size/material.

• Must-do: Budget for it in year 1.

What To Do Next

1. Bring in Contractors Before Closing

Absolutely. You need real-world quotes before you're fully committed:

• Basement waterproofing specialist

• Licensed plumber

• General contractor (if you’re planning multiple remodels)

• Optional: HVAC tech for peace of mind

2. Negotiate Concessions or Credits

Since this is an estate sale, the sellers might not do the work—but they might give you cash back at closing instead. This is very common in situations like this.

You can say something like:

If they refuse, you decide whether you’re okay absorbing those costs post-closing, or if it’s a deal breaker.

3. Get It in Writing

Everything should go through your agent and be documented: repairs, credits, seller disclosures (like the history of water damage or roof leaks).

 Summary

• Yes, consult contractors before proceeding.

• Ask for credits, not repairs, especially in an estate sale.

• Biggest red flags are water issues and potential foundation damage—get that reviewed fast.

• If they refuse concessions, you’re not screwed—but factor those repair costs into your overall budget. This could still be a great buy if you love the house and can afford the repairs.

1. Are you buying a residence or investment property? The subjective criteria for a residence don't translate properly into a good investment property. 

2. New homes aren't necessarily better than older homes, depending on builder, quality and price. A solid inspection is required for brand new homes and you'll be surprised by some of the findings.

3. RR West is pretty much land locked - not much new development there. Same as with Cedar Park, those prices will only go up because of that. Leander has plenty of empty space to expand and build, that's why so many new houses, lower price points and likely lower appreciation.
RR East has more open spaces, and can annex more, thus likely lower prices. Plus a clay soil problem, making the foundation issue a question of when, not if. But foundations need to be maintained all over TX, so you need to learn to do that anyway and anywhere.

4. School ratings are a very important criteria in property location selection. Between an older/smaller/pricer house in an excellent schools area and another newer/bigger/cheaper one in mediocre/lousy schools, the former will always beat the later. Schools quality affect many other factors - criminality, shopping, vacancy, etc.
But, beware, school ratings change - new master-planned divisions might start with new schools with low or no ratings, evolve into excellent schools as the nice houses get occupied by young professionals, and devolve in rating as the kids grow up and go to college (a 15-20years cycle IMO) and a new generation might move into the now old and soon obsolete houses. 

5. IMO, A-class or above properties do NOT make good rentals, because a. they likely require high rent, b. they are too nice to place anyone in (or require serious vetting), thus requiring the “perfect” tenant, which is hard to find, hard to qualify, and more important, hard to keep.

• Why? Because someone with those qualifications will be a. very demanding as a tenant b. in a temporary situation (either corporate placement, or someone gathering their down payment and/or figuring out things, areas, schools, etc. before c. moving into their own residence. Thus creating frequent vacancies, with the associated expensive make-ready operations.
  A-class might make good investments due to high appreciation (but counting on that is closer to speculation than investment), but they will be lousy cashflow rentals, even when paid off.
• Nice properties attract nice tenants (at least in theory, or at least nicer tenants). You should tailor your expectations in line with the property class rental you are offering and the tenant pool it’s likely to attract.
  What we desire as the ideal tenant might be different from what is a good tenant for the type of property you have and might be different from how it’s expressed in your rental criteria and what flexibility you are willing to accept.
  More than that, a property of a different class than its neighborhood will have trouble attracting matching tenants - a reason not to over-remodel a property above its neighborhood class/comparables. [FYI - We tested this with one of our rentals, made too nice for the surrounding neighborhood, and while having no problem attracting visitors due to excellent photos and marketing, many declined to apply after seeing the neighbors and street, and a couple even didn’t stop by - the property was showing as an A- class in marketing and in person while being in a C+ blue-collar neighborhood. Thank God for good schools that saved our behinds in this case].

So, back to the first question - are you looking for a residence or for a investment rental?  A $600k 4-bed, 3-bath is a fancy residence around here and a mediocre investment property.

@Neil Narayan - what do they call "the hottest ZIP codes"? 

The ZIPs with the most activity? With most inventory? With most price drops (as in "hot, don't touch")?

I don't know about other areas in TX, but I keep a close eye on Austin-SAN corridor, and I'm familiar with the market in Kyle, New Braunfels and NE San Antonio. And IMHO, the prices are dropping big time (on avg. 10K/month...houses that were above 300K a year ago are not selling at 250K now) and the available rentals saturation is worse than I seen during summer season (with rents dropping from 1$-1.08/sqft to 0.8$/sqft and very little contacts and applications...just go in Zillow and look how many rentals are on the market now in Kyle, New Braunfels or Converse). 

So, hot Zip codes, don't touch or you'll get burned. Or buying opportunities if the bottom is reached soon. All depending on perspective.

I would take it with a big grain of salt, I think Opendoor is trying to drum up interest, given how many properties, they and other institutional buyers, are having on the market (e.g. AMH4Rent dumping their TX portfolio, just do a search in Kyle and Buda). 

https://www.cpapracticeadvisor.com/2024/12/27/boi-reporting-...

"A 5th U.S. Circuit Court of Appeals late Thursday reinstated a nationwide injunction that had been issued earlier this month by a federal judge in Texas who had ruled that the Corporate Transparency Act was unconstitutional, Reuters reported on Friday, thus suspending the deadline once again for most reporting companies to file beneficial ownership information (BOI) reports with the Financial Crimes Enforcement Network (FinCEN)."

@Ashish Acharya @Clinton Davis

@Bob Dole - there is more to the cost segregation question than on the surface. Here is a CSS Decision Diagram flowchart intended to bring together all the various questions when assessing the benefits of a Cost Segregation Study (via a professional or DIY).
FYI - You can do a CSS for ~$400, ask @Malik Javed how.

@Brad Herb - one thing to watch when investing in a syndication with an SDIRA is the highly trumpeted ROI in early years via a cost segregation study and the accelerated depreciation it creates...which you'll not be able to take advantage of via a SDIRA.
The same is true for a house—placing a tax-advantaged asset into a tax-advantaged investing account cancels the tax advantages (or many of the immediate ones).
Maybe @Michael Plaks or @Kaaren Hall can explain this better or correct my understanding here?

@Bob Dole Two other benefits of CSS and accelerated depreciation via a cost segregation study: partial disposition and the death step-up basis.  

1. Partial Disposition Benefit: In a cost segregation study, components of a property are identified and depreciated on shorter schedules (like 5, 7, or 15 years). When an owner replaces or retires certain items (e.g., lighting, HVAC, or carpeting), they can claim a deduction for the remaining undepreciated value of those items. This allows the owner to “write off” the value of disposed assets immediately, rather than continuing to depreciate them. The result is an immediate tax benefit in the year of disposition, reducing taxable income.
2. Death Step-Up Basis: (bummer, you have to die for this benefit to kick in, but...) When an owner passes away, the property’s tax basis is reset to its fair market value on the date of death (this is known as the “step-up basis”). A prior cost segregation study increases the depreciation taken during the owner’s lifetime, lowering taxable income each year. Then, at death, the property’s basis resets, effectively erasing the accumulated depreciation. This benefit allows the owner’s estate or heirs to receive the property at a new, higher basis—reducing capital gains taxes if they choose to sell the property after inheriting it.

In short, partial disposition allows tax deductions for retired property components during ownership, while the death step-up basis resets the property’s depreciated value, providing tax relief for heirs. Both offer valuable tax strategies, particularly when cost segregation is applied early.