All Forum Posts by: David Krulac

@John Underwood in PA. the statute of limitations for Adverse Possession is 21 years.  We have purchased hundreds of properties at Tax Sales, and in a few cases have not done a Quiet Title Action and waited the 21 years.  Obviously doesn't work for every property, every situation and every Tax Sale.  I'm not an attorney and am not giving legal advice.  

The problem with the Tax Sales is lack of notice or insufficient notice.  In one of our cases the property was titled in husband and wife's names.  we bought at Tax Sale and at the trial to reclaim their property the wife, who had signed the Certified Mail Notice of the sale, swore under penalty of perjury, that she "never" told her husband of the Tax Sale.  Therefore, he did not know of the Tax Sale and the court ruled that the sale was invalid and overturned.  In another case the property was owned by John Smith, but the county records were listed with sur name first, so as Smith John.  The notice was sent to the proper address but addressed to Smith John.  John Smith appealed the Tax Sale and the court ruled in his favor saying that the notice should have been sent to either John Smith or Smith, John.  Since the comma was missing the sale was invalid.  Any time a person has moved, and the sale notice didn't get to the owner, the sale is potentially overturned.  Any time the owner has passed away, the notice is invalid.  Any time the owner has not signed the Certified Mail notice, the sale is potentially invalid.  In one specific county the same judge handled all the Tax Sale cases every year.  The judge believed that the loss of the property was too severe of punishment and would do everything he could from the bench to overturn every Tax Sale before him.  In one case, he actually was instruction the incompetent attorney for the former owner on how to present his case in the best light for the judge.  It was if the Judge was "of counsel" for the plaintiff.  It was almost humorous.  We had one case where the sale was court contested and cost us $45,000 in legal fees and after 9 years of Depositions, Interrogatories, etc, we still had not gone before the judge. 

David Krulac

Bigger Pockets Podcast #82

Have bought hundreds of property at auctions, including the first property I bought (detailed in Bigger Pockets Podcast #82) and the very first thing is you have to know value.  The second thing is to know the rules of the sale, like all cash, no cash, no personal checks, deposits required the day of sale, pre-registering bidders, etc.  The third thing is to actually visit the site with your own eyes, ears, and nose.  I've seen people pay more than market value for a property, seen 2 people bid against each other and pay more than market value.  The fourth thing is to vette the property knowing liens against the property, zoning, environmental issues like wetlands, flood zone, availability of utilities, condemnation, code violations, and more. On the plus sign I have seen huge bargains at auctions as well as people overbidding.

and I didn't say my 24 years of ownership were 2000 to 2024.  And my stats can directly from the Federal Government Dept of Labor, Bureau of Labor Statistics. The highest year in that 24 year span was 13.5%, and there was also a 11.3% and 10.3% yearly inflation. All the other years were single digits and there were 6 years were the inflation rate was less than 3%, and 18 years where the inflation rate was between 3% and 7.6%  I copied the numbers exactly for BLS, and you can "trust but verify" by taking the time to look up yourself before saying your government stats are wrong.

Many tax thresholds are NOT indexed for inflation.  It a hidden way that taxes are increased with no new legislation.  In Bigger Pockets Podcast #82, I discussed that capital gains in general are NOT indexed to inflation, but in my view should be.  The longer you own a property the more effect INFLATION has on your capital gain.  The first property I bought I paid $27,000 for a 17 year old home that I owned for the next 24 years and sold for $100,000.  Much, if not most of the gain from $27,000 to $100,000 was due to inflation, which you and I have no control over and are taxed as if it is real money going into our pocket. The year I bought the house the inflation rate was 9.1% (I didn't count that year as I didn't own the property for the full year.)  Based on Bureau of Labor Statistics (BLS) of the US Department of Labor for those 24 years the cumulative inflation rate was 116.8%.  (I realize that my calculation is only simple addition, when the real inflation is compounded and much higher than 116.8%.)  The highest yearly inflation rate during that time was 13.5% and the lowest rate was 1.6%. Inflation alone increased the value by $31,536, which if Long Term Captial Gains were indexed to inflation would reduce the Capital Gains by that amount.

Another example of NOT indexing rates to inflation is the $600 requirement for issuing 1099s.  When that figure was first used the Federal Minimum Wage was $1 per hour and the 1099 requirement represented somebody who worked for you for a minimum of 600 hours.  Today, with the $20 minimum wage, the 1099 requirement only represents 30 hours of labor. (Even at $15 minimum wage that still is only 40 hours of labor.)  

David Krulac

Bigger Pockets Podcast #82

People back out of deals all the time.  In one case the seller just failed to show at settlement, sent his attorney to say he wasn't going to settle.  Another time a couple told the mortgage company that they were getting a divorce, which sabotaged their mortgage application.  Whether that was true or not, don't think they ever got divorced.  Another time after the buyer had their priest come and bless the house, at the last minute decided that house did not have the right feng shui and volunteered to forfeit their $10,000 deposit.  We've also had a buyer pass away between the time of signing the sales agreement and settlement. We allowed the estate to back out with no penalty. 

We have done both.  The first house I bought (detailed in BP Podcast #82) I house hacked from day one, then moved out and rented the whole house for the next18 years, then sold and did a Section 1031 exchange.  The second personal residence that I bought was a two unit and lived I one and rented the other.  When I moved out I then rented the whole property and subdivided the back yard and did a land development plan for building 17 new houses.  Then the third personal residence I bought paid $139,000 and lived there for a long time and sold for $500,000 cash in two days and used the Section 121 tax free sale.  This provision allows $250,000 tax exclusion for a single person or $500,000 tax exclusion for a couple.  imho the 121 and 1031 are two of the best features of the tax law benefitting real estate owners.  I would highly recommend using either or bath provisions.

David Krulac

Bigger Pockets Podcast #82 

With the Navy in town there should be a higher number of VA mortgages there. Look for military and civilian workers selling their homes, for transfers out of town, or trade ups for bigger homes. Contact real estate agent, telling them that you are a buyer looking for the assumable VA mortgages. Don't ignore assumable FHA mortgages also. Friends at a title company could tell you people who settled with VA/FHA mortgages. Search courthouse records for assumable mortgages, some USDA mortgages may also be assumable. Look at lists of properties that are on the Sheriff Sale, and Tax Sales, as some of those could have assumable mortgages, and provide a list of potential assumable mortgages, where the owners are potentially losing their properties.

David Krulac

Bigger Pockets Podcast guest #82  

I've always used the analogy that when you buy real estate, you are in control.  You made the decisions that drive your success.  In the stock market you are not even the tail on the dog, more like a flea on the tail of the dog. 

Financing, as mentioned above is a big component real estate investing. I have never borrowed less than 80% LTV and have financed 90%, 97%, and 95% at times. You can't do that in the stock market and I've never had a margin call in real estate. I really did start with nothing and the first 11 properties I bought were 100% financed in one way or another. I had to get financing, because I had not money, no savings, no rich relatives and was only on the job 9 months when I bought my first property. (which I talked about in Bigger Pockets Podcast #82). If I didn't get heavy financing I would not have been able to buy any real estate. Can't do that on wall street!

Control and financing are only two advantages to real estate.  John Paulsen made $5 billion in 2008 stock market, congrats to him.  I would say that opportunity was not available to the average small time investor. 

You can use your normal lease, but Section 8 will have their own lease in addition. they screen the tenant for income eligibility and require a physical inspection of the property before tenant moves in and on a yearly basis for renewals. Peeling paint, handrails on stairs and cracked glass are no-no. Depending on the level of your property, your rent may exceed section 8 thresholds. The "Median" rent for Harrisburg & Dauphin County is eff $876, 1br $1,021, 2br $1,273, 3br $1,634 and 4 br $1,695. Those are Median rents, 50% of rents are higher, 50% are lower. All the rents for Section 8 HUD for the entire country are at www.HUDuser.org Look for FMR (Fair Market Rent). Section 8 will deduct utilities that the tenant pays from those figures.

David Krulac

Bigger Pockets Podcast #82   

Don't know Reno, been there and even have relatives there. However, locally some places in PA are allowing ADU, but have restrictions that if you build one for a parent or a child, that once they leave it can NOT be rented to a non-relative. So, there are cases here where ADUs are sitting their empty when the elderly parent passed away and can not be occupied by a non-relative.