All Forum Posts by: Jimmy H.

Yes the inheritance tax is likely to have a deduction of somewhere between 1-5 million and 35-55% tax on amounts above that. I am aware of the gift tax rules as well.

Your mention of paying bills in someone else's name is similar to what im thinking about, except you just buy the whole property in someone else's name.

I can't really see any tax/legal flaws with this. Just curious if anyone out there was aware of something that i've overlooked.

Silver market apparently has been severely manipulated over the past few decades (even a pending suit against some JPMorganer's for this - don't have alink on hand) and apparently there is ashort squeeze in silver.

I think gold and silver will continue to go up. I think holdings in currencies of commodity based economies will prosper long term.

that being said, I think RE poses some of the greatest opportunities. Buy when others are fearful and sell when everyone is excited is the general premise. therefore I am avoiding commodities at the moment and focusing on RE. Let the talking heads drive down investments prices in RE and let the dumb money chase the silver miners, etc.

And as was previously mentioned in this thread - the truth is that you will be most successful doing what you know. A bit of diversity should be required, but if you are knowledgeable and successful in one RE niche (or any market or niche for that matter) I say stay there and milk it for all its worth. Do what you know best.

Turn off your TV and computer and you might have an easier time spotting opportunities without tlking heads swaying your judgement. Or if you have to have the TV on, do the exact opposite of what the talking heads are advising.

I had a thought that you could potentially use RE to bypass inheritance and gift tax issues. I know that you are only allowed to gift about $12,000 to any one individual, and I know the goverment taxes you when you die and want to pass on wealth to your heirs.

I know this situation would involve a lot of trust between the parties and is situational....but consider this scenario. Parent has cash (or could potnetially liqudate mostly into cash) and buys investment property in the child's name. Simple as that, I don't see how this is a gift or would violate any laws - but that is why I am throwing it out to al BPers to poke holes in.

If a parent buys a property and puts the name directly in the ownership of a child (or an LLc that a child owns), isn't this an easy way of bypassing inheritance tax issues?

A variation on the theme - You could also form an LLC that is 99% owned my child and 1% owned by parent and the parent rolls their property into the LLC name?

Will this work? why or why not?

I am wanting to set up a nice home office for potential real estate and/or other ventures (none right now except for my own home).

I have 1 small filing cabinet, a computer, and a desk. I am wanting to purchase a large filing cabinet system and do everything else to have a well organized set up.

Can I start an LLC, which I will purchase investment property under in the future - but that may be years out, and expense such home office costs. An LLC is a pass thru entity and I can claim those deductions on my personal taxes, and with no current income to the LLC i would essentially be writing just the home office expense off on my taxes at this point.

Is this kosher, being as I don't have any income to the LLC and probably won't for at least a year or more? I do fully intend to use the LLC as an investment holding company at some point.

I'm nearly all cash with reference to the equity portion of my "portfolio" because i think we'll see pullback and I want to jump on some higher yield opportunities.

I think it best to view your RE portfolio as its own entity instead of in the context of your overall portfolio including other assets classes. Other assets classes are not as closlely run like a business with revenues, expenses, debt service, unpredictable maintenance/repairs, etc. Equities for example, you buy and hold and they go up or down - no thought needed for operating capital or the like.

Therefore I think you should view real estate as its own business rather than as an asset class of your overall portfolio.

In that light i think 6 months of debt service and expenses is reasonable, but I would also develop some sort of metric beyond that to keep cash for potential acquisitions and to be able to jump on new opportunities. This market can present unique opportunities everyday. I think its best to follow the 6 month operating capital rule and have a good chunk of cash set aside to pursue new opportunities as well.

It is well known that "cash is king", and making a cash fofer with limited financing can often get you a discount off of an asking price that you may not have been able to get using financing.

My question is: How hard is it to finance properties you acquire with cash?

I know every different type of financing and every different type of property will have different needs and hurdles to clear to acheive financing. But, all else equal, given the same property type, loan type, lender, etc. Is it harder to finance a property you own out right rather than to line up financing for acquisition.

It seems to me that lenders would be quite pleased lending on cahs owned assets as its easy to set their desired LTV , etc. So it seems to me that it should be easy to finance free and clear properties. But if not, if it is harder to finance properties after acquisition - why is that the case?

My obvious thought is (if you have the cash) to acquire in cash as a "bargaining tool" and then leverage the property after the fact to get most, say 70-80% or so, of your cash back?

I'd like this thread to be a place where we can bring our collective brain power together to try and determine some of the better markets for a long term buy and hold rental strategy. This can be MFH or SFR and it comes with standard disclosure that I understand that all real estate is local, you cannot predict the future, and that even buy and hold investments should be sold sometimes. Also, it should be noted that a "market" can be viewed as a city, neighborhood, or region of a state, etc.

That said, here are some of my thoughts about what factors and catalysts help to determine a markets' overall attractiveness. The primary driver in my eyes is population trends as demand for housing drives prices for homes and rents and is a general reflection of the attractiveness of living in a particular area

Population growth - among other things, largely a function of education - school quality, crime and safety, housing affordability, weather and employment. I would argue that housing affordablity is in part a function of the housing supply/demand in the area. Both crime and school quality is largely a function of not only the leadership in the area but also of tax revenues, which in turns mean that these are both a function of employment. Employment also seeks skilled workers for the type of job functions needed so it should be somewhat of a prerequisite in my book to have higher education institutions in the area.

Job growth - generally, the attractiveness of a particular area is determined at the state level where grants, taxes, other incentives are determined. also, as aforementioned, an adequate workforce pool to pull from.

In viewing investments, the buy and hold portion of the scenario is concerned with appreciation; And as we know, there must be cash flow to make the investment worth while. To get adequate cash flow, we must often seek either the "working class" neighborhoods or the "exurbs". This also indicates a contrarian view for me, as I am hesitant to invest where all the action is and property values have already risne substantially.

1)Employment
a)good current employment situation
b)regulatory and tax climate attractive for businesses to invest in and create jobs
c)workforce to attract business investment

2)Population
a)education facilities
b)competent local leadership
c)weather - "Sun Belt" trend

3)Investment analysis
a)good tenants, low crime
b)affordable housing and rents
c)low taxes - cost of ownership
d) sufficient cash flow and ROI

As Finexaminer mentioned in another post, you must start with a macro view of trends, determine areas to focus on and move closer in your analysis for a more finite view of particular areas and neighborhoods and specific properties therein.

Such analysis will make you realize why places like Colorado springs have grown tremendously. My analysis has lead me to like Colorado - like colorado springs, Carolinas - charlotte and others, and Alabama - huntsville. I also like Arizona - mesa. Arizona, Texas, and Florida look attractive as always but i tend to shy away from places like Texas because of all of the hype - perhaps some of you more knowledgable in these markets can enlighten me as to where the growth will be in these states.

Essentially I am looking for areas with good weather and affordable housing that currently have good education and employment. An area that also has an attractive environment for business investment for future job growth and low taxes and minimal tenant "friendly" laws.

Overall I have the feeling that the SE region of the US is due for growth in the coming decades, but perhaps I am biased due to my relative familiarity with the region.

What are your thoughts on specific areas you are interested in and why, as well as your thoughts on my methodology or other considerations in analyzing markets? Perhaps i'm putting too much thought into the market side of things but i realize that significant change will occur in the next 50 years - I want to ride or rather lead the wave rather than be trailing and following others to the hot markets right before they bust.

I really want to find the "under the radar" areas. Being from Lexington I know that Lexington has great education, employment, job growth, a large univerity - and seems to fit the bill in most respects. But I know many of you would never had Lexington cross your radar. It is such towns that I want to find now, and when the area begins to show up on the radar I will already be invested and get to enjoy the appreciation.

Thoughts?

PS. Pardon my utter lack of brevity

What do you think the future holds for cities, regions, and states that are on the "decline"?

Some of your more basic examples include cities like Toledo and Detroit - the Rust Belt.

From an investment perspective, there are undoubtedly still people investing in these areas for cash-flow.

But, we have reached an interesting point in the development of America. The original development of America started in the East and created iconic cities such as Chicago and New York and manufacturing towns in the Midwest. But the Midwest in particular, which was booming during the industrial revolution is now quite derelict (generalization) - there are no manufacturing jobs to be had anymore as they've moved overseas. This leads to unemployment, crime, decreased capital investment, decreased revenues to the city/state, and eventually decreased education quality and more and more divestment - it's like a downward spiral, or a self-manifesting black hole, if you will.

On the bright side, the population in America is set to increase exponentially during my generation. It also seems that our gov't is going to devalue the dollar to try and spur investment and blue collar job growth.

What do you think will happen to these cities and areas. Is the downward spiral impossible to break? Cities like New York have diversified largely into financial and other services. But an entire country can't live on servicing each other when no one is making anything. As our population trends further south and west, what will happen to these cities? I can't imagine them turning to true ghost towns, but at the same time it's hard to picture them breaking out of the "spiral". Perhaps they will continue to plod along with sluggish economies and population/job growth for the next 50 years?

I have been thinking about investing in such areas for cash flow, and although I may not see much price appreciation if I do, I know my investment won't just up and disappear. But it got me thinking, aside from just an investment perspective, what does the future of these cities truly hold?

Thoughts?

Finexaminer -

Yes frankly I think we could get rid of the IRS and implement a sales tax - no income tax. That promotes savings.

We could get rid of a large portion of the DOE, programs like SS, medicare and medicaid, welfare, keep the FDIC for deposit insurance but cut their workforce at leas tin half and stop breathing down the necks of banks and imposing process and procedure regulations instead of top level regulations. Cut defense spending significantly.

We should also abolish the Fed while we're at it.

So, i'm scouring Loopnet for commercial multi-family opportunities. I've noticed that many of the properties that list brief financials on loopnet have terrible overhead/operating expense ratios.

For example a huge 200-300 unit complex may have top line gross revenue of $2.7 mill but NOI of only $600k.

Or a 50 unit complex with $350k top line gross revenue and only $60k NOI.

Many variables go into this, I realize, and to truly find out you must do your due diligence on each specific property to see where the expenses are coming from.

My question is this - given that utilities included/not included is held equal for each property, do most variances in expenses on apartments arise from either poor management and deffered maintenance/old buildings.

This seems to be the two main variables. You can switch any complex to be utilities included, not included, or a mixture thereof. Holding that as a constant - do fluctuations arise basically from maintenance and management. And from that could I assume that a competent individual (hopefully that includes me lol) with due care should expect to be able to run almost any complex at the 50% rule?

Given a year or so to get good tenants, reduce turnover, and just manage the property well overall and get deffered maintenance issues in shape even replace HVAC's roofs ,etc if needed - is it reasonable to expect to be able to operate nearly any complex at or near 50% expense/overhead ratio?

It seems feasible to me, and if that's the case some of these apartment REO deal look really attractive. If a property gross's 350k and net's 65k and is selling at a current 9% CAP - that make sthe property worth $750k or so (which is the asking price). If i can improve operating efficency and get maintenance under control I think i can get the property NOI above 100k which makes the property worth $1m+.

Is it reasonable to believe you can get most any apartment complex to run at or close to the 50% rule. (again I know every property is different)

Thoughts?