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All Forum Posts by: Jerry W.

Jerry W. has started 26 posts and replied 4117 times.

Post: Biden introduces plan to increase taxes on Real Estate investors

Jerry W.
ModeratorPosted
  • Investor
  • Thermopolis, WY
  • Posts 4,327
  • Votes 4,008

@Anthony Wick, I do want to challenge your statement about taxes. 

@Shiloh Lundahl . Lol. What? I don't want to misquote you. Are you saying I am telling myself I don't want to make a lot of money? I'll tell you exactly what my brain is telling me. "If you are fortunate enough to be in the 1% of wealthiest individuals on earth, then you better realize that the 99% will hate you for whining about paying taxes." No, I don't want to pay more taxes. Why would I? Yes, I take full advantage of the tax code. I also believe if you're getting crushed in taxes, you are either; 1) A poor tax planner; 2) Have a terrible CPA; 3) Have more money than most human beings. While some of us are thinking about taking full advantage of the IRS tax code, there are many more individuals worried about paying rent and buying groceries this week.

My taxes were devastating last year.  I had a hailstorm take out over 20 roofs.  Yes I had insurance, but it only pays for about 70% of the cost doing a new roof and to be blunt some insurance companies are horrible and only pay about 50%.  The reason this relates to taxes is because the $150K in insurance money is taxable income if you are in business.  Since every house in town was hammered there were no  available roofing companies to put 20 roofs on for me.  I got 4 roofs on, but have more than 16 to do this year.  So I pay taxes on the $120K I didn't spend and lose over $30K of it.  Now next year I have $30K less to put new roofs on with, when I actually needed $30K more to do roofs with.  I actually believe there are some intelligent folks in Congress that work hard to make taxes fair, but I also think there are career politicians who don't care.  I did get creative and buy my first new vehicle for a tax break.  Putting $10K down on a new $70K truck and expensing the whole thing helped on taxes, but my payments will not be tax deductible except interest, and I can take no more depreciation.  Unintended consequences are one of the things I fear most about new laws.  I have testified several times for and against laws based upon lawmakers trying to pass laws who didn't see the unintended consequences.  I have never done a 1031 transfer but would like to.  Most of the time that I sell a house it is on payments and is to one of my workers who wants to own his own home, so a 1031 is no help.

Post: Biden introduces plan to increase taxes on Real Estate investors

Jerry W.
ModeratorPosted
  • Investor
  • Thermopolis, WY
  • Posts 4,327
  • Votes 4,008

@Jon Schwartz, you have an interesting view on the poor stimulating the economy more, but I would disagree.  It is true that they spend more percentage wise of their money, but let me give you an example of why you are wrong in this case.  As @Shiloh Lundahl mentioned the rich often have many expenses that poor do not which stimulate the economy.  Last year my rental income looked very good, but actually it was misleading due to a bad hail storm that took out over 20 of my roofs.  So lets say I made $150K.  Now I paid out $50K for having 4 roofs put on houses and enough materials to put another 4 roofs on in 2020.  I also bought a new truck and expensed the whole thing to try to lower taxes.  There was another $60K, I bought a dozen new windows, at least 40 gallons of paint, several hundred feet of rain gutters, light fixtures, carpet, vinyl flooring, tools, lumber, plywood, at least 4 new appliances and as many used appliances from yard sales.  I employed at least 12 people part time for painting, roofing on weekends, cleaning out apartments, mowing yards, and of course there is my office staff.  I paid for dozens of tire repairs from roofing nails, bought thousands of dollars in gas, filed deeds, paid local land taxes, dump fees of a couple of thousand, and many hundreds to the local convenience stores for drinks and ice for my workers, doughnuts, gatoraid, sodas, etc.  I also bought 3 new houses that needed extensive work.  While it looked like my rentals made me $50K, that was after I took out many thousands in depreciation and many tens of thousands in expenses.  Hell I paid over $5K in just local town water and trash pick up fees.  I am sure at least one full time employee is being paid by the local bank for what I pay in interest, and it is probably the Bank manager.  Seriously I paid at least $70K in interest, probably a lot more.  

There is value in everybody who buys things in our economy, but the tax breaks that are handed out are also there for a reason, they are not just a special interest pork barrel eating frenzy.  When I make $50K in my rental business I literally generated $200K in spending that massively stimulated the local and federal economy.  I pay almost $40K in land taxes to local governments each year.  That helps build roads, put in new sewer lines, buy garbage trucks and of course employ municipal workers.  My $50K of rental income is not just 25% more than the person earning $40K, it is 1000% more in money spent to stimulate the GDP.  If I actually build a house or garage it again multiplies more.

Only a tiny fraction of what I spent would have been spent if I were not building a business.  The houses I bought would still be empty and rotting, the truck would not have been bought, the new roofs would not have been put on, etc.

Post: Tell me why I’m wrong! Classic SF vs MF debate

Jerry W.
ModeratorPosted
  • Investor
  • Thermopolis, WY
  • Posts 4,327
  • Votes 4,008

@Account Closed, I am curious how you get the value of a duplex increasing. Could you elaborate? In my area the rent a property brings in does not count in valuation unless you have 5 units or more in the building. I only wish I could raise rents by $50 per year. I bought out my last partner at the end of 2013. Since 2014 I have averaged about a $50 rent increase per door for the entire 6 years. My houses have not gone up 10% in the last 5 years. My rents are just a little under market, but not much. I do that intentionally so I get a larger pool to choose from, I prefer to get the best tenants even if I sacrifice a little rent. As I said earlier time is the item I lack most. As to the amount of down payment getting me into a large multi, keep in mind that the average value of my units is between $60K and $70k and that is after I fix them up. The price to rent ratios are pretty bad in my area. The largest multi in my town is 6 fourplexes in a group, then after that is 2 9 unit buildings sold together for a total of 18 units. Turnover on those units are the highest of anywhere in town. The rents in the 6 fourplex units have not gone up $100 per month in the last 6 years. I follow all the advertised rental units in town to keep up on trends. So far my biggest drawback to SFRs was a bad hailstorm last year that took out over 20 roofs, multi and SFR alike, and large deductibles on each. The town I have been looking at multis in is 130 miles away. You can only force so much appreciation. I have maybe $60K in my own money in all of my residential rental units. Most of my investment has been time fixing things up in order to be able to buy a unit that will cash flow. Virtually everyone of my units but the 4 plex was a distressed property. That is why my 4 plex does so poorly. I did not buy it at half price and fix it up. However it was a no cash purchase done with the owner's financing the down payment at 4% and interest only payments for 5 years with a balloon. Try doing that with no reserves on a 100 unit. Anyway I would appreciate your input on my scenario. I did know that in 2014 we were going into a small depression, and I intended to be in good shape to weather it, so I stayed cautious. A very off thing is the Covid19 pandemic. For the first time in 7 years my rentals are going into a fairly high demand. Housing sales should be virtually nothing as oil tanked, and we rely on oil income to generate jobs and taxes. Yet here we are in the best housing market in nearly 20 years. I hope to increase the rent in several properties from folks moving to the hicks from big cities.

Post: Tell me why I’m wrong! Classic SF vs MF debate

Jerry W.
ModeratorPosted
  • Investor
  • Thermopolis, WY
  • Posts 4,327
  • Votes 4,008

@Account Closed, I appreciate your taking the time to respond and especially for the chart, but of course I have to strongly disagree with your statement of "anyone recommending SFR's over multi-unit properties doesn't have a clue and most-likely never owned multi-unit properties" is patently untrue, and well as conceited beyond what you have a right to be. You sound like you have a lot of experience, so perhaps you can listen to a different opinion. First the question was singles vs 4 plexes. I like MF, but to be honest the poster has no more chance of buying a 100 unit in the next 5 years then of becoming president. You have to go with what opportunity brings you until your resources allow you to grow. Next I currently have a 12 unit apartment that of course does not have the economy of scale a 100 unit has. It makes money, but not nearly as much money as 12 SFRs do. I have a paid property manager there because the turnover is much higher. I have had many multi year SFR renters several for over 10 years. Most turnovers in SFrs are less than $500 and my apartments maybe $200 or less. I also have a pretty nice B+ 4 plex. Of all of them the 4 plex struggles the most in ROI. The added cost of lawn maintenance and snow removal as well as added costs for utilities is painful. If I compare the income from 12 SFRs to 12 of my multi units the 12 unit loses. The 12 unit has the most turnovers, the most police visits, the most headaches to deal with, (fighting tenants). However if I wanted to seriously grow and had the money it would of course be a Multi for the reasons that you state. For now, the cost of entry prohibits my buying the 40 unit and up Multis. Of course there are no 40s in my town, I am looking out of town. The amount of due diligence, reserves, resources etc. are just on a different scale few can do without some serious money. I have been able to scale up with very little cash lately by finding great deals and paying cash. I can then refi most or all of my money back out. I doubt that will ever happen with multis for me.(I know it does happen in multis) Lets hope I can someday. I agree that maintenance is more expensive for SFRs than my multi, but my utility costs are down. In my area SFRs are in a much higher demand than apartments, even 3 bedroom multis. That may be cultural to my area. Oddly enough SFRs require much less time for me to manage. I know that sounds odd, but that is important to me. I may get 2 or 3 calls for maintenance issues per year on a SFR, and they stay rented for 2 to 10 years. My SFRs get at least 4 or 5 calls per month, and turn over at least twice per year. Now I am getting close to my maximum units that I can self manage and maintain a full time job. The most time consuming property is a duplex that I use as a vacation rental. It has the best cash flow of them all hands down. I like the idea of scaling into at least a 40 unit and have looked at some, that may justify hiring in house management. Due to the initial costs and the huge reserves the bankers want, especially for larger units it has been hard to get a deal going.

Multis are nice, but are hard to get into and you rarely have the money to buy distressed units and fix them up like you can houses.  Of course if you can the profits are huge.  Each method of investing has rewards, the exit for SFRs has a lot more flexibility in a bad market as you can sell to homeowners, not just other investors.

Post: New member introduction

Jerry W.
ModeratorPosted
  • Investor
  • Thermopolis, WY
  • Posts 4,327
  • Votes 4,008

@Emmanuel Otero, welcome to BP bud.  I invest in Wyoming, and have been considering expanding into Cheyenne or casper or even the Sheridan area.  Let me know if I can be of help bud.

Post: Short Term/Air BNB rental properties

Jerry W.
ModeratorPosted
  • Investor
  • Thermopolis, WY
  • Posts 4,327
  • Votes 4,008

My reservations all cancelled in March through May.  End of May it picked up.  In June I had my best month ever.  Booked all but 1 day.  It has tapered off a little, but it has been very good.  We are in the middle of Wyoming.  Nearly all of them just want to get away for a few days or many are driving to all of the National Parks.  Yellowstone, Mount Rushmore, Devil's Tower, etc.

Post: What's the LONGEST you've ever been under contract for???

Jerry W.
ModeratorPosted
  • Investor
  • Thermopolis, WY
  • Posts 4,327
  • Votes 4,008

My longest was 2 and a half years. I bought it on an online auction probably 5 times, they finally must have lowere there reserve price. Then it took about 3 months and I insisted on my title insurance company, and they found a claim for a lien for $7K. I went to the guy to see if he would sell the lien off cheap and he offered to reduce it $100 if I paid cash. A bit snotty about it. The lawyers who did the original foreclosure finally filed a lawsuit to quiet title and got his lien thrown out, a year later. Then they listed it for auction again and I objected and said they still had my $2500 earnest money. After several months they finally sent an email and gave me 72 hours to close. I brought the certified check the next day and bought it. The plan was to put about $80K in it and flip it, the contractor and I were going to do a JV. We hoped to make about $80K on it. Due to the time lapse his schedule was shot for a long time to work on it. I listed it and did a little clean up and sold it owner financed for about a $30K profit in 6 months. It has not closed yet however.

Post: Hello Wyoming

Jerry W.
ModeratorPosted
  • Investor
  • Thermopolis, WY
  • Posts 4,327
  • Votes 4,008

@Ryan Brown, welcome to WYO investing.  The first thing you had better look at is utilities.  In MF utilities can make or break you.  Often gas and water are in the landlords name.  Utilities can take the profit out of a MF deal quickly.  In addition you will have lawn maintenance in summer and snow removal in winter.  Why don't you post your numbers for us to look at.  By just posting your assumptions we cannot evaluate it.  If you have done it already good luck.  Let me know if you need something.  I experimented and bought a unit in Riverton a few years ago.

Post: Joe Biden wants to trash the 1031 exchange

Jerry W.
ModeratorPosted
  • Investor
  • Thermopolis, WY
  • Posts 4,327
  • Votes 4,008

My problem is that eliminating the 1031 exchange basically taxes inflation.  If you add 25% to the money supply you get inflation.  Your property will go up in value and if you sale it you are paying taxes on the increased value.  Now hopefully you have fixed up the property and forced some appreciation as well.  You are less willing to buy a new property and fix it up if you lose 25 to 35% of your sale price on the current one.  sales and upgrades will slow down a fair bit.  That being said it will not stop me from buying more, it will stop folks from selling and they will hold it and pass it to their kids using the free stepped up basis.

Post: 2020 Mid-year Goals Check-Up

Jerry W.
ModeratorPosted
  • Investor
  • Thermopolis, WY
  • Posts 4,327
  • Votes 4,008

@Shiloh Lundahl, I did not have the big goals I did last year.  I had planned to buy and add another vacation rental unit.  They did really great last year.  I did purchase a property, an 800 square foot house.  I put a new roof on it, repaired some ceiling issues, but covid 19 and quarantine in place hit and shut my VRs down.  I ended up fixing it up lightly and renting it out to a couple for a year.  I also intended to flip a property I purchased, either by fixing it up or just cleaning it up and flipping depending on price.  I have it under contract.  We had a bad hailstorm last year and I lost about 20 roofs.  I put new roofs on 4 houses last year, and hope to put at least another 10 on this year.  I currently have 7 done, one was pretty big, and another one under way.  I had hoped to add at least 2 quality rentals, but I had purchased 2 rentals late last year and need to get them refurbished and have one really big renovation from a trashed rental house.  I have the two new units refurbished and there is  a small duplex with them that is 2/3 done and rented out under a master lease.  I am upgrading and repairing some flooring in a unit as well.  I did purchase one new house for a rental unit but it needed so much work that I flipped it under an owner finance.  I had another goal of increasing cash flow by $2k per month.  I do not think that I have done that yet, maybe I am at $800 increase, but I am spending so much on roofs that it is not noticeable.  So while I am feeling like I had no goals and nothing is happening in hindsight I have accomplished a lot.  Thanks for the post.