All Forum Posts by: Joe Splitrock

 These are not examples of code. They are companies with physical assets, intellectual property, human resources (employees), cash reserves, investments and many revenue streams. They sell products, services or advertising that people pay for. I hope you made this comment off the cuff and don't actually believe that Google is the same Bitcoin. 

My day job is with a company that makes electrical infrastructure for data centers. We sell to Google, Amazon. Microsoft and Visa. They invest hundreds of millions in their infrastructure. Massive data centers on a scale that would take years to replicate. We also sell hardware for crypto mining and the business model is different. Many mining operators are venture capital funds that just deploy for 12-24 month ROI. They look to get a fast return and get out. They may reinvest or move to something else. There are also established companies that are miners like Bitdeer. These are actual companies committed long term to the crypto larger defi business model. They are much more than just Bitcoin. Bitdeer is a company and a business, like Google.

Just understand when you buy Bitcoin that you do not own part of Bitdeer or any miner. You are paying them a fee to transact, so you are their customer. This is part of the risk with crypto. The businesses that actually support crypto are paid with mining and transaction fees. When prices are moving up, there is massive incentive for these companies. When prices plunge, the ROI disappears and miners start shutting down. Smart companies like Bitdeer are diversifying, so even if Bitcoin failed, the can shift the business to other use of blockchain technology.

A better analogy to Bitcoin would be currency trading or futures trading. You are buying something that isn't physical and banking on appreciation by the time you sell it.

Even just comparing software like Windows to Bitcoin, is a bad comparison. Windows is copywrite code owned by Microsoft. People pay to use the code. Bitcoin was released open source and owned by nobody. Anyone can copy, modify or use the code. Had the creator of Bitcoin secured copyright and patent protections, then Bitcoin would be more valuable. There are now considerable patents in the blockchain space, so there are people scrambling to protect IP. You mentioned PayPal, who is one company that does have blockchain patents. It just goes back to my original point that there are companies dealing with Bitcoin, but Bitcoin by itself is not a company. 

 This is your problem. You can't keep rents stable when costs are not. That is not how any business is run successfully. That is why everything is increasing in cost right now. You know increased costs will come, so you need to proactively increase rents to keep up. I bet if you looked at your 18 properties and compared each to market value for rent, you could easily free up MORE than $900 a month in cash flow. 

There is nothing wrong with paying off mortgages as you mature in your investing career and starting with your primary residence makes the most sense. I would just caution you at not falling into the lazy landlord trap. I see it all time where a landlord owns a property ten years and never raised rents. Their cash flow slowly erodes, so they start deferring updates on a property. They don't paint the exterior, they don't proactively update old HVAC, etc. Then 20 or 30 years from now, you are stuck with run down assets and the only way you can get cash flow is paying off debt, which is known as buying cash flow. 

I get not wanting to be the richest man in the graveyard but humans today will live to be over 100. Not sure how old you are, but are you sure your investments will carry you 60 years if you run them this way? 

Orlando is a year round destination. It is not only home to Disney, but also countless conventions and events with over 2 million square feet of convention space. i would expect Myrtle Beach to have more seasonal swing. I have been to Orlando at least 20 times, mostly for business but several for family vacation too. I have never been to Myrtle Beach. At least from my destination, Orlando is much easier and cheaper to fly into. Only easier location is Las Vegas, which is the convention capital of the world. There are people successful in both destinations, so either could work. Keep in mind that in ANY city, location is key. So you don't just want to be in a city, you want a desirable location within that city. 

I think a couple of your options are off the table. When you are talking 10% down on a vacation rental, that implies using a second home loan. That is not an investment loan - it is a vacation home. Yes, you can rent a vacation home, but it is personal mixed use, not direct investment. The $70K to buy land would probably not be considered like kind either. A vacant lot generally isn't considered like kind to a rental property and building isn't allowed with 1031 funds. Of course when you read up on like kind exchanges, people stretch the interpretation to meet their own needs. You could literally do whatever you want and until you get audited, it is not an issue. I am more in the camp of keeping it clean, so you don't put yourself in a bad position.

Four things helped Florida through COVID:

1. Governor retained the citizens freedoms. Kids could go to school, limited shut downs and mandates. On top of that, low taxes and nice weather, so people said why deal with this crap up north. People from places like California figure, good enough weather and lower housing prices - even at the inflated rate compared to California.

2. Remote work made it possible for people to move and retain their job. This made it possible for people to move there, who otherwise would have been locked to a specific location.

3. Domestic tourism, specifically short term rentals, saw a massive boost. People who normally would have left the country were concerned about reentry or medical emergencies. This severely limited out of country travel. Even Hawaii had crazy quarantine policies, so people looking for a warm destination basically had Florida. On top of that, hotels were less desirable due to fears over being around people. Hotels also shut down amenities like breakfast, weight rooms and even pools. Hotels also have had staffing issues, which limited capacity and has hurt service as they ramp back up.

4. Excess cash with nothing to spend it on. The federal government handed out thousands of dollars to families. Student loans payments and even mortgages were frozen. People had all this extra cash, but local things like concerts, movies and sporting events were all cancelled. What is left? I am going to Disney World! People had money and said, lets go vacation. Kids are out of school or remote school, work is remote, so nothing stopping people from vacationing. Go back to point 3 and where do people go? 

The reason FL suffered during the housing crisis was speculation and devastation to tourism during a recession. Tourism is discretionary spending, meaning during tight economic times it is where you cut spending. When we enter into a recession again, it will impact tourism and it will impact short term rentals, which affects housing. The question is how many people that moved to Florida, stay in Florida? How much of this housing demand for STR was COVID spike versus long term sustainable. My family took a vacation to Florida, but it was to replace a trip we had planned to New York. We now have a new trip to New York planned this summer. I think COVID benefits could fade. Change in political leadership, hurricanes, recession could all create short term problems.

On the plus side, more businesses have moved to Florida, so that should help during the next down turn. I am personally bullish on Florida long term. Florida's population growth has been outpacing California, New York and Illinois long before COVID and that should continue long term. In other words, if there is a dip, expect Florida to recover from it.

@Russell Brazil can help you. He is the king of DC real estate and he gives out free T-shirts.

 I wouldn't refer to it as a flip if you plan to 1031 exchange. You are rehabbing, renting (for a year+) and selling. Flipping is an active business that is taxable. 

As Dan said, any profits not moved to the new property are taxable. You will also transfer basis, which means any claimed depreciation moves into the new property. This happens each time you exchange, so just be aware that will become taxable in the future. A 1031 is tax deferral, not tax avoidance.  

As far as the business vehicle. Talk to your CPA about the best way to claim that. The size of your business and percentage use of the vehicle for business will help determine the best route. One rental probably doesn't justify a vehicle, but if you were doing multiple flips a year, it could be justified. Of course you can do whatever you want, just be prepared to defend it to the IRS, meaning substantiating the miles were for business.

 I would advise against this when renting by the room. Dogs need space and confining the dog to a bedroom is cruel to the dog. Letting the dog roam the common areas could be a problem for other tenants. If it was just you and her, then I would say do whatever you are comfortable with. You could also make it dog friendly, but then future tenants need to have their dogs screened for compatibility with your existing tenant. Far too complex for my taste. 

 Lowering taxes is done by lowering expenses. It has been successfully done by politicians at the federal level (in the past) and in many states currently. One of the reasons people and businesses are leaving California for Texas is taxes. This is controlled by politicians and therefore controlled by your votes. Legalizing weed or gambling or other sin tax industries can raise money, but it also costs money and affects your community. There is a good argument that sin taxes disproportionately hurt the poor. I just mentioned that because you talk about good schools. Schools are simply buildings. A students success is more determined at home. Having parents who are high all the time will undue any benefit they see in a mega school. 

@Jerryll Noorden if direct mail doesn't work, then why is Amazon sending me post cards, texting me and calling me every day begging me to buy their products? Oh wait that is "used car warranty" people who are doing that. Amazon doesn't need to do those things, because when you have something that someone wants, they will look for you. In todays world, there is only one place people look, it is on the internet. More specifically they will search you out on Google and visit your website. 

I would argue there is more risk when you are pushing your product/services on someone, because you will attract problems. Who is more likely to back out of a sale, someone who contacted you wanting to sell or someone you texted that said "sure give me an offer". Who is more motivated and more importantly committed? 

There is also the reality that sending people post cards and unsolicited texts has a tendency to make people mad. How inspiring is it to wake up every day and piss people off? I am guessing the burn rate on wholesalers is huge. (Burn rate meaning burn out and quit rate).

I know people will say postcards work, bandit signs work, text messages work, phone calls work, door knocking works. Technically everything works if you contact enough people. I could advertise lipstick on BiggerPockets and someone would click on the link. That doesn't mean that BiggerPockets is the best place to advertise lipstick. 

I like what @Joe Villeneuve said, looking for stacks of needles, instead of needles in a haystack. The other terms that come to mind are "shot gun approach" or "throw enough sh1t at the wall and see what sticks". These approaches are just working examples of working harder rather than working smarter. I see it all the time on BP where people say, "I listed a property for rent and have 50 showings lined up". That just tells me that you have 49 unqualified people you are wasting your time with. My last vacancy, I had one showing, one application and I got one amazing tenant out of it. My competition on Zillow was priced lower and had more contacts than me, yet still took two weeks longer to rent.

As far as people with 400K followers, they have learned how to attract followers, not how to give good advice. I say that because the best advice is often contrary to the "feel good advice". Followers are emotional, not logical. They follow people because they are pretty, tell you what you want to hear and they display a life style that you desire. The reality is that they are photoshopped, giving bad advice and their life style if is funded by followers, not by following their own advice. 

Jerryll and Joe, you are two of my favorites in the BP forums. Thanks for keeping it real and debunking the BS.