All Forum Posts by: John Hyatt

Hi Sunil,

If you are looking for a broad scope of a neighborhood I think Zillow is a good source: http://www.zillow.com/home-values/. You can type in any city, zipcode, state, or even the entire country as a whole. Granted Zillow is not necessarily accurate, but for new investors and even experienced investors you can get a general idea of a neighborhood. I know a lot of people say Zillow isn’t accurate and I would agree to an extent, but as a licensed real estate agent I did comps on my house and Zillow was within $2k (about a 1% error give or take). That being said I have a pretty easy neighborhood to comp because there were recent sales and it’s not a “unique” neighborhood like Beverly Hills or Malibu. If you wanted to invest in a “unique” neighborhood I would check Zillow to get a rough idea and then contact a local real estate agent for the most accurate info. It really depends on what you are looking to do with the information. If you are looking to invest, I would definitely get a real estate agent’s help or advice because you want to make sure before you get in you are certain on the numbers. This again can be found on Zillow, just look up an area of interest and call one of the agents on the side who advertise.

-John

I have been driving around my area of expertise in Phoenix, Arizona and have mailed around 20 postcards to the tax mailing address of the owner of the property listed on the Maricopa County Assessors website. About half of them got returned as wrong address. Is this normal? I hear a lot of investors say they get deals driving for dollars. Is there a better way to get in touch with the owner? I usually mail to the houses that look vacant or are in need of repairs. Thank you in advance!!

I know it’s at the beginning stages, but do you think the 3D printers will be the future of real estate? Building apartment complex, subdivisions, or skyscrapers? I read an article that a Chinese company is selling 3D printers that can build homes for as little as $16k all the way up to $44k, they built 10 houses in 24 hours (granted they weren’t the nicest design). I can see several years down the road spec builders or corporations using these to cut down on labor costs. Some of the problems I can think of is where do you store the printer after it is done printing the home and how do you transport it? I am sure this is an easy problem to solve, just curious. What do you think?

Originally posted by @Bill Exeter:

Originally posted by @Rob Beland:

A 1031 exchange is a way to defer paying taxes. The tax liability doesn't go away. If you continue to exchange for a number of years and then just sell out you will be liable for the taxes associated with your final sale. I don't believe there is a provision of the code that says you are responsible for the payment of all back taxes cumulatively. The liability just rolls over and with each exchange it sort of starts fresh but since you are always exchanging up your liability will continue to grow. If you die your estate is responsible and at this point I would say speak with a 1031 specialist. 

I wanted to clarify certain parts of this post.

The tax liability can go away if you continue to exchange until you pass on.  When you pass on your heirs will receive a step-up in cost basis, which means the capital gain and depreciation recapture taxes will completely go away.  The estate would be responsible for any estate taxes, but there would be no capital gain or depreciation recapture taxes with the step-up in cost basis.

The actual taxes that you pay will be based upon the sale price, the selling expenses and the adjusted cost basis at the time that you sell your final property (assuming that you cash out and pay the taxes and don't hold until you pass).  This means that all of your accumulated gains and losses are netted together and taxes upon the final sale/disposition.  So, effectively it is all cumulative back taxes. 

Hi Bill,

Thank you for your responses! I also checked out your website www.exeter1031.com and it had answers to almost every question I could think of and even those I didn’t think of.

-John

Hi TJ,

I purchased a single family house near Arizona State University and was renting out the bedrooms. The funny thing is I thought I would get all students, but instead I got a wide variety of people instead (none of which were students). Renting out rooms is differnt then renting out a duplex I know, but my point is that I dont think it will matter when you list it. Depending on the size of the city and college you should be able to find someone any time of the year. Some people may be looking in October for a place to live because they tried the dorms and hate sharing a bedroom and bathroom, etc.

-John

Hi David,

I think it depends on your intentions with the property, your financial situation, your risk tolerance, your preference. From an investment standpoint and a leverage standpoint its always better to take a longer loan due to the fact that you are making more money with less (at least for the first 15 years) and you can acquire more loans easier since a 15 year loan will increase your debt to income ratio (granted not much, but if you buy all your properties at 15 year loans it will add up). We are taught by all the guru’s and real estate financial wizards to buy as many properties as possible and use leverage to create wealth. Another reason a 30 year loan would be better is if you are flipping the house or plan to keep it for only a few years. There is no point to have a larger monthly payment and it will cut down on your Cash on Cash return.

All that being said, if you plan to keep it for life and your goal is to set yourself up for retirement and you only need a couple of houses to do that, then I say why not? If you only need 4 houses to retire let’s say then the 15 year loan would probably be best (unlessyou are stretched too thin and can’t qualify for all 4). I took the dave ramsey course and he recommends the 15 year loan because of the interest saved and he just doesn’t like debt at all mainly. In theory the 30 year loan is the better option, but in reality I say it is up to you. You know your situation and your goals best. If I were 60 years old and wanted to retire in 15 years then I would do a 15 year loan too…but I am only 24 and plan to use leverage and time to build my wealth.

P.S. the tax savings and inflation is all good on the 30 year loan, but in reality I don’t think that makes much of a difference to most of us. Unless we have millions of dollars’ worth in assets under our belt or hundreds of thousands of dollars in income a year (which may be your case) I don’t think it matters so I am not even going to factor it in at this point. I think the cool thing is that you took action and your are better off than 90% of Americans, great job on creating passive income!

-John

Hello,

I am a newbie when it comes to 1031 Exchanges, I have a couple of questions. I have always heard about them, but don’t really know anyone who has done it successfully. Here are my questions:

1) Can you have more than one 1031 exchange strand going? For example, two houses or more each worth $100k and you 1031 exchange each one separately into a $150k house and repeat every year?

2) What happens when you eventually sell a house/complex/entity that was 1031 exchanged? For example, you exchange up for years and then one day sell. Let’s say you started with $100k house or duplex and are now at a $1m house or complex after 10 years and just want to cash out are you taxed on everything or just the profit from the most recent exchange?

3) Let’s say you 1031 exchange up until you decide to just hold onto a property and keep it until the day you die. What happens after you die?

Thank you in advance!

-John

Hi Patrick,

I have processed over 300 short sales from begging through approval over the past five years. That being said, no short sale is the same. It depends on the lender, the investor, the seller, the negotiator, the negotiator on the bank side, etc. For example, Bank of America may be the lender, but the final decision comes down to the investor, which Bank of America has thousands of investors who own the loans. My questions for you would be, how much upside down is the house? how much are they behind on payments/late fees? How much time is left on the loan? Depending on the answers to those questions you may be able to have an investor take over her mortgage “Subject to” and then pay you an assignment fee. For example, if the house is worth 110k and the owner owes 100k, but is late 20k on payments and the loan has only 25 years left or something like that I think an investor would be wise to pay the 20k past due payments, pay you assignment fee, and then they lock down a 110k property for only 20k (no loan hassle or anything). However, if it is a property that is worth 110k and the seller owes 200k then I don’t think it will be worth it and a short sale might be the best option. If I were in your situation I would refer the lead to a real estate agent or attorney that specializes in short sales and tell them you have a buyer for it (you should double check to make sure this is legal in your state/city/etc) or ask for a lead in exchange if you are not a realtor and can’t get referral fee etc.

-John

Hi Scott,

I would recommend just going into a local title company and asking an Escrow Officer to explain it to you. If you haven't picked a title company already just be honest with them and say you are new and are purchasing a piece of property. Title companies get "show boaters" all the time (I used to work for them for 5 years) and the ones they love helping are the ones who are "new". That is what I would do personally, just walk into any Title company near your house and say "I have a contract that I need help understanding, do you have an escrow officer that can spend a couple of minutes with me?" Keep in mind today is end of the month and they will probably be super duper slammed busy. I would recommend going tomorrow or Thursday.

-John  

I am currently reading "The complete guide to buying and selling apartment buildings" by Steve Berges and he makes the argument that if you buy one apartment complex every year and flip it into a larger complex (I am assuming 1031 Exchange since he doesn't account for taxes) for 10 years and then hold the 10th complex and have it paid off in 25 years you will be better off then if you purchase 1 apartment complex every year for 10 years and then hold them, not just by a little bit but over $90m!! I have always been a buy and hold guy, because I want to retire young and enjoy the rest of my life. This chart made me rethink my avenue. Its sort of similar to Brandon Turner's "7 years to 7 figure wealth" which I think was awesome and am going to print and hang in my office.

That being said the author goes on and says lets say you cant create 20% a deal and can only do 15% he said its still around $27m! Steve said 20% is easy and in the 7 years to 7 figures Brandon advises similar statements (purchase at 20% discount and increase profit by 10% over the year through forced appreciation).  

1) Does this seam realistic? My question, would be why stop after 10 years? Let just say someone wanted to retire in 10 years...is this realistic? or even if someone's goal was to retire on $2m they could essentially flip for 5 years and be set with a $3m property and live on cash flow and then after 25 years it gets better.

2) Can this be replicated in SFH? for example buy one house at 100k and sell for 120k after a year by forcing appreciation and 1031 up to 200k etc. or do several 100K homes at once?

3) What are your thoughts? let me know if you cannot see the pictures.

Buy one property every year for 10 years and hold them all:

VS. Buy a property and flip up every year and hold the last one after 10 years:

-John