All Forum Posts by: Joshua Christensen

Hey Austin,

It's best to have an Attorney draft this as you're getting into offering securities to your investor friends.  If they're not actively involved, It needs to be done correctly.

I had a friend a few years ago do this through mortgage notes.  Everything was ok for a few years.  Something happened that interupted payments and the investor (aka note holder) sued for payment.  It turned into an SEC case against my friend because offering notes is considered a securitization act.  

Be careful out there.  The SEC is out looking for these and the fines are not pretty.  

I agree with Randy,

I deal with all sorts of shenanigans from contractors here in Albuquerque, and I keep looking until I find the one I trust at a fair value.  Over the years, I've learned that the lowest bidder is not always the best work and has often cost me more to do it right later.  A/C vendors make a lot of money on spread, so keep asking.  There's someone who can/will do a good job for a much more competitive rate.  

Summer time, rates are higher as these guys are busy, so they tend to throw out big "if they pay great" numbers to control their business flow.

I agree, if it's there and it was working, it needs to be fixed.  

It's a great question for a registered tax pro or CPA.

be careful a out advice from hunches on here.

Hey Matt, Tyler makes some really good points.

I'd add, is there a way to generate revenue on the farm?

Lease the fields to an active farmer?

Any leasable water rights? These can bring significant revenue.

lease of any equine / animal pens?

rv development?

tiny home village for STR?

solar field lease to city?

wind or cell tower leases?

any frontage of highways for billboards?

you may be able to utilize the equity through an LOC as mentioned AND create cash flow on the farm without giving it up.

a 60k investment for nearly 300k in equity is a nice 5x return immediately and it's potentially tapable for future uses.

all the best to you.

I agree with @Greg Scott.

1. One tenant cannot "remove" another tenant from the lease.  The one wanting to be removed needs to come with the one staying to "re-qualify" the lease with the new lease.

2. You're crossing into civil legal matters that you should not get in the middle of.  

3. If she's on the lease, yes there are some "rights" for reentry.  However, since he put out the restraining order and she abandoned it, there are some civil matters now introduced.  

I'd also consider a 30 day non-renewal notice to avoid it continuing and causing any further problems.  People get pretty aggressive in these situations when they might be completely nice at any other time.  There's a child involved.  Vandalism and potentially violent acts could start to impede the quiet enjoyment of other residents.

Hey there Jon,

Any interest in an assisted living facility?  I have a 7 bed facility that will provide owner finance / Wrap of underlying mortgage.  The land is 13 acres with multiple options for other development such as mobile home park, RV, tiny home village, storage, etc.  It's in New Mexico south of Albuquerque about 45 minutes.

First, talk with a tax preparer who understands the capital gains rules and ways to avoid them.

I'd ask about Adding you to title now while he is living.  I believe your cost basis will increase to the day you take ownership vs. waiting until he passes.  

An interesting rule is the death of a spouse. If your mother-in-law passed, talk to a broker to get a letter of value from the date she passed. The cost basis is advanced to the date of the death for the surviving spouse.  If you're in title when he passes, you become the surviving ownership.  That may qualify you for an increase in cost basis?  Ask the pros.

Another option.  IRS requires 4.9% interest for tax purposes on an owner financed sale.  

1. If the interest charged is less, they charge income taxes on 4.9% as imputed (I believe that's the term)

2. They will back off the sales price any "imputed" interest to determine a tax basis.

3. They also only charge imputed interest in the year it is "paid".  

4. They back off any closing costs from the sales price to determine taxable basis.

5. They also allow improvements (with documented evidence) to the property to be backed off the sales price for basis.

If you do not need the money and don't mind the cash flow, consider owner finance and carry it out for years.  

Is the property currently in a trust?  If he passes, the house is still owned by the trust upon death and you can keep the house into perpetuity without a sale in the trust.  It doesn't change ownership, just trustees.

Talking to an estate planner, a good cpa, etc. will help you find a solid solution.  I think there are multiple ways to address the issue.

@Brandon Justice

It sounds like you have a good business plan to move it forward into cash flow positive.  

Time is your biggest ally in deals like this.  If you can get the rents up to $1900 per unit in 3 years, that's fantastic.  

How you operate the asset is critical.  Vetting your tenants and incentivizing them to maintain the property is key to reducing turnover costs.  

You can look at a deposit insurance that the tenants pay to offset repairs and fights over their deposits.  Rhino is one that we've looked into (haven't used yet).

What are your goals?  Long term cash flow?  Short term Flip for capital gains?  

Hey @Jerell Edmonds,

What was the first investment?  

My first investment was a Sandwich Lease Option.  My second was partnership.  Since 2008, I didn't put any of my own money into a deal until 2022.  I've been very fortunate to structure deals that the capital was provided in various different ways on over 400 units.  

Single Family?  1-4 unit?  House Hack?  Syndication?

@Jonathan Greene offered great suggestions on saving for your next deal and being careful about partnerships.  I've been in good and bad partnerships.  Know what you're getting into.  

The answer to your question really depends on your goals and desires to scale?  Do you want thousands of doors or just a few to build a comfortable retirement down the road?

Consider a couple of scenarios.

1. Buy a new primary residence with low down. Convert your current residence to a rental.

2. Consider a NOMO or Lease Wrap approach. If you're familiar with lease arbitrage for STRs, then do the same thing with a LTR exit. Extremely low cash needed, some cases, none. This is how I bought my current primary home for $500 out of pocket that now has several hundred thousand in equity & a HELOC for future deals.

3. Wholesale a few deals.Learn the art of the wholesale and raise a little capital.

4. Pull equity from your current home.  Be careful not to overleverage yourself.  If you have a lot of lazy equity in your house, it can be a good source of capital for your next deal.

5. Joint Venture / Partnerships.  Who do you know that you can partner with to bring capital to the table for your next deal?  A good friend of mine (an undocumented foreign national) utilized this approach with 4 plexes starting in 2017.  Today, without credit, he's built a multimillion dollar portfolio that supports him and his family.  He flipped cars to bring money to the table.  

As you can see, there are a lot of ways to skin the cat.  Get creative.  When its important, you'll find the solution that works best for you.  

@Gerardo Waisbaum this is one of the more thought provoking questions I've seen in some time.  Thanks.

The answers provided are solid approaches.  

The question I have is how you're holding the reserves? Are these your personal, JV, or Syndicated deals? That structure makes a big difference in how you report the reserves.

@Evan Polaski broke it down simply. 

I consider a couple of strategies. The time of holding the reserves and liquidity are factors. If you are building a longer term CAPEX reserve, then consider a few strategies...

1. CD laddering as an option for higher returns on reserves not needed immediately.  You're locking in the rate for a longer period of 3-6 months on each CD.  They have rolling maturities for access without penalties.

2. Money Markets for a more liquid shorter term need. Rates will be more volatile and going into a cycle of rate easing by the FED's these rates are set to drop soon which could cost you in interest earnings.  Liquidity is the biggest factor in this approach.  

Any way you look at it, have your lazy dollars earning for you while you sleep to help increase your yields over time.  Sounds like you're on the right track.