All Forum Posts by: J Scott Hamilton

The short answer is that all creditor claims for a bankruptcy petitioner have to be filed in a timely manner with the court if any creditor wants any kind of settlement for those claims from the bankruptcy plan.

My guess is that as a landlord you may be a creditor, but I am not a lawyer. It's probably worth a short consultation with a lawyer to determine if you need to file, by what date, and what rights you would expect to preserve.

That's awesome Jennifer!

Here are what I consider the takeaway points from the various post; things you did absolutely right.

1) Trusting your intuition when a deal is too good to pass up, too good not to wait for, or too good not to sell too early.

2) Waiting for your Boston property to peak in value, even when it has sentimental value. Sell when the market is high.

3) Not rushing the 1031 exchange just because you can. You leave money on the table, taxable or not, if you don't get full value from the Boston property before doing the exchange. Also, you waited until you had the replacement property before you sold the exchangeable property. Now you don't have pressure to identify the replacement and close escrow on the replacement.

4) Find a fixer upper commercial property, but one that already has move-in ready units to get the cash flow going and start covering your costs.

5) But most important, not overleveraging your property at the very beginning. When sale prices dropped during a usual contraction cycle, you don't have to worry about being underwater in the mortgage and the bank getting nervous. Now you have the HELOC acting as a credit line for investment, but you are managing it carefully so that your total debt service is manageable.

You are not only an inspiration, but an example for us newbies getting started.

If you are a single-member LLC, the IRS will consider your ownership a "disregarded entity" for tax purposes unless your LLC was set up to be taxed as a corporation. So that means you would be filing as a Schedule C sole proprietorship, and a W-2 would not be an option under any scenario.

Since this is posted in "Innovative Strategies", consider the following. Years ago when I was in tax practice, it was determined that investing in a real estate limited partnership was considered "like kind" for purposes of a 1031 exchange.  You might see if there are any such interests on the secondary market that you could identify and buy.

In California I would do the following:

1) Find a piece of undeveloped land close to the end of a municipal bus line that runs very frequently and on weekends.

2) Use the 1 million to raise another 4 million in investor capital for a LLC structured as a limited partnership.

3) Build low income housing as an apartment building. Make sure the development qualifies for any and all tax credits. Make sure the passive investors get their share of the tax credits on the Schedule K-1.

4) Get a native Spanish speaking property manager. Allow one of the tenants to get a rate reduction for maintaining the landscaping.

5) Once the property is fully leased out and seasoned, sell off to a REIT.

6) Rinse and repeat.

The sale price numbers get much better as you work your way up the Slopes, towards Station Square, or towards Arlington, but the properties get harder to sell. Not sure how easy they are to rent as I don't get access to those numbers off the MLS. I can tell you that properties coming onto the market in the Slopes often get priced high and then go through price reductions while sitting on the MLS for months.

Near as I can tell the epicenter for value is up to one block off E. Carson Street, north or south, and between 18th St and 27th St. Outside that perimeter the sale price drops quicker than than the rental value, and you'll see $/sq. ft. transition from $120-$140+ down to <$100.

An invester outside Pittsburgh looking at these income properties should think about marketing them to nurses and researchers, not the stereotypical students for UPitt, CMU, etc. Even though the watering holes are frequented by college kids on the weekends, the density of restaurants and bars actually works better for busy professionals who want to live in a walkable urban area.

@Anthony Muffi, may I offer an idea for focus that could combine your interest in flipping and new construction at the same time. You probably know that Allegheny County's population is pretty old compared to the rest of the US. Many of these seniors are still living in SFRs, while some have moved into multi-unit nursing homes and assisted living facilities. From what I can tell there hasn't been a lot of new construction in the region for decades, and so the housing stock for seniors may be suboptimal.

So you might want to look into property development for seniors, placement of seniors from SFR to multi, and flipping retiree SFRs as they move either to assisted living or to warmer climes like Florida. For those seniors who couldn't keep up with property maintenance, you may have some good fix and flip opportunities.

Also look into Allegheny County's (VPRP) Vacant Property Recovery Program. If you find a suitable abandoned building with property tax payments at least three years in arrears, the program could allow you to rehab the property and have the municipality lawyers clear and transfer you title. The properties range from nearly move-in ready to parcels just months away from demolition. To get an idea of what can be available check out Wilkensburg CDC's property listings.

Hope this gives you some tips to hit the ground running here.

I can affirm what @Jeremy Pace just said.  At a high level, the issue with Pittsburgh real estate is that after the crash in the steel industry in the 70s/80s, the combined statistical area went through massive depopulation as folk emmigrated to other parts of the nation to find work.  Many of the buildings that had no users began to decay and fall into ruin, with high concentrations of such buildings in the Monongahela Valley. The market is still in the process of absorbing this excess housing stock in the form of rehabs.

Many of these buildings are vintage 1890 - 1910 when Andrew Carnegie was rapidly expanding the local steel industry. As you can imagine, even a lot of these buildings that are in service are still in pretty rough shape. The cost of rehabbing will often put the ARV above nearby comps, making them hard to sell after the work is done. Rents can be okay in the poorer area, but when I was checking out the popular South Side Flats area, many of the properties weren't even breaking the 1% rule.

For out of state buy and hold investors, you'll find neighborhood valuations to be particularly treacherous. Because of the historical nature of municipality formation here, we have too many townships that are too small to properly maintain city services. For this and other reasons quite a few municipalities are under a PA state system of financial distress known as Act 47. It's a financial limbo condition where the town is not technically in bankruptcy yet is severely limited in operating as an ongoing financial entity. So within a couple miles of each other, for example, Braddock and Rankin are in Act 47 but Swissvale is not.

On the positive side, the region has shown some great signs of stabilization in the last 5 - 10 years, and was relatively strong during the 2008 financial crisis.  For the locals and recent immigrants, there are some great opportunities to invest if you can study the fundamentals and ignore the emotional issues the region shares collectively. But the market will probably be biased heavily in favor of income over appreciation until some legitimate building stock shortages show up in key neighborhoods and until new construction starts showing more promise.

It depends on what causes deflation.

1) Too much stuff chasing too few buyers.  This happens when there is a depopulation, such as impacted Rust Belt communities  in the 1980s - 2010s.  Properties and rents get cheaper, because it is a buyer's market. Many properties will not cash flow, period, and many get bulldozed and pushed into their own basements as decay eventually caves them in.

2) Tight money supply; a Central Bank doesn't keep enough dollars in circulation.  People may want to buy, but they can not find credit. Lack of buyers causes motivated sellers to drop prices in order to get out of their properties. Lower end properties will probably be affected more than luxury properties.

3) Devaluation; meaning the purchasing power of your currency deflates relative to world currencies.  People find foreign goods are more expensive (including petroleum products and energy) and have little money left over for discretionary spending. This can cause people to trade down in their housing in order to balance their household budget. This scenario gets strange, as foreign direct investment can cause some markets to actually rise in value while markets driven by local purchasers see their valuations drop.

I lived in southern California continuously from 1988 to 2005 and see some of what the OP's adviser was talking about.  Yes, property values and rents did appreciate substantially over time, although there were some fairly big dips in the market around 1990 and 2008. Most of the rent and appraisal appreciation was due to steadily higher incomes and net immigration to the really hot regions like Orange County and parts of San Diego. Even with new condo neighborhoods getting built all the time, there wasn't really enough housing stock to meet demand.

But the carrying costs of these properties for renters and home owners vis-a-vis their incomes have gotten pretty burdensome. We would see a lot of doubling up in properties with single people renting bedrooms when they were of an age to rent entire apartments, simply due to affordability. Areas like Santa Ana, CA, had some of the highest population densities, in an area mostly dominated by SFRs, simply due to entire immigrant families sharing living quarters.

So you have to ask yourself if there is some element of a 'greater fool theory' keeping the valuations propped up? Is there some point where incomes flatten to the point where rents and home prices simply can't go any higher because there are no buyers.  And if affordability becomes enough of a burden, do people simply stop migrating to California? Some of those questions are partially answered by the San Francisco Bay Area, whose wages and rents are higher than Orange County, and partially by periodic net migration outflows from California to Oregon, Washington, and Colorado.

Personally, I wouldn't invest in that market simply because most renters and even buyers have to pay a huge chunk of their income to keep a roof over their heads. If the country were to suffer a sustained economic crisis, I could see these high cost of living areas take it the worst if the labor market also suffers severely.