All Forum Posts by: Juan Rodriguez

Thank you everybody for your help. I was able to get it done in time :-)

Hello,

I've been a landlord for many years, but in 2022 we bought, rehabbed, and started operating a short term rental, so we have paid several contractors over $600. This year I also paid over $600 for property management and my CPA. Do we need to send a 1099 to all of the people that I paid over $600 in relation to our real estate work, including property manager, CPA, and home rehab/repair contractors? Most are not corporations, which I know would be exempt from needing to send a 1099. The STR is in Texas, so I assume I don't have to send the 1099 to Texas tax department, just the IRS and the contractor. Is this assumption correct?

It's worth mentioning that my wife is able to qualify as REP for 2022 tax year

And I know I'm running close to the end of January deadline, which I'm nervous about. It slipped my mind until this week. Ouch!

Thank you. This is all valuable feedback. I agree that turnkey properties tend to sell at a premium, but if the turnkey provider is good, they do tend to come with all major capex and deferred maintenance addressed, so there should not be any big expenses for the first five years, and by then I would think that rent appreciation would've improved cash flow to better handle a capex event, and property appreciation would have been enough to have the property above what you may have paid for (depending on how much of a premium you paid for it). 

I agree with @Joseph Crunkilton that going active, while carrying a higher potential for returns, it can also puts you more at risk for cost overruns from the rehab (and the surprises that tend to show up in the process), plus a significant amount of time put in such as I have experienced with my STR.

At a recent BP podcast, episode 708, they were coaching three people on the show. One of them bought several turnkey properties, and she wanted to move into different strategies, which launched some talk about the "turnkey trap", referencing low cash flow and how fees and repairs would eat up any income over the long term. My initial reaction was that this was rather short-sighted as it focused on returns in the first few years of owning a turnkey rental (where cash flow is low, and you do end up paying top of market value for the property). But my understanding was that the real benefits of buy and hold residential rental real estate show up many years later through rent appreciation, value appreciation (which gets magnified via leverage), loan paydown and tax depreciation benefits. Such that in 10 years the cumulative investment returns from all of these factors is such that it wouldn't matter that you bought a turnkey rental at the high end of market value, because the returns would be substantial enough that you would not feel like you got into a trap. Sure, other strategies like BRRRR, STRs, and value-added CRE can yield significantly higher returns, but I see that more for someone that has a goal to achieve financial independence exclusively through real estate and quit their job in the next few years. In which case Turnkey might be a bit on the slow side to achieve that, but not a trap in my opinion.

To give more insight into my background, I have a full-time W2 job (unrelated to real estate) that I am happy with and have no plans or desire to quit anytime soon, so I am ok with the longgame of buy and hold real estate. I currently have three investment properties: a local rental I bought in 2010 and self-manage, a turnkey rental I bought in 2021, and a short-term rental I bought in 2022 and mostly self-manage. I am also invested in several syndications as a limited partner. I am also looking into buying my next turnkey rental (and have a goal of eventually having at least 5 Turnkey rentals)

What are your thoughts on whether Turnkey is a trap, or is it a reasonable and promising alternative to build wealth in real estate? If I am completely wrong and turnkey is truly a trap, I am definitely open to reconsider since I am still early in my Turnkey investment journey and would want to know sooner rather than later whether to shift my strategy.

Thanks :-)

My properties are located in Maryland (PG County) and Tennessee (Shelby county). I am also looking to buy this year in San Antonio, TX; Lancaster, PA; and Aguada, PR (probably not all three this same year).

@Alan Lacey, I agree that rent increases usually more than compensate for all of these expense increases. However, it seems to me that with the upcoming increases I am experiencing with property taxes, insurance, and higher cost for maintenance/repair, it looks like my cash flow will be bumping down quite a bit this year as increasing rents well over $100+ is not reasonable right now.

There is a lot of focus on inflation, rising home prices and rising inflation. But will it be rising property taxes what will lead to a real estate sell-off and potential real estate recession? Based on latest tax assessed values, one of my rental property taxes is going up by over 40%, and another by 23%. I don’t hear much talk about this, and wonder if other investors are seeing this steep increase in property taxes, which can put a significant dent on rental returns, and eat significantly into cash flow.

Thank you

Hello,

I had a new roof put in this past year, which cost me around $7k. I provided all the information to my CPA for 2021 tax preparation, and he told me that I couldn’t expense it out, and that the cost would be added to the depreciation schedule by dividing the $7k over the depreciable life of 27.5 years, and taken slowly/linearly across that time. I was expecting/hoping I could take the full $7k deduction this year, but maybe I was mistaken. Can I get a second opinion here?

Thank you :)

Thanks for the replies. This is all very helpful and will simplify things approaching it as a lease extension instead doing the whole thing every year. 

Hello,

I’m renewing the lease of one of my tenants in the next two months for a property I manage (about 45 min drive from where I live). I’ve always just used the previous lease agreement document but updated it for the year and terms (including rent increase if applicable), print it, take it to the property and sign it together with the tenant. It’s a bit of an annoyance especially since it’s so long at 11 pages, and everything is the same except the year and rent (if it increased). The question I had is if it would be ok to draft a lease renewal that states the lease renewal term, and rent, and points to the previous year’s lease for all of the gory/legal details?

Thanks!