All Forum Posts by: Kirby Davis

@Matt Crusinberry Thanks, Matt. I appreciate the insight.

@Cameron Tope thanks, Cameron. This is exactly what I was thinking - get that great financing to really push your cash flow. I was hoping I could transfer the deed. We have a trust and a couple of LLC's we operate under currently. I'll get my lawyer involved. Appreciate the advice!

When financing a property under a conventional mortgage, which requires the loan be under you personally, how do you protect yourself legally? Obviously a conventional mortgage offers the best terms, which can improve cash flow. But these require the mortgage be under your personal name. How do you protect yourself legally? I typically operate under an LLC and want to ensure I'm

Protected. But I also want to use the conventional mortgage when possible.

@James York Just a word of caution. Please make sure you have someone you trust in the area giving you feedback on the property. Memphis and Little Rock are very similar in that certain areas can be fine, but there are a lot of BAD areas that can easily be disguised as decent/good areas by turnkey providers. I see properties listed by Turnkey providers in Memphis all the time, priced right at that 1% rule because they know a lot of investors target that, and it looks like a good return to someone not familiar with the area. Most of these are in rough areas, so the renters you'll get will cause some issues - this translates to significant additional expense, which their numbers do not account for. In these areas, turnover will likely cost you a good bit, as the renters are very hard on the property, and crime can cost you, also. There's also very little chance for much appreciation in these areas (outside of certain pockets, and those aren't huge), so buy for cash flow but be sure you are accounting for the right level of tenant and the expenses associated with that level... 

I'm originally from Memphis and have lived in Arkansas for the past 10 years. Just wanting to give a word of caution, as I see a lot of turnkey opportunities presented in these areas, and it worries me because they look great. Only knowledge of that area specifically would let you know it's going to be a serious dud. 

@Michael Plaks

Completely agree with the strange loopholes that already exist and the literal interpretation. I think it could definitely be abused. But also could lead to missed opportunities to improve single family homes in depressed areas where cost is low, but the houses are in decent shape. Investing in these areas at 50% of cost improvement basis would vastly improve the area and values, but 100% of cost would almost never be achievable for any investor, as the payback would never exist. 50% could help the area - because NOTHING is happening now... it’ll be interesting to see how it plays out.

@Natalie Kolodij.

Definitely don’t disagree with what you’re saying. It has just been left wide open at the moment. I also find it quite difficult to execute on single family houses in areas where housing is somewhat depressed, and homes sell for low prices in an OZ. These houses may be in decent condition, and spending what you paid for it would basically be a gold plated house by the time you were done 😂. It’ll be a fine balance unless the house is falling down in some areas.

Now, serious value add multi family, commercial or raw land is easy to do.

@Natalie Kolodij

Here’s the part that is being “interpreted” differently in several areas that I’m seeing.

during any 30-month period beginning after the date of acquisition of such property, additions to basis with respect to such property in the hands of the qualified opportunity fund exceed an amount equal to the adjusted basis of such property at the beginning of such 30-month period in the hands of the qualified opportunity fund.

Now, I’m seeing multiple interpretations stating this allows for depreciation to change your basis to no longer be purchase price for substantial improvement qualification. Example, purchase price $110,000 with $100,000 allocated toward building. Depreciated down to $80,000, and improved within 30 months from the $80,000 adjusted basis, requiring only $80k in improvement versus $100k.

@Michael Plaks I agree. I’ve also seen places indicating the adjusted basis at the beginning of that 30 months as the amount needed for improvement... gotta love the clarity here.

What is your take on the 30 month improvement at an amount of at least 100% of adjusted basis. From what I'm seeing, it's 100% of adjusted basis at the start of any 30 month period while you own the property. It is not 30 months from date of purchase, and it's not 100% improvement cost vs purchase amount. It is relative to basis at the beginning of the 30 month period you choose, and I am assuming if you used a 1031 with a reduced basis, it would be based on that reduced adjusted basis coming into the property (not purchase price). 

This is very helpful! Thank you! Do you have any banks you would recommend for properties in Tennessee? I've talked to two banks locally and one in Arkansas, and all 3 will only do a 20 year commercial loan with 15% down. I'm buying for cash flow, and I only have 2 conventional mortgage loans currently. 

The houses are actually very low purchase prices $40-$65k, with 1.5-2% rent ranges. In an area that has been depressed, but has new large businesses moving to the area which will compress housing availability, push rents a little higher and push property values a little higher. I'm buying below retail at these prices already. I'm also well-connected with some of the big businesses moving to the area and utilizing relationships to offer housing for their employees.  

I'd like to get 30 year fixed rate loans to improve cash flow.