All Forum Posts by: Kirby Davis

 I don't know exactly where your property is, but I know that can be a rough area. Unless you just happen to be in a place that has had some gentrification over the last couple of years, it's probably not a C neighborhood. That being said, regardless of the level of neighborhood, that's not an acceptable level of service. If they had strong demand and showed it right after the renters moved out, while working through the turnover process (expected completion within 1-2 weeks depending on extent of work needed), then I'd understand, and it would likely already be rented. 4 months later - fire your PM and move on. 

I'm from Memphis. 

@Dave Foster The government is definitely not in the business of simplifying things!

Looking into 1031 now. Definitely agree with the previous posters - get a pro at least on a consultant basis. The 1031 process is over-complicated, per usual with government issues. 

I definitely wouldn't decrease rent $50/month,  unless you're having a really hard time renting the property. If you are, then you probably need to reevaluate the property to understand why - is the area saturated with rentals, are the finishings not up to par with other properties in that price range, etc... If you're priced where you should be based on the market, you're just cutting your cashflow. Like mentioned above, you have basically no recourse if they break the lease, so you're discounting for a false safety in the first place. Plus, if they're asking for that upfront, be wary of what may be coming. 

This is so accurate. You can't get inside most properties that are currently rented until you have a contract. Have your out in your contract. You're right - don't get emotionally invested. At all. It's easier said than done. That boring spreadsheet/calculation view is the best way to figure out what to do. Not pretty pictures. 

Well, I guess at this point, I should add that we actually have a signed contract on the property now. Until we actually close on the sale, I know it can still swing either way. Interested in advice. 

Hey guys. I have a rather complicated situation, and I'm trying to decide what is the best option forward. I work full-time, W2 employee, strong salary. My husband traveled 250-300 days/year, so almost two years ago we decided to put an end to that. We bought land and built a large agricultural operation that is contracted with a large food producer. It's definitely not passive. It could be, but we made the mistake of hiring a retired family member to manage most of the work, and realizing it was too much for them, my husband works along with them full-time. This cashflows ~ $100k to us annually. (Realistically, we could hire someone to manage it full time and it would be $50k cashflow passively, but the family situation is complicated, so we can't do that at this time.) The tax benefits are also tremendous, as the depreciation covers all of the income from the operation and most of my W2 income. 

We haven't been looking to sell the operation, but we were approached with an offer that would essentially net out a little over $800k to us. Now, we are evaluating whether we should sell or hold the investment, as it does gain good equity ever year, but we are also in an advantageous situation, as getting a contract like we have is very difficult right now due to the current market. In the area we live in, a lot of people buy our type of operation mainly to have it passively managed with minimal cash flow and to use the depreciation to cover other income they have elsewhere. I love the benefits of the depreciation, but we are also at a point where we still need cashflow. 

My question is this: Given the information on how this performs, should we sell? (Could we replace this level of cashflow?) Or should we keep this and continue to build our portfolio with truly passive investments. Once the family issue is resolved - hopefully within the next year - hire someone and cashflow the $50k passively? 

Next, if we do sell, what would be the best options for the $800k? 1031 into something else? If so, what type of investment - we obviously want to maintain strong cashflow and would want the next investment to be passive or to at least be a business investment that required oversight/management but not day-to-day grind. Or, take the cash, pay our taxes, use the rest to pay off every bit of debt we have, then use the ~$200k remaining to start investing completely passively to (hopefully) quickly replace any need for W2 employment going forward. 

Any insight/advice/new ways to look at this is much appreciated! 

 Jason, on this deal, do you repay the full loan or 70%, as the lender maintains 30% equity in the deal. Do you have more details on how this is structured? 

@Frank Patalano I’d say the biggest thing holding me back right now is being comfortable investing out of state. My market is way too hot to make longer-term investing a good option. The rental rates are nowhere near strong enough to make sense when buying very inflated houses. Cap rate is around 5-6% here. Just not enough to make sense. But... as someone who has worked their butt off to build everything from scratch by managing it with my spouse, and being very hands on, it’s very scary to invest in another area and count on/trust others. It just feels very risky to buy a house without actually walking through it, hire someone to make repairs and hire someone to rent it. There has to be a lot of trust built to do that comfortably. Turnkey rentals usually aren’t that great when you look at the real numbers. And a lot of those companies are not honest or transparent.

I’m interested in single family or small multi-family properties.

I just had an opportunity come up that I wasn't looking for, and I don't fully know how to evaluate it. It's a 4 metal building storage facility with a total of 24 storage units that rent for $600/month each. Taxes are  $10,500/year and insurance is $3,450/year. Industrial type storage with 14 ft roll up doors on each unit. 

What other expenses need to be accounted for, and how what are recommended assumption rates (vacancy, capex, repairs, etc...)

Any guidance would be appreciated.