All Forum Posts by: Mark Doty

@Brian Eastman , @Eamonn McElroy

Thanks to both of you for the responses! How do I identify if the real estate losses are non-passive? I'm basically acting as an owner-builder and hiring out the contractors for the current project (the BRRRR).

For the ROBS to work, I read that "high volume" is in the 3-5 flips per year.  Does that sound accurate?  Could you flip and or run apartment buildings (5+ units) under the ROBS structure?

@Brian Eastman, @Eamonn McElroy

Before exploring this concept with a qualified legal and tax professional, I wonder if any of the community has anecdotal experience around taking a distribution from a 401K and balancing the earned income taxes with paper losses from doing a cost segregation study.  I haven't been able to find much information around this topic so I admittedly may be searching for a unicorn.

My scenario: I have a (2-4) unit multifamily with serious rehab that falls very close $1M ARV. My goal with the property is to execute the BRRRR strategy and hold for the long term, so I think a cost seg might make sense. I'm also considering a 401K distribution or perhaps a ROBS strategy to free up more capital to scale and the purpose of the post is to weigh the pros, cons and feasibility of these options. Ultimately, I'm considering the ROBS or distribution options to eject from the corporate world.

If the cost segregation shows $100K of paper loss/bonus depreciation, etc., can I balance this loss against earned income of $100K from a 401K distribution?  I realize there will an unavoidable 10% penalty to take out the 401K, but I'm curious about the potential income tax avoidance.

Can any of you see major flaws in either path?  I won't take any comments here as legal or tax advice.

Has anyone had experience with how ADUs are appraised? My consideration is to use a BRRRR model to purchase a SFR, then build an ADU/Companion Unit on the property. San Diego is a tough market for cash flow (initially) but adding units seems to be an effective way to overcome the rent ratio. However, I'm unsure how the addition of an ADU would impact the appraised value.

Do you have resources around this topic or know how appraisals are measured on ADUs, in CA, if know?  Thanks in advance for input on the topic!

@Tab Teehee nice topic!  I’m wavering on this decision this year and trying to figure out how to make it work. I live and invest in San Diego but don’t have steady enough deal flow to pay the bills in order to get the real estate business off the ground. SD isn’t a cash flow market so that means I need more transactions (flips or wholesales, which are very competitive) or a move to a different investing market. It’s a tough call and starting another year at my W2 feels painful. 
I’ve been focusing on real estate for about 18 months and feel like this year I need to focus on scaling, pipeline development, and raising capital. With solid progress, perhaps I can leave corporate America towards the end of the year. 

Best of luck to all who are striving for this goal!

@Carlos Ceron congrats on the duplex and on the Devin to move forward! I think you need to keep shopping for something better on the HELOC. You will see different options in terms of principle and interest in the payments vs interest only. 60% LTV seems on the lower end too.

As you look at your options, keep in mind how you will pay back the HELOC (ie value add/Refi/BRrrr) and that the monthly payments on the HELOC are also covered by your rental income.

Best of luck in 2020!

@Ben Sellers lots of good advice here...look for something that needs rehab and has a large enough lot to add another unit down the road.   Best of luck!

@Sean Abrahamsen I think @Kenneth Donaghy makes the relevant points here. The exclusivity agreement is an optional thing but the $300 fee isn’t something I would agree to. 

@Lee Ripma

You've been a KC investor with BRRRR for a while now, correct? What has changed in your philosophy where equity plays a larger role? Are you at a point where your cashflow has now exceeded your monthly bills?

@Jeff Marzo Good luck! You should definitely find an easier time reinvesting with the BRRRR strategy, but those winters are brutal! The commercial multifamily space should have a much easier entry point also. There are certainly attractive elements of cash flowing markets but huge tradeoffs from a quality of life perspective.