All Forum Posts by: Michael Gansberg

@Gloria A. - holy cow. Find the baddest a$$ eviction lawyer in your area, and sic him/her on them. I don't know the laws in NC(assuming your property is in NC,) but in NY you can generally serve a 30 day(sometimes 60 depending on lease terms, other times 90, don't get me started, I ❤️NY!) But you'll need to evict them even if they're current on rent, these tenants will cost you in the long run.

@Troy P. - I don't have hard and fast rules on this point, but I have a slight preference for real estate built after 1978(the year lead paint was banned in the US.) Lead paint can be a headache, and sometimes more costly than you expect. I don't know what rules are like nationwide, but in NY State if you want to remove the siding and re-side a house(and the existing siding has lead paint,) you have to put a giant tent over the house to prevent the spread of lead paint. What most people do to avoid this issue is put the new siding over the old siding. 

@Jack Lin - you get what you pay for. So many real estate investors like buying cheap houses, because, hey, they're cheap! But what if the cheap houses stay cheap? And they're likely to attract people who like cheap things(maybe not the best tenant base.) Also, don't focus on number of doors, that's another fetish common among RE investors. I'd rather have 1 door which produces $500/mo in cash flow than 10 which produce $60 of chump change apiece. You may be priced out of Manhattan- but how about nearby in Jersey? Or Pennsylvania? 

High yield in the stock market is known as a value trap by most investors, real estate is no different. If you find a deal that appears to offer 20% cash on cash(with or without financing, or whatever,) then you're missing something- like the roof will need replacing very soon, the likely tenant base is untenable, the house is hot with lead paint/asbestos, your sewer line was plumbed through your neighbor's basement because 50 years ago the neighbor's were super chummy and wanted to save some dough, but now the fancy lady who just bought the adjacent house has uncovered this fact and guess what! You have to re-plumb your sewer line and hire the excavators to dig up the sidewalk(yes, this happened to me, and yes, the home inspection missed it.)

I refused to buy an apartment in Manhattan because they were too expensive(IMO,) then my wife convinced me. Sold it 14 years later, and I'm glad I listened to my wife- things can stay (apparently) expensive when the demand is there. And things can stay persistently (apparently) cheap when demand is lacking.

@Alexandra Isenhour - I had this situation once. No towing company would help, the police told me I had to mire myself in paperwork, and I kinda threw up my hands, since the former tenant(who I was on good terms with) kept saying, "I'm working on it, I'll get it done," etc. It's a little 2 family house I still own- the new tenants really wanted that parking spot. So they came up with a creative solution(btw- I'm 100% confident that those tenants, whose names I've forgotten, are outside the statute of limitations, which is why I'm sharing this story for the first time.)

The tenants literally lifted the car off the ground, moved it into the middle of the street, and left it there. Lol. It was towed pronto, and that's the last I've heard of it. Also- I can't say for certain that the above is what happened- I heard it through the grapevine 😁

Not anti-Trump at all- I don't know why you'd think that. I'm pro-honesty. The IRS has no idea what he makes- they've expressed skepticism regarding DJT's numbers and a simultaneous inability(or unwillingness due to resource constraints) to figure it out. I'd link the article from NY Times but I don't know BP's policy on links. Google the below if you want(the title of the story)- you might find it illuminating. Nice chatting- I think this is a bit off-topic, maybe we should get back to yakking about real estate. 

Trump’s Taxes: Red Flags, Big Losses and a Windfall From His Father

@Bruce Woodruff - I couldn't say. The reason I can't say is because I don't know what DJT earns, and I don't think the IRS does either. Does that strike you as a problem? I acknowledge I lack the tax-savvy to understand his returns in any event, but I suspect dishonesty at all levels(only because whenever a spotlight is shone on his behaviors, dishonesty emerges. Example- he wasn't under audit in 2016-2017 when he refused to release his returns due to "audit," he didn't donate his presidential salary to charity as he said he would, and so on.) So if wherever we look we find dishonesty, how can we trust the numbers DJT puts forth to the IRS? A safer assumption is that his tax returns are a mixture of fabrication and BS.

The NY Times article from Dec 21 on this is interesting- it states that the IRS found numerous questionable write-offs over many years, but that the cost of investigation was likely higher than the benefits that could be obtained due to the complexity of DJT's returns. The IRS notes that the fees were too “difficult to examine unless they were found to be fraudulent payments.” Of course the IRS would never find them to be fraudulent because they were unwilling to investigate. That sort of stuff bothers me. 

Regarding Musk- I rescind my prior statement. He practices typical(and legal) rich person tax strategies as far as I can tell, and I have no problem with that(as I practice them also.)

I read through some of DJT's returns- from the sidelines, it's tough to know what's accurate and what's a lie. Someone whose businesses are as numerous as DJT's has the ability to state whatever they like, knowing that the IRS lacks the resources to untangle the mess known as DJT's returns. Knowing this gives DJT a strong incentive to be dishonest- the theory being, if the IRS can't catch a lie, why be honest?

The system will always be rigged in favor of the rich. The rich generally get that way by using the levers available to them- hard/intelligent work, smart advisors, the decline in interest rates for half a generation inflating assets beyond all prior expectations, or, in DJT's case, having a rich daddy(what a lovely zygote. And the location can't be beat!) DJT is right- every American is entitled- and expected- to practice tax avoidance(via depreciation, 1031 exchanges, or whatever, the tax code legally allows) but tax evasion is a different animal. Nothing peeves tax-paying citizens more than grifters who refuse to pay their fair share because they have the resources to do so(see: Donald Trump, Elon Musk, etc.) But there's no easy solution- the plutocracy will always have the resources to outwit the IRS.  

@Denise Harmening - sorry to hear about these difficulties. Sounds like you'd be better off self-managing or with a different manager. For the future, there are some steps you can take to reduce the likelihood of recurrence. The best one would be to install Nest thermostats(or Ecobee, or some such thermostat) which can be adjusted from anywhere in the world- as long as you have cell service. You can also set warnings- for instance, when the indoor temperature drops below a certain value, say 50 degrees- and you'll get a ding on your phone when that happens. Another option is Simplisafe- it's a remote alarm company- and they offer water sensors(they look like white hockey pucks.) Place the sensors in a place where water might pool when there's a pipe burst- the basement, perhaps- and you'll get notified. 

I have both systems in my primary residence- Nest also helps save energy, so I highly recommend it. You'll need wifi in the house to take advantage of either of these options. 

@Jordan Akins - I second @Mike Nelson 's suggestion. DST's(Delaware Statutory Trusts) can solve your dad's problem. He'll take a hit on the cashflow(but ask yourself- is the cashflow really $20k/mo if he's deferred $200k of repairs? Deferred maintenance usually gets more expensive with time, and it's not always the gradual process you're hoping for.)

Your dad can avoid paying any capital gains if he does the 1031 and purchases the correct amount of replacement property, and he can diversify as well into different geographies and asset classes- residential rentals, commercial of all flavors, land, farms, whatever. Also- he will never get a phone call again regarding a problematic tenant, an overflowing toilet...or anything, really. 

@Marek Kucharski - good work on your accomplishments. Investing without much money can be challenging. One of the benefits of real estate investing is the protection from our instincts to sell at the worst time- when things are tough. There were plenty of investors who sold stocks in 2009 at exactly the wrong time, all it took was the click of a button. When you invest in a house(or other RE asset,) when things are challenging, you can't click a button and escape it- you have to fix the problems. And then the asset is better for it, and so are you(financially, anyway. The headaches may not be worth it.) If you're a shareholder in some company in the S&P 500, you will have no ability to fix their issues. I believe this inability to sell quickly when times are rough gives RE investors an advantage. There was an interesting study showing that while stocks rose sharply over some long time period, individual investors made approximately zero percent over the same time period. The authors concluded that it was likely because investors sold out of fear and often at the wrong time.

I suggest fixing the problems that bother you the most. It sounds like you don't like dealing with tenants(join the club) and you don't like the zero cash flow situation. You seem to be in the most active area of RE investing- direct ownership and direct management. Slightly more passive would be hiring out a manager(not always practical, and a bad manager can be worse than no manager) or buying a condo and renting that out. You could 1031 into a condo and defer your taxable gains. Condo ownership tends to be a bit easier than a house- usually the common area maintenance, like snow removal/lawn care, and external repairs(roof, facade) are handled by the condo board. Further into the passivity spectrum are investments in a syndication(something I've never done) or investments into Delaware Statutory Trusts(something I've done plenty of.) In these investments, you won't ever hear from the tenant, but you also don't control the investment. At the extreme end of the passivity spectrum are things like private and public REITS. I suspect your cashflow situation would improve if you invested in any of these vehicles, and your tenant headaches would vanish.

I believe both stocks and real estate should occupy positions in any investor's portfolio. Good luck with it.