All Forum Posts by: Rahul Bhatt

Originally posted by @Matt Mason:

Keep in mind that it would be very doubtful that the people in the original example would be able to take all of that income and property tax deduction because most people in this situation would have already lost their deduction because they pay alternative minimum tax. Once you get into certain upper middle class tax brackets in CA, pretty much everybody pays AMT, so increasing the exemption limits on AMT is a nice boon to CA taxpayers at the same time that the limits on SALT deductions is a negative.

The Bush tax cuts of 2001 and 2003 weren’t as big a tax cut for NY, NJ, and CA taxpayers because the AMT wasn’t changed and it ensnared a lot of more these taxpayers. This wasn’t publicized as much at the time. Overall, the SALT deductions are negative to high tax states but might not be as bad as reported because so many of the taxpayers affected are already in AMT.

Hope it helps. 

Originally posted by @David K.:

Hi,

I found a duplex outside of Cleveland Ohio that I was hoping to get some feedback on. I am a long-time lurker in investment properties, but have never pulled the trigger. I found a property recently that seems too good to be true (or just undervalued) and wanted to get some feedback from those more knowledgeable:

PURCHASE INFO:

Purchase price: $55,000

Financing: 20% down ($11k) with rest ($44k) financed at 4% over 30 years.

EXPENSES:

Mortgage: $2,573 annually

Insurance: $900 annually

Property taxes: $2,750 annually

Misc. Expenses: $4,200 (assuming 25% of Gross Income)

Vacancy: $1,800 (assuming 10% of Gross Income)

Total Annual Expenses: $12,103

INCOME AND RETURN:

Rent: $1,400 / month (2 units; 1st at $800 and 2nd at $600 / month)

Annual Gross Income: $16,800

NOI: $7,150 annually

Cash Flow: $4,577 annually

Cap Rate: 13%

COC Return: 41%

Notes: The property is in a very blue collar area; not terrible, but certainly not a good area either. Significantly, the owner is about 6k delinquent in local taxes. I suspect this is negotiable on how this will be paid / impact purchase price, but frankly even if I paid off the delinquency entirely (and calculate it as part of purchase price), CAP rate is still 11% and COC Return is still like 35%.

The current owner purchased the home out of foreclosure for half the current asking price, and the current asking price is under the county appraised value (not that that means much). Home seems well maintained from what I’ve seen (so far, of course). The bigger unit is rented and the smaller unit is occupied by the owner. I believe the owner is financially hard-pressed (hence the tax delinquency), so that could explain the desire to unload the property. But it has been on the market for 6 months, so something seems off. 

My initial guess is that the tax delinquency is scaring other investors off, but as stated above, the numbers work even the buyer pays it off. Is there something I’m missing? New furnaces and water tanks were installed in 2013, which incidentally coincides with when the owner began to get delinquent. But no other information is currently known about possible cap ex—frankly, the current returns seems to give plenty of wriggle room even if there are immediate cap exs that are necessary.

Thoughts appreciated. (And Happy New Year to all!)

Also Keep in mind you have to build your team in the market anyway with turnkey you are delaying it for couple of years (if you got honest turnkey provider). so you have to do it from thousand miles once all the shiny upgrades are vanished.

Again it is individual preference i prefer built in equity or force apprreciation depending on the market where I am in.wish you luck

Originally posted by @Chinmay J.:

Originally posted by @Rahul Bhatt:

I dont get the turnkey concept because numbers never works. you are paying almost market value or sometime more than market value. you want to build the equity as a real estate investor.If you really want to invest passively than REIT or online platform makes more sense.I have analyzed and still analyzed tunkey property but none of them makes any sense to me.

What do you mean by "numbers  never works [sic]"  Proforma statements on any TK providers' website will show you exactly how the numbers work. Not to mention testimonials from hundreds of people that they are making consistent returns is enough for me to believe in validity of business model. 

Of course, the fact that you are not having any equity in the property and its entirely a cash flow game is not lost on me.  I have properties in Virginia that have plenty of equity, mostly because I bought them cheap during the depth of the Great Recession. Those days are long gone. If I were living in a market that is conducive to Turnkey operations, I'd never buy a TK property.  I would buy them cheap, rehab them myself, and benefit from the equity.  However, sitting 1000s of miles away I am unable to do it, and I don't live in a turnkey market, so why not invest in a provider who can do it for you and enjoy the cash flow ! Its as simple as that.