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All Forum Posts by: Andrey Y.

Andrey Y. has started 114 posts and replied 1826 times.

Post: Corona will have heavy impact on economy and lead to foreclosures

Andrey Y.Posted
  • Specialist
  • Honolulu, HI
  • Posts 1,887
  • Votes 1,264
Originally posted by @David Barnett:
Originally posted by @Christine Mulkins:
Originally posted by @David Barnett:
Originally posted by @Christine Mulkins:

The biggest treat in my opinion is when states don’t require tenants to pay rent (requiring landlords to give them rent relief) but landlords are not getting relief on their expenses (mortgages and the like). So landlords are expected to pay for everything but tenants get a break. That can have devastating effects on the multifamily space. In particular, those of us who have commercial loans that aren’t part of this Fannie/Freddy loan forbearance thing. That’s the domino effect that concerns me the most. I can’t imagine it would come to that, but in some of the more liberal states, it’s a possibility. 

Reserves, reserves, reserves!  This whole situation screams out why all investors should retain some of their earnings as a buffer for economic situations.  In addition, are you expecting 100% non-payment?  I really don't think non-payment will be as pronounced as people are fearing, unless the assets are in low C/D areas.

Yes I have plenty of reserves. That’s not the point I’m trying to make. I’m saying that it would be a major kick in the face to the landlords (the ones providing the housing, utilities, repairs) if the “powers that be” in local government think tenants should get rent relief for a period of time but rental owners are expected to foot the bill on the tenants behalf. Regardless of reserves, it’s just not right. That’s my point. 

The rent is still due and any rent relief is temporary.  If the tenant does not pay, the rent relief cannot be permanent.  When the restriction is lifted, you start the process of ensuring that the tenant brings their rent payments current.  If they do not bring their balance current, the landlord goes through the process of eviction.  If your tenants use this as a way to try to take advantage, they are not good people anyways.  It's probably best that they are out of the property once the restrictions are lifted.  The whole COVID-19 situation has been ridiculous (in my opinion), and I wouldn't focus energy/mental head space on something that isn't fair or right.  Our elected officials have decided this is how they want to fix this, and this is what reserves are for...

 Well said. Agree completely ^^

Post: How you can profit from a Big Mortgage

Andrey Y.Posted
  • Specialist
  • Honolulu, HI
  • Posts 1,887
  • Votes 1,264
Originally posted by @John Teachout:

I'm unclear as to why cash flow is a bad thing. And the benefit of a B.A.M is what again? So one can pay a lot of interest to someone else? Not following this line of thinking. Guess I'm doing it all wrong as my properties cash flow and I don't have any B.A.M.s

 Do you think Bob Bowling who payed $300K for an asset with $80K downpayment, now who cash out refinanced $750,000 at 4% ($1M valuation) is worried about a tenant not paying rent for 3 months?

Paid off properties is also a viable strategy. I would prefer no mortgage to a person with a 60% LTV mortgage, because there is too much equity and the bank can foreclose in a time of trouble.

A person with a 90% LTV mortgage, the bank has no incentive to foreclose. They (the bank) are taking all the risk and would lose money if they foreclosed.

Post: How you can profit from a Big Mortgage

Andrey Y.Posted
  • Specialist
  • Honolulu, HI
  • Posts 1,887
  • Votes 1,264
Originally posted by @Joe Villeneuve:

So, to summarize your long winded whining, Cash Flow is a bad reason/way to invest because:

1 - You have chosen a market to invest in, that has poor cash flow
2 - Nobody can successfully cash flow because you can't do it in your market of choice.

 I am actually cash flowing AND profiting in Hawaii specifically because rental income growth goes hand in hand with appreciation.  I would STILL profit even if my rentals were unoccupied. You cannot say the same thing.

The reason I can cover missed rent payments is because I focus on profitable markets, not to be confused with "cash flow" markets on paper.

Landlords are freaking out all over this forum due to the anticipation of 1-2 missed rent payments.  But they purchased fantastic assets in cash flow markets with dreams of cash flow right. Why are these landlords getting so nervous, I thought "cash flow" would help them in times of trouble?

The chickens are now coming home to roost. We will see which investors understand the difference between cash flow and profit.

Post: How you can profit from a Big Mortgage

Andrey Y.Posted
  • Specialist
  • Honolulu, HI
  • Posts 1,887
  • Votes 1,264

In light of all the recent threads about COVID-19, worrying about tenants not being able to pay rent, legislation that seems to screw over landlords month after month, and ethical dilemmas about where it is our obligation as landlords (or God's children) to cover the bills of tenants because of (fill in the blank)

Cash flow is for poor investors or investors that are poor (Apologize in advance to the BP / GRE / Turnkey advertisers)

Let me introduce to you a concept that is not often talk about, and probably frowned upon over the last 11 year bull market:

Big A** Mortgage (BAM)

Things most investors foolishly ignore..

  1. - Historic rent growth
  2. - Historic appreciation rate.
  3. - NOI per square foot
  4. - Operating expenses per sf
  5. - Capex per sf

Cash flow is for poor investors or investors that are poor.

If you need or hoped for cash flow to pay your cable bill then you probably should not be investing in real estate. The only reason I'm not cash flowing is because of a BAM that I am paying down because I am in a high appreciation market vs. a market where the only reason I may get cash flow is because the prices are so cheap because sellers are trying to unload unprofitable properties, this is by design.

So-called cash flow gets eaten up by CapEx and by pesky critters like the coronavirus. EVERY. SINGLE. TIME. I know that "cash flow" has been shoved down our throats because it makes money for advertisers and those companies selling it.

Its time to wake up and start thinking like the big boys (family offices, hedge funds, and billionaires). They are buying 3.5 caps in NY, London, HK, LA, and SF.. FOR A REASON. That reason is not the dream of cash flow.

Post: Why is Rent still due during COVID-19?

Andrey Y.Posted
  • Specialist
  • Honolulu, HI
  • Posts 1,887
  • Votes 1,264
Originally posted by @Account Closed:

Yeah, I do feel bad for landlords that are going to struggle just due to market forces alone right now.  But if you're extra smacked because the left leaning area you opted to invest in also kicks you while you're down -- well, don't allow yourself to have that happen. Get out of those armpits. 

In the place you call the "armpit" i.e the Bay Area, I have a townhouse occupied by an engineer paying over 3500$/month whose rent I have no doubt whatsoever will hit my account on the 29th as it always does. In your capitalist heaven red state of Indiana I have multiple rentals that I have no idea will pay or not. And even if I can evict them, who will rent now?  Your so called armpits are the economic engines that drive America while the opiod addicted trash in the red states suck up our taxes. Sound a bit harsh? I know its an exaggeration but no different than your categorization of the most productive and educated states in the country as its "armpit". 

 Educated in America is not something we should brag about. 

I can say this, I have had 13 years of post high school higher education (college, medical school, residency) in the US. Other countries are miles ahead of us in all aspects of education.

California is okay, but being taxed to death doesn't justify living there IMO. Hawaii has better weather (best in the world many would say), world class hiking and scenery (often a 5-10 minute drive, as opposed to 1-2 hours from a city in CA), better beaches by far, better surfing, less taxes and less red tape, more landlord friendly in HI (can evict in 3 weeks), better travel hub to Asia, etc.

CA and NY residents suffer from the same fate. Most have never traveled overseas because they think its the best where they are. Well, I don't enjoy being taxed at 52% not to mention the random taxes they seem to dream up every year.

I believe its your patriotic duty to pay as little taxes as possible legally. There is ALWAYS leakage, beaurocracy, and red tape when you give you hard earned money to the government. Therefore its wasted in one way or another.

Its not the 60s or 70s anymore. All of the preconceived notions we were brought up on about "the rest of the world" as patently false once you step outside the US and take the time to travel.

Post: Why is Rent still due during COVID-19?

Andrey Y.Posted
  • Specialist
  • Honolulu, HI
  • Posts 1,887
  • Votes 1,264
Originally posted by @Dan H.:
Originally posted by @Jay Hinrichs:
Originally posted by @David King:
Mary the state school taxes can't be paid late. The state will evict and take my houses. I have to collect over $400 per month to cover a $5,000 school tax on each of 10 properties. That's around $50,000. I am retired so this income is all I have. Please explain how your math works for me? Please don't tell me about how the tenants are going to come to my rescue when they get their jobs back I have way more experience than that. My houses are paid off. I have tried to refinance and they say I don't make enough to pay a mortgage. If you're going to tell me about a fairy tale organization that is going to come to my rescue please post their phone number so I can call them. My wife and I will be out of money if the rent doesn't come in.

Originally posted by @Mary M.:

@Greg M. you left off utilities, mortgage companies, credit cards, banks.....etc.... and all of those are allowing payments to be delayed or added to the back of the amortization... utilities etc take amount owed and split it up over x months.....

Your in great shape more landlords should be like you..  your solution is to just liquidate .. sell one to weather the storm.. or sell them all go to cash.. which should be significant redeploy into assets that pay you monthly. problem solved.. if you have a lot of appreciation and a tax burden you could 1031 into a different asset class ?  But to think your in dire straights when your portfolio is paid for.. not sure about that. I just congratulate you on having it paid for and being in great shape.

 A mostly disagree with Jay again.  Twice in one thread, I thought it would never happen.   @David King should have never placed himself into this situation.  He acquired without allocating for reserves.  He did the classic over extend to acquire RE.  He should have never purchased the 10th RE.

So my view is there should not be more LL like him.  He should have acquired while keeping reserves.  Do you really think he can sell now?  It will be tough?  I have preached in numerous posts to not over extend and my definition of over extend is not to be made insolvent (as you point out he is not going to go bankrupt), but to be forced to sell at an inopportune time (i.e. if you were forced to sell in the GR you were over extended).  This qualifies as an inopportune time to sell.

 I mostly agree with Jay.

I have 3 tenants in 2 rentals in Hawaii. One of my units is already in escrow and will close shortly. I saw this coming from a mile away but unfortunately I could only sell the unit that was vacant. That rental has made me many times my DP already.

I could afford to pay the mortgage for 6 months lets say. But why should I? Terrible business model. So far, two out of the three tenants are telling me April is good, and the 3rd one is going to make partial payments hopefully. I will do this for 2 months. If it doesn't work, I will sell all the units and 1031 into a passive Delaware Statutory Trust (as I am already doing with the unit in escrow).

My tenants are working with me and I am working with them. I have never been so optimistic, carefree, and motivated as I am now (big part of this is daily gym/cardio)

Being a landlord is NOT the job for someone who wants to make everything out of their time in this life (fitness, travel freely on your terms all over the world, time with family and friends, meditation/time to reflect, learn languages). All of the landlords I know are lacking in most if not all of those things

Post: Deducting my $800 appraisal fee (X2) as an expense for the year

Andrey Y.Posted
  • Specialist
  • Honolulu, HI
  • Posts 1,887
  • Votes 1,264
Originally posted by @Natalie Kolodij:

All of your loan related costs get amortized over the life of the loan. 

I don't really see how this would work. As an example, the properties are already on a depreciation schedule (using the initial PP + other things). So, I am performing one or more cashout refis after the initial purchase event. I don't know where in the taxes (edit depreciating schedule, or put as an expense somewhere?) it would go.

Because loan related costs from the initial purchase (which I already have factored in), are different from loan related costs from future cash out refinances (which are different loans).

I mean, does the depreciation schedule get reset or depreciation just becomes higher?

Conceptually I understand what you are saying, I just don't know how to input it into the tax software. Seems like it should be fairly straightforward. Thanks for your input.

Post: Deducting my $800 appraisal fee (X2) as an expense for the year

Andrey Y.Posted
  • Specialist
  • Honolulu, HI
  • Posts 1,887
  • Votes 1,264
Originally posted by @Kirk R.:
Originally posted by @Andrey Y.:
Originally posted by @Kirk R.:
Originally posted by @Andrey Y.:

I was just doing my taxes and I realized I had paid for two appraisals ($800 a pop) for two refi's in 2019. Of note, I paid them with a credit card and they didn't appear on the settlement statement at the end.

If I can deduct this as a rental expense, where (what line item) in my taxes should I do so?

Thanks and have a great one and stay safe!

 $800! daaang. like multi unit? Ours are like $200 for sfh. 

Put it under mileage lol not sure but it would for sure be coming off.  legitimate expense. 

 Yea, those are the crazy prices in Hawaii. Mileage? Seems odd.. ;) One of them I actually went with another lender towards the end but either way they were expenses out of my pocket for two difference properties. Still, not sure exactly where to put it? And since it was a refi and not an initial purchase, definitely these amounts are not being expensed or amortized anywhere on my taxes.

pest control or cleaning supplies? i would just get it in there.  if yiu get audited just plain it.   now you got me curious where that really should go.   I would put it under legal & professional same as where my tax preparer money is. 

 The other thing is, sometime when I add an expense on a rental property, the amount I owe the IRS goes UP! {I am using H&R Block Premium desktop version} I mean, I do have carryover losses and carryover AMT from prior years, but how can increased rental EXPENSES worsen tax benefits? I would think it would either do nothing (too much losses already and I am not a real estate professional), OR decrease tax owed. So, this is rather bewildering to me.

Post: Deducting my $800 appraisal fee (X2) as an expense for the year

Andrey Y.Posted
  • Specialist
  • Honolulu, HI
  • Posts 1,887
  • Votes 1,264
Originally posted by @Kirk R.:
Originally posted by @Andrey Y.:

I was just doing my taxes and I realized I had paid for two appraisals ($800 a pop) for two refi's in 2019. Of note, I paid them with a credit card and they didn't appear on the settlement statement at the end.

If I can deduct this as a rental expense, where (what line item) in my taxes should I do so?

Thanks and have a great one and stay safe!

 $800! daaang. like multi unit? Ours are like $200 for sfh. 

Put it under mileage lol not sure but it would for sure be coming off.  legitimate expense. 

 Yea, those are the crazy prices in Hawaii. Mileage? Seems odd.. ;) One of them I actually went with another lender towards the end but either way they were expenses out of my pocket for two difference properties. Still, not sure exactly where to put it? And since it was a refi and not an initial purchase, definitely these amounts are not being expensed or amortized anywhere on my taxes.

Post: Deducting my $800 appraisal fee (X2) as an expense for the year

Andrey Y.Posted
  • Specialist
  • Honolulu, HI
  • Posts 1,887
  • Votes 1,264

bumpp