All Forum Posts by: Steve Morris

"this issue didn't come up until"

OK, you need to talk with your broker.  You should've gotten a PTR with title exceptions from title.  In my PSAs, buyer needs to waive those ion writing to continue to close.  Should've happened within the first 30 days.

That laundry contract would've been recorded (at least everyone I've seen) on title.

"Basically it's a lien stating that the service company (lets just call them company A) gets exclusive right to the laundry room in the building."

That's pretty standard, so it's not unusual.  I've told owner that if they hire a laundry service guy to be aware.  They are about as bad to get out of as garbage (assuming you're a non-franchise account) contracts.

You can get out, but you'll pay back an amortized amount of the up front payment they gave the previous owner and then NPV on future collections.

I'd say, I wouldn't call off the deal, but read the contract to see when you can get out VERY CAREFULLY.  You usually get like  2 week window with specific notice details or it just rolls over for another term.

Can only really talk Portland METRO.  Am broker, so this is what I hear:

1) Do NOT want in Portland proper.  Too many city council members's using the "rent's too d*** high" as a campaign plank

2) Looking for upside from mismanagement.  Of course, this punished the good operators that stay at the market.

3) Suburbs with large employers or further out suburbs that are growing with little new construction

4) Utility billing potential since water is the fastest growing expense here

5) No major rehab projects, the rent growth market looking a little gloomy for the next few years to amortize the cost.

6) 3 bed and 2 bed/2bth are appealing due to lower turns and relatively lack of supply.  We have a bunch of expensive stuidos now.

Well, you'll need to wait long enough to get a clear title, unless you plan on offering some sort of "special" warranty deed (talk to your title people).  Sometimes on auctions, there is a redemption period for the original owner also.

Also, it'll be inventory as opposed to an investment which affects your tax status.

Most of these are better off as a TIC structure since being a DST adds one more layer and is treated more as a stock sale than property sale so may be licensing issues. However, you're going to have to have a plan:

1) Operating agreement - Syndicator needs to stay in the deal and probably do asset mgmt until unwinds

2) Accounting - Going in, to get the full 1031 deferral, you're going to need to break down the deal for each investor by their share of debt, equity and price so they can get the deferral  Same thing when you unwind.

3) Ongoing accounting - You'll need to figure how to handle capital calls (which you want to avoid since most investors are passive and looking at yield/capital preservation).  You'll also need to allocate payouts and tax shelter for mort int and depreciation of the asset.

When you unwind, its more up to the investors if they individually want to roll into another 1031.  However, you'll need to provide the same accounting to all.

Get a tax professional to setup the TIC, you need it.

Well, there are private syndications also that qualify for 1031 exchanges.  SHouldn't be hard to do a search.

On DSTs, those qualify but are sold by licensed stock guys, not real estate guys - Hence the accreditation which a private syndicator should ask for also.  Plenty out there.  My main suggestion would be to diversify and buy a bunch of smaller ones instead of one big one.  You can find ones in different locations and product types also.

With studios, you have several things vs. larger units:

1) More rent in terms of $/sqft, however,

2) Smaller households mean more turnover than larger units.

3) I think a neighborhood has a lower capacity (they don't need as many) for studios vs. 2 beds.  In Portland, a lot of new const was studios and now we have an excess of those spaces.

I don't know man, I'll bet his net worth is much larger than yours.

I understand totally people not wanting debt and I go thru this with my wife all the time.  There's a sleep factor there.  Add in, probably 80% of people do not manage nor understand debt very well with credit cards, auto loans and student debt.

However, cutting spending increases your worth yet not as much as investing with other people's money.  If you look at people with a lot greater net worth that didn't get it from dad/mom, odds are they borrowed and leveraged.  I broker apartments and about 5% of the deals I run into are cash.

Again, if you can borrow $1 at x% and earn >>>x% on it, why wouldn't you assume that risk if you understand?

You should also write in something about inspecting each unit to ensure it's rent-ready.

Just write a clause that any/all empty units need to be rent-ready or a penalty of $2000/unit (whatever) at close.