All Forum Posts by: Steve Morris

Well, there is a reason that 1031 QIs (qualified intermediaries) exist.  If you want a tax deferral, you CANNOT put any of the money from the relinquished property used to buy the upleg in an account you control.

Any cash you take out of the transaction, whether before it goes to the QI or if a 1031 fails comes back to you, becomes boot and taxable now for CapGains and depreciation recapture. 

Depends where you live.  I'm in Portland-METRO and lic in OR/WA.

For a loan, you'll need to qualify the property (i.e. how well does it generate income to pay back the debt - aka DCR and does it have value more than the loan amount - hence appraisals) and qualify personally (i.e. how well qualified are the owners to pay back the debt).

Refinancing an LLC is not a problem since you'll have an operating agreement with named officers that the bank will conder on the personal side.

In addition, it is a Limited Liability Corp, which means recourse is usually (TALK TO AN ATTY FIRST) limited to the assets in the LLC. Much better than holding it personally.

I don't know about lease efficient since you can get variability of return in any segment.

I'd start with:

1) What segment are you comfortable with

2) What can you afford

3) What will make you the best return CFBT and appreciation.

Get someone that knows Excel and do your own XLS.  

Seems every time I get one of these "free" or "Online" they make assumptions I don't think match mine and most have some math errors, even if minor.

In addition, you can do forward-looking things like skew of pricing vs. return/CFBT and modeling with what happens is you increase rents 2%/5%/10% annually.

What sort of fuel did it use?  If oil, what's the status of the tank?  If buried, remediation's a bigger issue.

Otherwise, scrap dealers is about it.

"My question is, what do I say or ask them once I do get in contact with them and how would I go about making an offer on a property that is off market?"

1) Get a title report.  Make sure there are no lis pendens (i.e. pending legal actions).  You do not want to buy a property with a cloud on title

2) If clear, go to the bank (if it is small) and determine who handles REO. Find out who needs to sign-off on a sale. More people = more time.

3) Find out if you can what the takeback amount was.  If it was a simple (i.e. non-judicial foreclosure) then it'll be cheaper than going thru the courts to take it back.

4) Determine your walk-away number. Realize most REO is "as-is" and don't expect repairs as a condition of sale. Also (at least in OR), you'll get something like a Special Warranty Deed (in AL may have a diff name). The bank is ONLY warranting title issues that happened while they owned it. So talk to the title officer to see if anything like recorded easements or if you need extended title (i.e. survey).

5) Call the bank tell them a price and do everything you can to convince this'll be a wham-bam simple transaction (you have enought money to make it happen).  The property has issues, so banks probably want it totally off their books, so don't assume they'll finance unless they have to.

MEANT - 

I think I'd look at the REAL numbers and if you can make a 28% ROI tax-sheltered,

"I feel like prices will drop by 12/20, but no idea how much or if it’ll even affect this and other multifamily in my area"

Well, I can only go back to 2009 in OR, prices on average did NOT drop.  However, if an owner got his hand forced like by a bank and had to make a sale, it was below-market.  If a sale involved a willing buyer and seller, prices weren't dropping.  And from 2011-2018 they easily doubled.

I think I'd look at the REAL numbers and if you can make a 8% ROI tax-sheltered, I'd have no problems at any time. Just make sure you're using REAL numbers and understand the property so you get no surprises.

Well, I guess there's CoStar, but you need to be a broker to afford it.  Any change you have a friend in the Comm RE biz with a CoStar account.

Having said that, CapRates are not real accurate due to reporting bias.  Are the numbers used actual or ProForma.  Did the buyer/seller/broker generate them?  The residential agents are all over the place on CapRates for the same property.

Stupid as it sounds, probably the most accurate indicator is $/SqFt.  You know the price and SqFt for sure on a transaction and it does seem to be an accurate metric.