All Forum Posts by: Rich Weese

Ken,

I have been out the day today SFR business for quite some time. I do have many older threads and posts on BP that my answer some of your questions and give you additional thoughts in leading to retirement.

You could go either way on this question. Since you have the option of using it for the personal residence tax exclusion, I would probably sell and go that direction. You don't always have that option, and cash normally gives you more flexibility. You could continue to use that process as long as you live in the home for the proper number of years in the previous five. I did that four or five times in my own career to take advantage of that. I carried it one step further, by purchasing a lot in building a brand-new home with built-in equity. You can see that in older threads.

When you do not have that option, I would probably go with the refinance if the LTV is high enough and the interest rate is low enough. I would add one caveat to that comment. If you don't like the property or the current tenant, that would make me consider doing a 1031 tax deferred exchange instead.

Good luck on your decision.

Rich "Mike" Weese

I have to admit that I was confused last time I tried to see what was going on with the bigger pockets website. I think I have 5000 posts on more but most of those were years ago. I came on this site again today and it seems more difficult for an old non-techie guy was last time. Is there a tutorial or something that would make this easier website to traverse. I guess this is progress.

Rich Weese

monitor – how do I find my biography to make changes nowadays? Feel free to email me directly if that is the way to do it. I do understand how to retrieve emails.

What is your definition of an investor? If you are receiving a return on investment you made in the property, you are an investor. If you are using 100% borrowed money and just receiving a fee, you did not receive that from your investment. I have done many investments with my own money and I have done many investments using OPM for part of the total. I also wrote a book many years ago with specific examples of both.

Cash is KING, but the king gets smaller every day with inflationary action.

I just include the profit in renovating appreciation as a natural occurrence to an astute investor.

I'm pretty sure I have a thread on BP about making the cash every 2. I picked a growing area with lots available and serious up tick in value. I built a brand new home on a construction loan and then went for a refi loan when complete. I would do COFI arm loan with negative amortization. There was enough funds to pay the construction loan, AND my loan for 2 years. Free living for 2 years and then equity on sale. It was usually in excess of 150K profit, tax free. I'd then do it again, same neighborhood.

Time will tell on the crash. I'll continue to play for both possibilities. I love RE also, but I plan for the worst and hope for the best.

@Steve K.

I'm in London just starting 3 week Cruise. Time limited. Will reply later Tonight or REALLY early in the morning when wifey is sleeping and I have more time.

Rich.

@Steve K. Risk vs reward

I agree that is one thing to consider, but SO many more. Here are a quick few:

1. Age

2. Risk tolerance of investor and ANY significant other.

3. Liklihood of current job income stream continuing.

4. Income tax level currently?

5. short term strategy?

6. Long term strategy?

7. Any SS or pension to help you when you get older?

8. What is your belief on future inflation?

9. WHEN do you feel next crash is coming?

10. Will you still be ok if Int. rates hit a "whopping" six percent?

11. Etc, etc, etc.

I also like to have the investor consider the following:

Of the 4 benefits of owning real estate, where do you expect to make your biggest profit in next 20 years?

A-cash flow

B- principal pay off

C- appreciation

D- depreciation and other tax benefits, like 1031 exchanges.

 I used to really chart these 4 benefits and it caused me to write a complete chapter on 2 of the 4, C&D.

I also learned a couple other things: Your home is about the only thing you get to declare interest paid and about the ONLY place you can avoid capital gains every couple years and make a killing...

Good luck digesting the above.

@J Scott

in 1974. I traded a 69 Corvette with the big block 465 hp motor for an Oldsmobile station wagon. I picked up my wife and our third baby ( under four years old) at the hospital! Four years later, I was able to purchase another 69 Corvette with the same motor and use it as a third car. Memories are what it is all about.

@Marcus Auerbach

I guess I have to both agree and disagree to your opening statement. I can't believe this thread has been resurrected again and is still around after  nearly 10 years! I checked back through before this post and counted somewhere between five and 10 that I had posted previously on the same thread.

Here is where I disagree with your statement:

I have now owned for 12 years what I consider one of a kind sport car. I have posted the specs on it previously but for those that don't want to read seven pages again, I have a 2005 Dodge Viper with a Hennessey conversion to the venom 650 hp motor. It also has the front end extended 9 1/2 inches using a Daytona racing front end which is only two and three-quarter inches off the ground . (it doesn't like speed bumps or dips in the road!) . It also has racing suspension with Asanti Rims and gigantic Pirelli tires. It has a larger tail for better airflow  and a diffuser underneath to help keep it on the ground

This car is one of a kind and always draws the largest crowd when entered in a car show. I thought about selling it at one time, but not because I had tired of it. It was a stupid car for someone that was RVing around the country and Canada full-time! My wife and I did that for six years and sometimes she followed our big rig in the Viper and other times it sat in storage.

Here is where I agree with your statement:

Once I added a Paxton supercharger and increased horsepower to 771, and grew older, this car became more work than fun. I still love this car, but it is too fast. It also does not have a lot of the conveniences that the newer sports cars do have.

I went back out and looked at the Chevrolet Corvette Z06 a couple months ago. This is still a pretty fast car with 650 hp and 650 pounds of torque. It is much more comfortable to drive and the push button convertible top is much more easier than operating the convertible top on the Viper.

So, I feel I did add something more PRACTICAL...... I now have a new torch red Corvette with adrenaline red interior, and black rims and accents all over the car. It is a joy to drive but certainly not the one-of-a-kind car like the Viper. I still own both........

I also need to disagree with the hot girlfriend quote. I found my hot girlfriend when she was 18, and we just celebrated our 47th wedding anniversary! She has never been a *****.

three more little tidbits.

1. I don't owe a penny on any automobile and have always paid cash for any car I've owned.

2. I still have the same daily driver. I purchased in 2009, a Chrysler 300,, with a hemi motor.

3. I just sold a 152 unit building in Garland, Texas  and literally made millions of dollars. I decided to give myself this present and every time I got in it, I would see something that I had earned from hard work and effort. Normally,  the money just goes in to an account or into additional property. This was a small reminder of success that I look at regularly

My four car garage is now filled to the gills with four cars and two golf carts. I live in the villages, Florida, where golf carts are the main mode of transportation..... I love all my vehicles and they have always been free and clear.

@David Faulkner

Orange county is where I made all my money decades ago doing syndications in real estate. I purchased a large office building on Chapman Avenue in Fullerton near the 57 freeway and I was off to the races. Now to your questions.

1. I would say it was a combination of several different actions. I wouldn't say it had much to do with being a forced appreciation play. I think it was more a case of  finding and buying a great property to start with, continuing with the same management rather than reinventing the wheel, and continuing to be aggressive in rent increases.  I also have to admit I was lucky in two distinct areas. The city of Garland decided to develop a brand-new park directly across the street from my building's. It helped as a draw for the families that would be occupying my units. The second area  leads into your question number two.

2.I had made the decision when purchasing the building  to allow it to continue being a value add property for the next purchaser. I never did any extensive rehab, but only with the big ticket items that buyers look for. There was a very destructive hailstorm a few years ago. After negotiating with Lloyd's of London insurance, we received a settlement of over $1,400,000. It covered the replacement of all 19 roofs, as well as nearly 60% of the AC units on the roof of the buildings. Once the insurance took care of that, they also had to match the exterior A/C unit with the interior heating furnace unit. That was a nice bonus to me. When they started to replace the flat roofs, they realized additional damage that had occurred with the mansard roofs and that led them to discover that much of the sheeting around the mansard windows needed to be replaced and that led to all the gutters needing to be replaced, etc. I had enough money left over to take care of other items like asphalt, children's play area and signage.

3. There was no 1031 going into this property and I chose to not do a 1031 going out of this property. I had stated I would cooperate with the buyer that needed a 1031 as I sold this property but that did not come to fruition.  I am old enough to have seen several   real estate crashes in my lifetime and am now old enough that I don't want to have another one while owning multi-properties.. I chose to bite the bullet and pay the tax consequences on this sale and be positioned to use funds in other income streams  as well as be prepared for the next crash, if I chose to get back in. I felt I was getting a ridiculously high valuation and did not want to pay for another ridiculously high valuation in a new property.

3A.  I believe I have posted information on bigger pockets of a 1031 that I did nearly 2 years ago. I exchanged a 650 unit self storage facility in Bonita Springs, Florida for two large apartment buildings in Texas. I purchased 128 units in Grand Prairie and 164 units in Mesquite. The 1031, was truly an unbelievable amount of work to be able to get the pieces of the puzzle to fit in the time limits allowed by section 1031. That exchange was out of a free and clear property of $3 million plus in to nearly $13 million of property. I would have needed to do the same balancing act on this sale except it would've been to an amount of $20 million plus. I believe that gets more difficult as you increase that number and did not want $20 million worth of overpriced property, IMO.

4. On the two properties I mentioned in number three above, I maintained the same management, but was able to determine what the problems were with building operation  and fix it. Curb appeal was gigantic with both these and in less than two years I have been able to increase the rents 24% on one building and 27% on the other. That will increase the cash flow amazingly. There is no secret about picking good location also.

I agree there are lots of devils in the details, but I syndicated thousands of apartments back in the 70s and ownership and management was the same then as it is now. Good location, negotiation, management, oversight, and decision-making will work in any transaction. I was able to find properties in good economies and bad economies. I think experienced research can keep a buyer from making lots of mistakes. Experience is also a huge help.

I don't think I've left very many secrets in this reply and I don't think there is any magic pill. I have handled all real estate in the same manner and continue to be very successful with it.

Feel free to ask more specific questions if you would like, but I'm not sure I have very many more specific answers.

Good luck.

Rich Weese

PS. I leave in 24 hours for a 3 1/2 week cruise to Europe so my Internet time will be limited.