Hi Spex,

I've been a long time lurker and I lost my old account on 2+2, but I just want to take a moment to thank you and all the other og members.

I've followed this thread back when I just went to college and started playing poker (horribly). It's been 12 years. What I've learned through this thread, changed my life. I always get into things "late" but I felt like real estate, I got in early because of 2+2 and this thread.

Over the past 12 years, I slowly rehabbed, built, and rented.

I'm am now financially free thanks to everyone on 2+2.

However, I'm still a noob and I messed up. I started an S corp and put a property inside the S corp. I can't get financing.

Any tips on getting it out and putting it into an LLC without tax and sales penalties?

Hi everyone,

I'm an attorney and I primarily practice in civil trial work and real estate. I've mostly done landlord/tenant work on residentials, both sides, but recently helped facilitate a larger residential deal.

My client is going to be acquiring a portfolio of SFR's, about 55 units totaling about 100 doors. The purchase price is being worked out now, but it looks to be between 3-4 million.

My question: Client came to me asking what is my finders fee for the transaction since i'm the one who set up the deal. I've heard 10-15% from colleagues, but that seems high? Is that payable by either party, my client, or both parties split? Or is that negotiable like closing costs?

My intuition was that my client, buyer, will pay because again, I represent them and facilitated with the seller. That being said, I don't know what a good fee is. I represent this client in other transactions as well, so I'm open to taking less than the standard since I will be doing most of the legal work for these properties when evictions arise.

Thanks in advance for the thoughts!

Finder's fee like a commission?

You would assumably get paid what a real estate broker would normally get paid.

A few points depending on how lucrative the deal is and how much complexity was involved from the lawyer side to putting the deal together.

I believe you can just form LLCs and quite claim deed the properties to the LLCs. Ask an attorney that deals with company formation, I'm sure there is a way to do this.

If the fee is basically just for making an intro, and given the size of the deal, I think 0.25-0.5% is more than fair. I assume you're also getting other business from the buyer and you're charging hourly (or fixed fee) for the transaction, as well. IMO, making more than $7,500-$15,000 just for putting two people together is getting into unreasonable territory.

It's tedious but you only have to do it once. NOt sure there's a shortcut.

Median home prices won't help you much. Just set your criteria at a price that will give you your target COCR and see if there are any houses available.

Your acquisition prices should include rehab money for modeling purposes.

Median home values won't be helpful at all. You're looking for places where the market is inefficient, and that's not necessarily that easy to find. So yeah, it's tedious, but you chose this life. And on the bright side, you only have to do it once.

Not unless section 8 accounts for those factors in the rental rate, which they generally don't. Section 8 doesn't pay more for a 3br that's 1900 sqft than one that's 1400 sqft. They pay the same. So just use the S8 rental rate to calculate your COCR and look for stuff that you can get for the price.

It's not necessarily true that MF will give better yields. Sometimes it can, other times it doesn't. In most cities where I invest, MF gives worse yields than SFH in the neighborhoods I buy in. As to whether you're taking on too much, I don't think that MF is harder, I just think the mistakes cost more money. So it depends on how much risk you want to take on. You could buy a 100 unit complex and learn as you go. But you'd just be risking relatively a lot of money in that learning process.

Hi spex. What do you think of debt leveraging? meaning renting a property for more than what you have to pay the bank.

This is tangentially aligned to the topic at hand, but close enough I think.

Anyways, my wife is convinced now is a good time to buy an investment property and get into the AirBnB business, specifically in the Joshua Tree area (a big national park in the Palm Springs/Indio desert area). I am admittedly a real estate dork.

Any thoughts?

Why does she think that?

1. Supply: RE prices have dropped materially but not rates AIRBNB rates so there is new long term value (doubt it)
2. Demand: she expects a surge in usage, despite the fact the US isn’t even onto covid wave #2. (No chance) Perhaps she thinks the park will be a money printing oasis during all that?
3. Flight to safety cash flow producing RE? (Doesn’t sound like it, and renting would probably be better)
4. Is emotionally sick of covid and really wants it all to end and is expressing that through a “financial” decision that it’s a good time to start investing in an airbnb.
5. You have a lot of money and it’s just for fun. In which case - go for it.


I personally think the timing is horrible - wait at least 6 months to reevaluate but expect to wait longer. RE prices should probably come down a bunch in many areas. Don’t know your location specifically though but supply will only rise and demand will be cratered for a long time imo.

The thesis is that instead of traveling to big cities for vacation people are going to want to "get away" and go remote. Joshua Tree area is a popular So Cal remote get away spot.

We know a person that owns a couple places in the area they use as BnB's and they say business is booming and they are booked solid, although they had to take a 2 month hit in March-April because the whole county shut down all the BnB's due to Covid, which is a risk of happening again moving forward as cases are skyrocketing.

I guess the financial business model as I understand it is that (in theory) you buy a place in the $200-$300K range with a 10% down deposit, your operating costs including mortgage are ~2k/month, and IF business is good you make double that pretty easy. Also, apparently you can do a lot of write-offs (depreciation, business expenses, etc.) and pay pretty much no taxes.

What is the seasonality in that area? There is the obvious risk of more COVID waves that can cause you to suck wind for a few months at a time. But most areas have some busy season where it might be booked solid, and then other times of the year that are very slow. Also make sure you are planning for all of the expenses so you don't get surprised later.

I agree with the other poster that the timing right now may be tough.

For someone who is a complete NOOB in real estate investing, how would you recommend they go about and learn / start out?

Seeing many of the op's credentials inspired me, as they sync up with my goals.

I don't really have any friends or mentors who do that sort of thing / I can learn from.

And unfortunately many of the websites seem like taut sales scams.

The only option I can really think of is perhaps get my real estate license, start selling houses, then gradually network and learn the ropes from there?

Perhaps try and find a smaller property developer and get a job with them on the low tier?

Take some sort of classes? Not sure what?

I have about 100k in various savings if that matters, just not sure where to start to begin a career in this field.

Thanks

Significant regulatory tail risk here. I know, I've seen it first hand (I live in a highly desirable tourist area).

Its all fun and cames until the neighborhoods start bitching... and there are very few places there an AirBNB is going to fly that don't have municipal regulations already on the books that can be used to target them.

Know the zoning-rug you're standing on and what it would take to pull it out from under you. There are a lot of places doing this on the basis of popular participation that don't have protections should the area decide to say no.

Bigger Pockets is a good place to start. Just tread lightly and go slow at first. Real estate is even more scam-filled than poker.

Is real estate in big cities likely to decline as a result of more people shifting to remote work and opting to live elsewhere (for lower cost of living and more bang for your buck in terms of house and land)? Mid- to long-term.

I 2nd biggerpockets. Kinda like the 2+2 of real estate investing. I've learned a lot there, but I haven't pulled the trigger yet. I think next year I will jump in as hopefully prices will start going down.

Is there any interest in a private group chat for people just starting out or wanting to get going in REI? Experienced investors would of course be welcome too. It's kind of difficult to get involved in local real estate clubs these days and with all that's going on, even dipping your toe into the market right now can be overwhelming when doing it by yourself.

Reading this thread gives you a good basic idea, honestly.

Bigger Pockets is also very good, although I'd stick with the more educational stuff and stay away from the 'hot takes' about specific markets, etc. At least while you're starting. Don't get sucked into an idea until you figure out what your goal is.

Really though, I'd try to find some people that did it. I'm actually selling my first investment property this month I bought thanks to originally reading this thread back in 2009!

Anyone here got any simple online literature to recommend to me to share with my parents in their 70s why they should rent out or airbnb their vacant coastal Maine property

i've shown them similar listings highlighting what they could earn per booking but they are so are natural skeptics

Something is more than nothing. The end.

You didn’t offer any other alternatives.

They are convinced they'll be so many hidden fees, extra work and costs that it'll just be lateral move

Link her to some YouTube videos showing how people getting rich using Airbnb

It isn't coastal Maine, but my brother in law owns a few places as investments, and he says after all expenses they need to rent it out ~15 days/month to break even on all the costs, including mortgage, and they have easily done this and made a small profit every month.

He also says they can write off A LOT as business expenses, depreciation, etc. and basically pay no taxes on the places. He says it is a lot of work though, mainly answering emails and phone calls from people asking dumb questions, and dealing with some scammers.

Thank you for this, the tax angle should be especially compelling because they are not happy at all about that

Keep in mind when you are selling an investment property you don't live in you have to add back the depreciation when/if you sell when calculating capital gains tax.

In the month to month, it does obv help a ton with cashflow.

Obv some of that depends on if they are counting it as a primary residence down the line.