Listeners of the show will remember Jillian Bandes who, in episode 74, discussed what real estate investors should consider about building structure when looking at commercial multifamily investing. The project manager for Bandes Construction covered 6 hot topics on building structure and maintenance that investors should be aware of with commercial multifamily properties.
In this episode, we discuss Jillian’s first investment property….a single family home with an ajacent rental apartment. She discusses razing the property, dealing with the local code and building officials and her plans on whether to rent the units or live in one and rent the remainder. The property was purchased through a foreclosure and we cover the online methods now employed by Pinellas County. Not only is this project about a potential home and investment, but Jillian is passionate about blazing the trail for urban renewal and redevelopment in St Petersburg’s core and her unit is in the heart of a rapidly changing area.
Residential property permitting and zoning regulations differ from commercial properties
Choose property in an area you are familiar with
Walk surrounding neighborhood
If investment property, define target rental market
If foreclosure property, know state of title (liens)
What is the property zoned for? Is property up to code? Accessory buildings permitted?
Work with local and municipal officials
St. Petersburg, Florida
Undergoing immense urban growth period
Investors need accessibility to invest in properties with potential for redevelopment/renewal
South St. Pete offers development opportunity and reasonable prices w/ proximity to cultural amenities
Jillian extends a big thank you to Carlyn Neuman of Tampa’s 360 Realty for helping to navigate online foreclosure bidding as well as to Katrina Trump of Bank of Tampa, for assisting with securing financing.
Many potential home buyers enter the housing market looking for something they can call “home”. Many look for a property based on personal aesthetics. However, these may not be the best indicators of a good investment property. Buying the ‘dream home’ may require a stringent, long-term financial requirement of the homeowner; one that may limit those who aspire to build an investment property portfolio. By purchasing a property for a primary residence not as long-term commitment but as a strategic investment decision, homeowners can take advantage of a provision in the IRS Tax Code that may enable them to acquire more investment property.
26 U.S. Code § 121 – Exclusion of gain from sale of principal residence
Sale of property exempt from gains tax if property was held as principal residence for a minimum of 2 out of 5 years of ownership
Single taxpayers entitled up to $250k exemption
Joint filing taxpayers entitled up to $500k exemption
Mandatory, 2-year residency need not be contiguous
Applicable to one sale every two years, no limit on how often this may be done by homeowner
Things to Know
Look for properties that are good investment decisions
Sect. 121 only applies to exemption from Capital Gains Tax, meaning only a property that is being sold for higher than original purchasing price
Sect. 121 may not be good for those looking to have children.
Money saved in exclusion from gains tax may be used to acquire new properties
Check with tax adviser or C.P.A. for eligibility; you may still be eligible for partial exemption
Sect. 1031 Exchange – enables investors to sell a property with capital gains and receive a deferral on gains tax if purchasing a new one
If property was acquired as a replacement property and converted to a primary residence, investor must live in property for 5 yrs before qualifying under Sect. 121
Okay. So you have made the leap and acquired a real estate investment asset to begin your portfolio. The next step, managing the property, is a recurring problem that arises for many investors. Real estate needs to be managed. A poorly managed property is a strain on any investor’s time and finances.
Josh Diggs, of Palm Capital Partners of Tampa, shares with us 10 tips for successful and effective property management. With years of experience in owning and managing investment real estate, Josh has crafted the essential shortlist to property management. His 10 tips cover all the points landlords and managers need to know about residential property management.
Due diligence on tenants
Background checks, credit checks
Don’t make exceptions on tenant-screening policies
Don’t buy used appliances
Repair costs on used appliances total more than purchasing new
It is better and more cost-effective to purchase new appliances w/ warranties
Have tenants complete and sign formal acknowledgments of unit conditions upon move-in
Be cautious hiring sub-contractors
Cheap ones may be appealing but service is unreliable/faulty
Referrals and word-of-mouth are best vehicles for finding reliable sub-contractors
Bed tenants mean bad communities
If existing tenants are bad influence on community, remove them
Complete regular property inspections
A/C, smoke alarms, etc.
Always deal with tenant directly
Don’t allow friends or family of tenant to intervene in matters involving the property
Maintain timely property maintenance
Waiting on necessary replacements and repairs may have serious long-term consequences
Always be professional
Regardless of situation, never allow personal matters to affect business
Josh’s company Palm Capital Partners, LLC is always looking for new investment opportunities. They are mainly interested in B+C multi-family properties.
If you have any questions on investing in the Tampa area or have a property you wish to sell you can contact Palm Capital Partners at 888-805-9317