J Darrin Gross
David Moore, what is the BIGGEST RISK?
David Moore
The BIGGEST RISK for an investor on assets, so the biggest risk in an exchange or what what in what?
J Darrin Gross
I let you I'll let you frame framing how you how you see what is the biggest risk could be there are.
David Moore
So I My biggest concern right now is just government changing the rules on my clients, you know, in the middle of a transaction or after somebody purchased something, and I just see so many situations today where you have to look at somebody's intent and what they're trying to accomplish versus what the laws are actually there allowing them to do versus what those laws were actually intend to do. Now, if I look at just complexity, and I'll just say as far as insurance products, I'm not a huge fan of limited liability companies for holding property. And and if you look at what was proposed, and Biden's build back better, it You rarely ever see an asset held by a corporation these days, because if you and I own an asset and a C Corp or S corp, we just want to go different directions, just taking the asset out of the corporation is going to trigger taxes that that nullify any benefit of an exchange, you're stuck in that entity, they want to go mark and mark it on distributions from limited liability companies to so where we talked about community versus non community property states, even with spouses with LLCs, I've got clients that will have a single LLC for all their properties, I've got clients that will have an LLC for each property, I've got clients that don't use any old C's, I would say, good stout insurance policy, I'm a bigger fan of than the old C's because of the complexity of moving assets with the LLC. Now, as I said, if we're in a community property state LLC is a lot easier to work with, and it is where we live. So, you know, that's one of my concerns. But my biggest concern right now is just the government changing the rules on stuff. And an example of that would be here, we've got the City of Portland and once more housing, and you can argue whether you think VRBO is housing are not, you know, obviously people have sort of shifted instead of long term rentals and renting to people directly. They're going to use that mechanism so they don't have to deal with some of the rent control laws. So you know, the Multnomah County changes rule says Okay, so we've got a number of clients with the retirement with retirement accounts, self directed IRAs 401k plans that buy rental houses and they were using VRBO for that thing and it worked very well. So they've got these assets. That's property that's available and all sudden the city can Any state somebody makes a law change. So no, boom, now you can't own these things you can't VRBO unless it's owner occupied property. So now every client I've got that had properties used that way with a retirement account, by law, they can't occupy your, you know, use that property anyway, so that no longer fits. So everybody that had those things now has to sell them and go do something else. So it's, it's tough when when we've got bureaucrats out there changing laws on things they don't understand at all. And they change the rules. And then so rent thing, you know, that vacation from Brent, sorry to sound callous on it, but nobody's giving the landlord that property owner, a vacation from paying the debt service. And everybody assumes that landlord is wealthy person. And I will be the first to tell you, I've got so many clients, they are land rich cash for everything they've got in that stuff, they've worked their tails off throughout their lives to accumulate some pool of real estate. And, and they're not wealthy people, you know, they need that that's what they live off of. And they're good people. And the other thing I'm seeing a fundamental shift in is, with the rent control laws and the changes and what property owners are able to do, you're seeing a lot of those people put up the the white flag and they're exchanging out of these assets they can no longer afford to deal with and into these passive investments, the DSTS, the ticks, that type of stuff. Now, what the government people don't understand, I would say is that the mom and pop that owned the property, they cared about the tenants, they knew the tenants, they really it was a different situation for them, they cared and by the way, you know that $4,300 Move out charge if you don't do it correctly, that hurts the mom and pop, well, what do you think of REIT a real estate investment trust, I'm seeing a fundamental shift in the ownership of our local property going from local people to institutional ownership from somewhere else. They don't care, it's a different deal. So it's just there's lots of things happening out there. And and I think it's all calculated. And so my concerns are just rules changing on people with with really no thought from the government of the true repercussions of those changes. And I see firsthand how it impacts my clients, and it's not good. So that's what really bothers me. Most, you know, as far as the insurance, the liability stuff, the LLCs, like I said, a good insurance policy is going to take care of that. You know, the other thing that is always out there to is with, for my businesses, we're moving money all the time. So, you know, we're concerned with all the wire fraud stuff, I mean, that's a huge thing. So having the policies, the insurance policies in place that are going to protect us, because, you know, the business owners got a lot of responsibility, let's say out there in liability if it's not taken care of correctly. So that's something unfortunately, it's just out there and seems to be growing and growing. And I really don't understand how they can't put a stop to that with a flip of a switch. Anything that's wired has to be received by somebody. I mean, you just locked down that money for 48 hours or something, don't allow it out. I would think that would change that whole thing a lot. But you know, nobody seems to be looking at solutions like that.