All Forum Posts by: Marcus Auerbach

@Michelle Cohen without seeing the property it's hard to tell if it's absolutley a tear down or if it could be liquidated somehow. Sometimes it's worth to "pre-hab" a property - meaning you clean it up, have trash removed and take care of the biggest issues like leaky plumbing, two broken windows etc, anything that makes the house un-inhabitable, remove everything that's really bad (like stained carpet, trashed kitchen), maybe have the interior painted white if the walls are very dirty and then sell it retail. It may not work for an investor, but it may still work for a handy contractor who needs a roof over his head or someone who has a handy family. A lot of people will actually accept conditions that's less than nice in exchange for homeownership and the chnace to fix it up over time. Their own labor is free and they don't need to make a profit, so it will still be worth it for them. You can even offer owner financing. And helping someone with little ressources to become a homeowner is actually a really rewarding thing to do.

@Dominic Augustine - Dan is right, my very first rental property is in West Milwaukee, actually South of Miller Park on S 54th and Beloit. That was back in 2010. The most important thing for me was to buy in a good neighborhood and I figured the taxes would keep the riffraff out, so to me that was a good thing. I never had any crime related issues and the neighborhood is mainly owner occupied. There was one bad rental property on the street and I would hear about some complaints once in a blue moon, but never an issue and the property is vacant now. I like to buy outside of Milwaukee and in better school districts and good neighborhoods, but I have never regretted my West Milwaukee decision. Every street is a little different. I would just spend some time to drive and walk the area. I can send you an app that is helpful to see listings you are passing by.

@Daniel Steinhart are you an Realtor friendly investor? For some people investor friendly seems to imply the willingsness to write 100 low ball offers on sub-100k deals. Because agents get paid a percentage comission they will always choose to work with a family to write a couple offers for 500k homes. You would too. I think what you are looking for is a Realtor who is also an active investor and gets it and can provide you with some direction instead of the other way around. Michael Henry is great, just don't ask him to write 100 offers!  

My approach is always to find common ground and a mutual agreement. Being confrontational or putting the hammer down usually leads to push back and headaches. This does not mean that I suggest to assume a weak position or not enforce rules - just to the contrary. You have to, otherwise you will not survive very long in this business. But you can be smart about it and put the sledgehammer aside for later. So be firm, but friendly. My first step would be to find out why paying weekly and why paying cash are important to the tenant. Once you understand his WHY it is going to be much easier to lay out a solution that will work for him and protects you for the half year you have left. 

If I get a request that is unrealistic I usually say: Okay, I understand. Let me check with the other owners and see what I can do for you. I put myself on the side of the tenant and blame it on the "other owners" - technically my wife and my bank.

Once a relationship with a tenant has gone sour it is very hard to get out of the situation without losses. Yes, in the end you will win because you can always evict, but it will cost you time, energy and a couple thousand dollars. But angry tenants have been known to put concrete down the toilet before they move out. And for that a mutal solution solution is always the first choice.

@Ernie V. what you probably did is ask them for an estimate. Contractors are super busy right now and would have to delay an actual job to get out to you for a free estimate. Nobody wants to do that, you wouldnt either. Rates are similar (about 100-120 for a small job per hour) and material is the same, so not much point in getting three written and itimized estimates and then choose the lowest one, as often recommended on the forums. I assue you are talking about a repair job. If it is a more complex and expensive job you should get estimates, but in that case contractors are usually willing to do that. Call someone close by, my plumber is in Germantown...

@Maggie G. you can get a personal umbrella insurance for very little money from the same company that insures your house and car. What it does is to cover you against all risks (car, house etc) you are insured against otherwise already, but it kicks in after you have exceeded your limit on your regular policy. Let's say you have a car accident and you cause damage worth 400k because you rear end a Ferraris push him under the Lambo in front of him and manage to destroy both. Your car insurance limit is 250k and maxed out, then the umbrella will cover the rest. Same if a tenant slips on your driveway and breaks his hip and is lifelong in a wheelchair. You can also get a commercial umbrella for your properties and in the name of your LLC. But sure to have your insurance agent explain the policy to you.

@Account Closed I don't think we disagree, please read what I said; your personal actions can always get you sued, plus if you make mistakes running your LLC i.e. comingle funds it's relativley easy to make the case for a good lawyer and make you personally liable. I think that is what you have meant. Good lawyers cost good money and this is not your every day smal claims court type lawyer hired by a tenant for $150 an hour.

You can probably find out the assets I own personally, because I have not put much effort into hiding anything (heck, I talk about it on BP!), but as one's net worth grows it's a consideration for many to seek the help of an asset protection specialist and set up trusts as holders of the LLCs in states like Nevada and Delaware etc.. My point is - you need to have some substantical assets before it is even worth thinking about this. For most people who are contemplating if they need an LLC or not IMO the asset protection side of it is less imporant than showing professionalism - there is just simply not enough money to make it worth while to go after them.

Mr Duplex did it again! Congrats Lorraine, nice job Micheal!

@Maggie G. most people start an LLC for two reasons: asset protection and marketing.

Marketing: operating as an LLC makes you look more professional to the outside world, regardless of renting or flipping. In a very simpified way banks don't like to lend to an LLC, because it limits your liability to what's in the LLC - and they really want more liability than an empty LLC without much assets or history. But who says you have to borrow with your LLC? You can set up an LLC and still borrow in your own name. It still makes you look professional to the outside. Plus later on it's a good thing to have an LLC that's already matured.

As far as asset protection LLC's are sometimes overrated by new investors. You first need to have assets worth protecting. If you have a few thousand dollars in equity it is hardly worth the effort. The LLC does not protect you, it just limits the exposure that you have.

Now if you buy your (second!) million dollar asset with 250k down you probably want to put that into an LLC. The reason I say second is that the equity within an LLC is not protected from creditors going after that particular LLC, but they can't go after your other ( your first) LLC or your personal assets. Its a way to ensure that when you get sued and are being found guilty and liable only the assets within that LLC are at risk (but make no mistake you are still personally liable for your personal actions).

However, even with an LLC structure, your first line of defense should always be a commercial umbrella insurance. It should take the first blow and only if that fails your assets are at risk. At that point you want to limit the damage to what's within that LLC and not everything you own. This is my most investors seem to choose to set up additional LLCs later as they grow, so they create firewalls between their assets: if one burns down they don't loose the other ones.

PS: this reflects my personal findings - I am not a lawyer and not your advisor.

I know thats not an easy one ;-)