All Forum Posts by: Aaron Smith

@Matthew Ormsby Welcome! 

Well, I guess, the best way to help you is to find out where you're looking for MFH. If you're looking in Utah, they can be  found, but they're pricey. You can start by looking on Loopnet, but that search is limited to a select few listings, then they want you to fork over your first born for a monthly fee. 

You can also look on Cityfeet.com, Realtors.com, Trulia, Zillow, even the major real estate offices, will list MFH. It also depends on your price range. Prices in Utah are pretty high right now for MFH,so I've been looking out of state. Michigan, Arizona, Florida. Cheaper prices, decent rents, and much better CAP rates and cash flow. It's not to say deals can't be found here in Utah, they're just hard to come buy unless you want to pay through the nose.

Btw, myself and @Kinley Puzey are B-town residents! :D

Welcome, 

Aaron

@Varinder Kumar use both, and this is only my unqualified opinion. The LLC, IF MANAGED CORRECTLY (get with your attorney on how to do this) will shield your personal assets from being brought into play if someone were to sue you in regards to the rental property. There are rules to managing your LLC and if not done properly, then you have what's called "Piercing the corporate veil", and your personal assets (home, savings, retirement, etc) can be brought into the suit as well. As long as your managing the LLC properly, then the only assets in play during the suit will be the ones in the LLC.

The umbrella policy is an additional layer of protection. And a smart investment. And since most ambulance chasers want the quick payout, the insurance SHOULD be enough to solve the issue without going to court. No guarantees of course. 

You should meet with your attorney and CPA to learn how best to protect your assets, both investment and personal. 

All the best, 

Aaron

@Andy D. your attorney should be able to recommend one to you. Attorney's are some of the biggest networking professions out there. I'd be surprised if he can't find a recommendation for you. I wish I could help you further. You may try talking to your CPA as well, just a thought. 

All the best, 

Aaron

@Amanda Han HOLY COW!!! I didn't even tag you on the thread!! I'm kind of scared you knew I mentioned you ;oD I did enjoy it. I have my accounting degree and MBA, and I couldn't agree more with your covering finding a CPA who works mainly in REI.

I did, however, do a rookie mistake and form my LLC before I bought property. I figured it'd make placing the property into the LLC easier. But, what's done is done. I knew I needed one either way..

Anyways, thank you for producing your book. I think it's a good read for those starting in REI.

All the best, 

Aaron

@Rickie Mincy just finished reading "The Book on Tax Strategies For the Savvy Real Estate Investor" by Amanda Han (you can find it in the "Education" tab up top ^. It's a good read, and covers banking. If you do pay for sudden expenses out of your pocket, have the business reimburse you as soon as possible. It makes it much easier to track your expenses for the business. 

If you haven't read the aforementioned book, I suggest picking it up. It's a good, quick, read (and it's tax deductible ;D ). 

A

Hi @Rickie Mincy. Congrats on your first property! 

The BEST way to avoid any issue, is to never commingle your personal funds with your business funds. Even though, your not setting the property up in an LLC, it makes life much easier for your CPA to plan your taxes when you can hand them a bank statement for the property instead of having to sort it out as you go. Hope that makes sense.

If you're going to be using your funds to fix the property, just put XYZ in the business account, and make sure you note it for your CPA so they can deduct it accordingly. 

I'm assuming this is a SFH and not a MFH, so putting it into an LLC can be problematic with banks anyways. But, consider trying to do so in the future. If something were to happen at the rental, and you're sued, you're personal assets, along with the rental, can be at risk. Sadly, we live in such a litigious society anymore, it's better to be safe than sorry.

Congrats again and I hope you have many more rentals in your future!

All the best, 

Aaron

@Frank Mancuso are the vacancy, CapEx, and Mgmt Fees part of the @2049 Expenses? If not, then your cash flow will need to be adjusted accordingly. There's nothing wrong with a bad neighborhood, as long as rent is being paid, and you have GOOD tenants. Sounds to me like it's a C- neighborhood. That's all fine and well, in my humble opinion. As long as you don't run it like a slumlord and treat your tenants well.

And HOLY HE!! man, 11% management fee? I'd see if you could get that down a couple of points. Especially if they're charging you the fee plus a % when they place a tenant. And if you're saving $10k for repairs, then you don't need the additional 6% in your calcs. Just keep that 10K set aside and use that as needed, if that makes sense. 

If it's common to see homes converted in that neighborhood, then it shouldn't be an issue. Future buyers will be (or should be if they did their homework) aware of this. 

@Michael Randle CapEx (Capital Expenditures) are those costs which, when incurred, will be amortized over a fixed period of years (Roof, new electrical, plumbing, windows), where as repairs, as @David Faulkner pointed out, are minor and are expended in the year they occurred (leaky faucet, new garbage disposal, clogged sink/toilet, one broken window, etc). A few lenders will REQUIRE you set set aside CapEx funds as part of the loan deal. And even if they don't, YOU SHOULD! Better to save that money now and not need it for a while.  

Welcome @Joe Ferrin! I miss Boise. Moved to SLC in 2012 for work. LOVE it here. But my wife and I miss the greenbelt! 

You've joined a great site with great people to help you and  your wife on your investing journey!

All the best! 

Aaron

Hi @Ammon Gutierrez and welcome to BP!!

As a somewhat new investor myself, the best thing I've read, and read consistently, is pick an area to focus on, and stick with that. Either SFH (single family homes) or MFH (multi-family). There's even trailer parks, trailers, RV Parks, campgrounds, you name it. The key is to find that one area that piques your interest, and GO FOR IT! And once you've found your ideal "sweet spot", if you will, then locate literature pertaining to that area, and get to reading. I've read 9 books in the last three months pertaining to MFH and REI in general.

Secondly, if you haven't found the right mentor or coach, keep looking. Hit up REI clubs. They're good places to start.

Me, and this is personal opinion, I wouldn't worry about your RE license unless you're going to go into real estate as a career, at least not yet. It's one more thing you're going to have to focus on. Eventually, go for it. But for now, worry about focusing on finding your niche, and then getting your first property. 

Hopefully that gives you some idea of where to start. Again, welcome to BP, and feel to reach out to us at any time! We're all here to learn and grow our pockets! 

All the best, 
Aaron

@Thomas S. I'm no lawyer. And this is just my 1/2 cent opinion :o) And as others have said, consult your CPA, and an attorney. And then move out of CA so you can avoid the massive fees/taxes you pay as a REI :D