All Forum Posts by: Aaron Bush

I work in the DST 1031 exchange business, and it's absolutely the way to go provided you don't plan to break any of the "7 deadly sins" of a DST. However, these are pretty restricting. No refis, can't make material value-adds to the property, etc. Plus you have to be willing to have the sponsor be the centralized authority in the syndication. Non-sponsor investors don't really get a say when it comes to the management side. That can eliminate a ton of headaches, but your investors might not like it.

Friends, 

I'm purchasing my first ever rental property (a duplex) with the help of a friend and business partner. We're going into it 50-50. We've done a lot of research and self-education over the past few years in preparation for owning a property, but we have come up against a tricky issue that I can't find very much clear information about online. Here's the situation:

My partner and I are purchasing the property with cash, so we have the ability to purchase the property through an LLC without triggering any due on sale clauses from a traditional lender. I had thought that this would be a nice added layer of liability protection in addition to our landlord insurance policy and my personal umbrella policy. However, I realized there might be an issue when I noticed that our landlord policy contained no mention of our entity. My partner is the named insured, and I'm an additional insured. Our entity's name isn't anywhere on the policy. We asked Traveler's insurance (our provider) if they could add the entity as an additional insured, and they were unwilling. We then looked into other options through other providers, and were unable to find anyone who was willing to add our entity to a policy for less than 200% of the price of our original policy.

My questions are as follows. Really appreciate any insight you all might have:

1. Is it a problem that our current policy makes no mention of our entity? My thought is that, if our entity owns the property, and something were to happen where a tenant or 3rd party were to sue our entity for any reason, the insurance company would not be required to cover the entity or its assets (the property) since it is not on the policy. Is that faulty reasoning? 

2. If our current coverage leaves gaps as I suspect, should it really be so expensive to have an entity added onto a policy? Most carriers we talked to wouldn't even add it. 

3. If the answer to question #2 is yes, would it just be better to ditch the LLC and make sure we each have an adequate umbrella policy? And if so, why do I always hear about people using LLCs to buy property? Why is this such a common strategy if it's not feasible from an insurance perspective? I've thought about a commercial general liability policy, but that seems expensive and a bit overkill considering we just have one duplex.

I'm just trying to find a way to get adequate property and liability insurance for our entity so that we aren't risking the assets that it owns. If the best way to protect the asset is to ditch the LLC and hold it in our personal names, any advice on how to structure that fairly for a partnership would be appreciated.

Thanks very much for any and all insights! My partner and I intend to seek legal advice of some kind, but I thought I would try asking these questions on the forums first! 

@Terry Mclain

I appreciate the offer! I'm currently finishing up my Junior year of school in Southern California, so I can't take you up on that immediately, but if you'd be willing to stay in contact, I'll be back in Des Moines in little more than a month. Would love to learn what I can from you firsthand if you are willing to let me tag along. 

@Ralph R. That's certainly true, although I don't think it's going to take 70 years for another similar kind of crash. Speculation aside, I'm not only concerned about another crisis. No matter what investment you invest in, the number one rule is buy low, sell high. Seems like getting in now is buying high. Sure, the opportunity may come to sell even higher, but the timing could certainly be more optimal. Do you guys think it's a good idea to wait a few years and see what happens?

@Terry Mclain, obviously I need to learn a LOT more, but I've started thinking about what type of investing I want to pursue in terms of my skill set. I'm not a handyman by any stretch of the imagination, and I'm not sure that I have the connections or the resources to compensate for that deficiency, so I think it best to avoid flipping. I like the idea of a simple buy, hold, and rent out strategy with single family houses (or duplexes and the like), but I can't be too confident of anything. I have access to some money through family members who might be willing to help give me a start, but I want to start conservatively. 

@Chase Keller, I am finishing my junior year at college, pursuing a B.S. in Business (Finance). I've thought about being an entrepreneur or getting into banking (more likely), but I love the sound of real estate on the side. If I dabble in it and really find that I love it, I could easily pursue it full time. I've had a lot of success (at least thus far) academically, so in 5-10 years I'd love to have the credentials that would entice a top 25 business school where I could pursue my MBA. All that said, I must admit that this is all very tentative, and subject to change. As far as the "it's never a bad time to get in" mantra that both you and (seemingly) @Russell Brazil hold to... I probably don't know what I'm talking about, and I'm certainly not going to argue with you since you know so much more than me... But is that really true? I mean, if I invest in real estate tomorrow, and then 07-09 happens all over again a week later, that's pretty unfortunate timing. Everybody wants appreciation in their properties, and for me to jump in and then take a haircut right off that bat... Idk, sounds like a pretty bad time to start a business, even if the business is a great one in and of itself. Thanks for responding, I appreciate your willingness to talk to me about this!

Hey guys, my name is Aaron Bush, and I'm from Des Moines, Iowa. I'm embarrassed to say I know very very little about real estate, but I'm trying to learn more, and I know bigger pockets is a great way to do that. I've been listening to the podcasts when I can, but I figured I would get involved on these forums, as I know there are a lot of people here who can help to show me the ropes. All that said, my first question is this: 

In your honest opinion, is this a good time to be jumping into the real estate business? I have talked to a lot of people about my interest in this, and it has been met with some skepticism. Obviously that is to be expected to an extent, but I have a lot of people warn me that I might be getting into this at the high point, which for any investment is a terrible idea. I'm only 20 years old, so I could wait a little longer and make my financial position a little stronger first. Would it be wise to wait a little longer before trying to get started just in case we are on the precipice of a major decline (like 07-09)? If not, why are you optimistic about the short term future of the real estate market?