All Forum Posts by: Allen B.

I am 100% convinced that the TN and MS Real Estate Commissions would view that scenario as a net listing. I would not participate in such a deal.

It is a fine line to walk when you are both an investor and an agent. If you buy a house under market value, then you better be able to defend yourself in a disciplinary hearing.

It is going to really depend on your state's property tax laws and the appreciation in value of your home.

If your state has a homestead exemption on property tax, then your llc is not going to qualify for homestead exemption. So your property tax bill will be higher.

You will not qualify for Section 121 Capital Gains Exclusion on your primary residence if your LLC owns the house. You will have to depreciate the house over 23.5 years, but this amount will be recaptured at 25% when you sell. You can do a 1031 exchange, but pay the extra fees, while it would have been tax free for nothing in your own name.

Your property insurance will most likely be higher as you have to pay for a landlord policy owned by the llc and a renters policy in your name.

The yearly fees and taxes on the llc will add up depending upon the state that you are located. The additional paperwork and forms will add up. Depending on where you live, the local jurisdiction may require your llc to have a business license and pay more taxes.

Unless your house is free and clear, it would violated Due on Sale clause. Yes not likely to be invoked now, but it is a possibility.

Asset protection this will be neutral unless the LLC has another member besides you.

I don't see how you would deduct utilities unless they were provided in the rent. The IRS will want to make sure this is a true market rent if they figure out you are renting to yourself.

In summary, I don't think the tax savings in deductions would outweigh what I have listed unless you think your market will not appreciate. If you think that, then you are better off just renting from someone else anyway.

The first thing to check on this property is the zoning. It may only be zoned for one unit. Just because there are three units there doesn't mean that it is legal.

We currently manage a 2 unit that has an extra house on the property that we let the tenants use for storage as the property is only zoned for sfr/duplex. The seller was selling it as a three unit, but when we did the due diligence for our buyer we found the zoning issue and re-priced the offer.

Assuming that it is ok zoning wise it may be hard to use the same units for college and vacation units unless you store the furnishings during the school year as the college students would most likely wear out the furnishings.

Good Luck

I used to list REO properties, but I sent my last listing back in March and just focus on being the buyer's agent for REO properties.

The REO listing side is burdened with maintaining the properties and doing monthly reports. Most companies require you to front the expenses until the property sells. They will ignore the proper value you set and then after 90 days re-assign it to another agent and then lower the price to what it should be and then it sells. I have been on both sides of that situation.

The listing agent commission is generally smaller then the selling agent, plus you have to pay a referral fee to the asset manager. In today's market it is much more profitable as an agent to focus on finding buyers and then picking the best REO property to sell to them. Last week I had five closings as a buyer's agent and now we are supervising the rehab on four of them.

If you insist on finding an asset manager then go to the agentsonline.net forum and go the BPO subforum and spend a week reading that resource. It has tons of companies hidden inside there.

The figure I used were supplied by my client. He tells me that he is clearing over $400 a month after our management fee, taxes, mortgage payment and insurance.

If you think the actual costs (not including mortgage payment)of a $950 rental are $475 a month, then I am not going to try to dissuade you of that opinion. The purpose of my post was to help the original poster learn what opportunities that are out there and not buy a property that won't cashflow.

We charge half the first month's rent to find a tenant and there after 8% for people that have multiple properties with us. The fee is only on actual rent collected, not scheduled. We have in our contract that we can charge an advertising fee, but have never collected on it. If there is an eviction the cost is around $250 paid to the attorney.

Memphis is a great marketplace because it is the world's largest distribution center and tremendous job growth is occurring here. It has very stable real estate prices. There is a real lack of savings of the blue collar workforce ranking Memphis 50 out 50 for savings rate and that creates a huge number of sub-prime mortgages (31%) and blue collar rentals. There is a steady supply of foreclosures that can be re-habbed and turned into rentals. It is a market that location is very important as some great paper deals are not so great in reality. If you buy in the wrong neighborhood, then you can easily lose money.

We have one right now for an investor that we helped him acquire. It was a 4 bedroom house that they bought for around $34,000. After repairs they have around $45,000 total in the house. The house rents for $950 a month. The investors did a cash out refinance so they got their $45,000 out. Including taxes, insurance and our management fee they are cash flowing over $400 a month on a single family. The rehab included a new roof and HVAC system so there shouldn't be any major repairs for a while.

Now this is the best producing single family that we have helped people acquire this year, but almost every one that we have helped acquire have been cash flowing at least $200 a month with a 70% mortgage on the property.

Memphis is a cashflow marketplace and it is easy to find sfh's that cash flow $100 or more a month. Finding them over $200 a month is just a little more work, but that is what we provide as value.

The good news in my market it is not to difficult to find properties that you can be in 60-70% after repairs that cash flow several hundred dollars a month. The key is of course buying the right property and overseeing the rehab properly. I would highly advise against buying any property right now that doesn't cash flow at least $200 a month in this current market.

In order to get hired to do this, then you should contact the REO agents in your town.

The banks hire asset managers that manage the properties. Some asset manager hire contractors directly others through the agent. Starting out it would be tough to be hired directly with asset management company.

Typically we are only authorized a set amount for re-keying, mowing etc.

For example the last one we did we could pay $100.00 for rekeying house and $30 to mow the grass every 2 weeks. Over that we had to get 2 bids if the lawn was too large for that amount.

Unfortunately the agent has to pay the bills and wait to be reimbursed. Sometimes this is after property sells. So one sure way to get job is to give the agent some float with your billing.

I started with $475.00 in 2001. Everything I have made came from that initial nest egg. I was able to buy 19 lots in Arkansas and sold them for a total of $20,000.

All it takes is the proper combination of education, money and being at the right place at the right time.

There is a lender that is a sponsor of some of the REIA clubs that can do 40 mortgages.

You can also use private money to fund your mortgages as well as they will not show up on a bureau and can be preferabel anyway.

For some investors the 10 mortgage line is a barrier they never cross