All Forum Posts by: Alvin Ng

@Jerry W. Ah very interesting, hadn’t thought of that. Thanks for sharing!

@Jerry W. Oh I got it now, your examples help shed light on the shortcomings/challenges of refinancing/LOC. What would be the right way to extract equity to purchase another property in a separate LLC to minimize this risk? I think you mentioned a structure of management LLC to handle cash flows and individual LLC per property would be ideal. The use case i'm thinking is BRRR with LLC (or SLLC) for each property.

Thanks for your valuable feedback! To help provide context, I currently own my primary residence and an investment property. It (hopefully) won't be too long before I pick up another investment property or 1031 up. TBH, I'm not expecting anything to go wrong as inspections/requests are immediately followed up and umbrella insurance is in place to catch the rest. Learning these things though really helps twofold: 1) What can I do early on that will help me later? 2) What are the low hanging fruit? I had some follow up questions:

@Jerry W. Is it possible to pierce a corporate veil by taking a LOC or keeping LTV high, in advance? Refinancing a loan or not paying extra principal payments seem like normal activities that investors may do. I agree that this can be counter productive if done around a suit filing though.

Regarding LOC, it's likely that you can't withdraw from LOC around a suit filing. But I thought just by having a LOC available means creditors cannot see the equity - possible deterrent from starting a suit. Having an LOC also seems like a normal activity if setup well in advance.

@Scott Smith Wow, lots of good stuff to digest here. I believe I have 1st and 2nd pillars in place. The 3rd pillar seems the most broad in terms of range and opinions. I'll take some time to learn more about SLLC and DSTs on how they compare and their costs. One book I read mentioned SLLC but the concern was that there weren't many involved suits to prove their effectiveness, although this could be dated information. Also will need to do some research on trusts and associated costs. 

Hi BP,

Although I’ve only started in real estate investing, I’ve been reading books on tax and legal protections. In protecting my investments, I’ve learned the importance of the first and second defense, home owner’s insurance and umbrella insurance. The third defense is minimizing your attractiveness to creditors/lawyers and lastly, isolating assets through liability separation. I also know to differentiate between inside and outside ‘attacks’. Inside relating to the property itself like tenant injuries and outside relating to my personal life like car accidents.

The book I've read suggests that an ideal structure of real estate assets in CA is to hold each property in an LP and have an LLC formed in Wyoming or Nevada as general partner - for cost and protection reasons. Unlike a CA LLC holding, outside ‘attacks' may not force sale of real estate and are limited to charging orders in Wyoming/Nevada. The rationale is that lawyers/creditors will be less inclined to spend time reaching for charging orders in different states, ie: third defense. Also LLC formation in those states are low cost.

I’m not even close to getting to this type of structuring but as an exercise of academia, I wanted to get opinions of BP members on the cost and protections of this type of asset structure.

Other forms of third defense I’ve come across include:

-Keeping LTV high

-Taking out LoC (creditors will not know the utilization of LoC until winning the case)

How is the interest taxed for accounts like this? Can I deduct anything special against it or is it treated like my normal W2 income?

Hi all,

Thank you all for your helpful replies! I had contacted my agent to start discussions with the seller. I was worried because I was thinking i'd also have to then coordinate with Section 8 to change their IRS reporting for the seller and myself. Also, anything related to courts and lawyers does concern me due to potential costs.

The good news is that I just received the rent for this month and it does include the rent for June! It seems the agent misspoke, and in this case worked out for the best. Quite a scare for me though.

@Nav Madhwan There wasn't much to say about Section 8 when closing Escrow. I actually emailed them about my situation yesterday and they replied that this was a problem between the "tenant" and landlord and wouldn't be able to help. Was quite disheartening. 

Hi Bigger Pockets,

I need your advice on how to proceed with my situation. I closed on a property on June 1 which has a tenant on section 8. Before closing, i called Section 8 and they informed me that it should be taken care of once the change of ownership happens and to call back once it closes. I called back on June 1 and was instructed to fill out a bunch of forms and sent them back. These forms were confirmed to be forwarded to the agent responsible for this property by June 7. Everything good so far...

Except, i didn't hear back from the agent for over 3 weeks. So i called them to get an update and it turned out the worker had left and someone new was assigned to the property. She asked me to resubmit the forms, which i promptly did. However, when i asked about the June rent, the agent informed me that it had already been paid to the previous owner and there was nothing they could do.

I'd appreciate any feedback and help on this. Thanks!

Does the upcoming Google Village increase the appeal of DTSJ? From the article, it may bring in up to 20,000 jobs.

http://www.mercurynews.com/2017/06/20/google-san-jose-negotiate-transit-village-downtown/

Hello BiggerPockets community,

I am currently going through the process of purchasing a duplex in Sacramento, CA. I have asked for records to confirm past income and costs of the property to accurately model the cash flow.

I wanted to know what to ask for to verify the income for the past few years. Is there a particular tax form you could ask for? I was asking for just the lease forms but i'm afraid that doesn't paint the whole picture.

Thanks!