All Forum Posts by: Andrew Burt

Thanks Anatole, some good things to consider. Just to be clear, neither property is secured by a mortgage so a cash-out refi isn't an option. I should have been more specific there. As such, that's why I'm interested in getting that $700k in equity to work for me. 

I'm assuming I should be looking at things like portfolio or asset loans (or even a commercial LOC) using the equity in the properties as collateral. There is some cash on hand (~$75k) to function as a downpayment on the next purchase.

I'm not averse to taking risks and I'd be happy using leverage in order to expand. I've dealt with a few bad tenants before but I'm generally happier with paying a slight premium to get in above the ground floor when it comes to properties and potential tenants. 

Thanks for your reply, Jonathan. As you say, it's not optimal. The initial purchase prices were ~$575k (including closing costs etc.) combined and have taken some time to get up to scratch. Both properties are rented at slightly under market rates. If I didn't sell, I'd be looking to increase rents 10% on both properties when leases come up for renewal.

I would be happy to sell one of the properties (or 1031 it at least) and use the proceeds. The other property sits on the edge of valuable land that is being developed and I'd prefer not to miss out on what I anticipate to be healthy development in that particular neighborhood. I bought that property under market value and assumed some instant equity at the closing table. I'm treating it as my buy and hold. 

What are your thoughts on pulling equity out of properties as opposed to selling? I don't really know too much about the pros and cons, let alone the process.

Good afternoon,

I currently manage a small three-member LLC with my parents. My parents have provided 95% of the capital funding up to this point and have let me roll with things in terms of making executive decisions on purchasing as well as the general direction of the business. They currently own rental properties in the UK and as both have full-time jobs, our collaborative LLC is my 'baby'. I'm looking to turbo-charge business over the next 5 years with an aim of doubling revenue by this time next year.

As things stand, our company owns two rental properties free and clear in Philadelphia, PA. Current valuation of the properties is ~$700k with about $130k appreciation over the past 2 years. Both properties are tenant-occupied with a combined monthly rental income of $3500. Expenses come out to ~$1000/month with net profit at ~$2500/month. I currently serve as property manager and have learned a lot in the past 2 years both in terms of business management and property management. I aim to continue in this role for the foreseeable future as my current full-time job allows me to do so. 

I would like to start pulling the equity out of these properties to fund other purchases. What would be the best way for me to tap that equity? I've noticed that the local market has started to soften over the past few months and I would like to gear up in time for our next purchase. I understand the basics of economic metrics when it comes to evaluating suitable purchases but would love to learn more about how other's assess their purchases or potential purchases. I'm open to all potential avenues - buy and holds, fixer-uppers, tenant-occupied purchases etc. 

So - what would you do in my situation?

@Jerry W. Ah okay, thanks for clarifying. I was struggling trying to wrap my head around the double-taxation aspect but I think I've understood it now. Tax once on the rental income from renting out our own home and then again when we pay rent to the LLC.

Thanks for the thoughts so far. 

I suppose that I'm more interested in the legality of renting from a multi-member LLC where you are a member. Is this commonplace? That's sort of the cut-and-thrust of my main query. Just for a moment, if you'll humor me, the numbers aren't really important. I know that sounds weird when talking about REI - and I agree - there are better cash following investments than $2000 properties but this is more me trying to wrap my head around it as a concept.

Hi all,

New member here. I have a question that is a bit different to what others have asked re. renting from a property held in the name of an LLC you are partnered in, so I'm hoping someone can help out or give some advice on my idea.

I currently own a home with my wife that we've lived in for just 6 months. It's a 3 bd/2 ba condo. It would rent out very easily for ~$2400-2500/month. We like the home but it's not a long term solution and we can already see there are obstacles to our happiness in living here. It is, however, perfect for the rental market where we live due to its location and specs - these are some of the reasons we purchased it. 

I'm also a member of a 3-party LLC that has been formed with the express purpose of purchasing real estate as an investment. I act as the signatory authority on financial and business deals; the other two members are my parents who are providing the main bulk of the capital. We are currently searching for a suitable property as an investment. We have enough capital to purchase a house in cash in a nearby neighborhood with the target of $2000/month in rent; that is considered the fair market rate for the sort of house we're looking at.

What are the tax/legal considerations of the LLC purchasing a house and my wife and I renting it from the LLC? We would pay the LLC fair market rent - we're not interested in tax loopholes or taking deductions on things like utilities or mortgage interest (no financing required). We just prefer the idea of not having to deal with HOAs and noisy neighbors above and below us. We'd also be paying less than our current mortgage + HOA fees + taxes in this potential home when you factor in rent received from our current home. The other two members of the LLC are fine with this arrangement if it's at all possible; the LLC receives guaranteed rent payments from the first month of ownership as well as a known, responsible party to tend to the property (this is an important consideration for my parents as they live abroad). They could rent out an investment property to a regular tenant but they wouldn't be guaranteed 100% vacancy and a responsible party to look after the property.

Does this sort of thing happen? If so, what do we need to be mindful of? I sort of thought of this idea without considering it too much so let me know if it's stupid or not possible. I will run this past my real estate attorney when she returns from vacation, I just wanted to see what people thought on this forum first before tendering the idea. 

Thanks in advance for any help!