All Forum Posts by: Keith Barton

Just make sure the name is available as a business entity name in your state. If your not ready to actually form the company you should at least be able to reserve the name to make sure nobody else takes it (if you are concerned about that....) At least Ohio allows one to reserve a name without creating the entity.

I'm kind of partial to Bootstrap Properties (but I'm a computer guy [the term booting up a computer comes from bootstrap])

Looking at the matter only with self interest in mind - cash flow is king. As long as you have positive cashflow from a deal, you can afford to make payments for as long as it takes to pay off the debt.

What I can't say is how that plays out in your current situation with your parents. Only you and your parents can determine what is best for your situation. If it will not be a problem for your parents for you to reduce the amount of your periodic repayment to them; and, if doing so gives you more cash flow - then go for the cash.

I will second just about everything the other posters have already mentioned; but, I also want you to at least be aware of something nobody has mentioned this yet....

Intuit employes CPAs, EAs, and attorneys for their ask a tax expert service. It used to be a pay service, but starting last year it was made available to all TurboTax users. I actually worked for Intuit last year as one of their tax experts. I also managed a Liberty Tax Service office a few years ago. My opinion is that I would trust the ask a tax expert over a random tax preparation service employee - don't get me wrong, I'm not dissing all tax prep employees - just saying Intuit pays much more for the professionals, and they are all licensed professionals.

Eric Michaels
I know I'm rather late to the game and that this is no longer an issue - but I thought you guys might like a little explanation of a few points....

I've represented parties in a number of foreclosure lawsuits (Ohio - judicial foreclosure) where the "aggressor" has changed part way through the suit. Forgive me if I tell you basic info you already know....

1) Any lien-holder may foreclose on the lien (under proper circumstances.) Examples of liens include 1st mortgage liens, 2nd (and so on) mortgage liens, tax liens, HOA lien, mechanics' liens, judgment liens, etc....

2) The plaintiff must notify all lien-holders (and anyone else who may have an interest in the property) by naming each as a defendant to the foreclosure action. This is why a title company must perform a judicial report before the suit is filed, while the suit is pending if it goes on long enough, and just before judgment is granted.

3) Claims, Counter-Claims, Cross-Claims...
-The plaintiff files a complaint against a defendant to assert a claim.
-The defendant files an answer to defend against the claim.
-The defendant can file a counter-claim to assert a claim against the plaintiff.
-A defendant who wants to protect their lien's interest must file a cross-claim to say - hey, I've got a claim against one of the other defendants (the property owner).

I represented an HOA who filed foreclosure against a unit owner (before I started representing the HOA). The bank and the county were named as defendants and filed cross-claims. As an aside - this was in Cuyahoga County (Cleveland), Ohio. At one time the worst place in the country for foreclosures (i.e., the most.) The court was overwhelmed: HUGE mess.... it made no sense for the HOA to continue taking the lead: a) no money to finish the suit; and, b) the HOA would get no money, as the property not worth enough to cover all liens. We didn't want to drop the suit because we wanted them someone who would pay HOA fees.

I told the bank - you keep pursuing under your cross-claim. We didn't dismiss because we wanted the foreclosure and it would've taken forever to start over. We told the judge what we were doing and he had no problem with it - which is as it should be.

If we dismissed our claim, it would not have affected the validity of the cross-claims - the show must go on. if the property owner makes a deal to satisfy 1 lien-holder but not the others, that 1 lien-holder must still continue asserting their claim (or cross-claim) or risk losing the right to foreclose on the property in the future.

The bank filed, and was granted, its motion for summary judgment. The bank ordered the sheriff sale. The bank bought the property at sale.

The priority of the 3 liens was 1) county taxes, 2) bank, 3) HOA. Proceeds were not enough to cover all liens. I had a few cases like this.

I don't know enough of Eric's situation to say why there was a concern about the lien not being discharged at sheriff sale. (which is what it sounds to me like Eric was saying.) Their are times when a property is subject to a prior lien after sheriff sale, but I've never taken the time to research under what conditions that would happen.

If you ever want to bid at a foreclosure sale - do your research. The bank will keep upping their bid price until they get to the amount they are owed. If a house is valued at 100,000, but the bank is owed (after interest, taxes, mortgage, legal fees, etc...) 110,000 and the minimum bid (2/3 of FMV in Ohio) is 67,000 - the bank will bid the minimum of 67,000. If anyone else bids on the house, the bank will keep going until they hit 110,000.

Short sales and REO sales are a whole 'nother ball of wax. I'm sure lots of people have their opinions about what offer is likely to be accepted for an ROE property - my opinion is it depends on the circumstances.

The requirements of each state differ. In Ohio an LLC must file its Articles of Organization with the Secretary of State (a pretty common requirement). The Articles must include an address that will be the principle place of business for the LLC. The Articles also must include the name and signature of someone authorized to file the Articles. The Articles also must include the name and address of a statutory agent, who can receive official notification of various things.

The person filing the Articles is the organizer, who does not need to be a member or manager of the LLC (I sign & file Articles for clients.) The statutory agent does not need to be a member or a manager of the organization.

Lexis can access various databases. When it comes to LLCs, the most common source of information Lexis has access to is all of the Secretaries of State - just the public records you can access yourself. However, Lexis also makes it easier to access UCC filings (public notices of liens granted to secure equipment financing and the like) - which may be of no help in learning information about LLCs involved with real estate.

Every LLC should have an EIN (and a specific person is listed as being associated with the EIN - typically a member or manager, but not necessarily), but EIN records are not available on as part of a typical Lexis subscription (at least not that I know of). There are other databases that can get information about EINs, but those searches typically cost money.

If the LLC has borrowed money, the members will typically have to give a personal guarantee, but personal guarantees and promissory notes are not matters of public record. However, if the LLC granted a mortgage to a lender, the mortgage is a matter of public record and the mortgage typically will have to be signed by a manager or member. If the LLC has ever been involved in a lawsuit, the lawsuit is a matter of public record and you can get information about the owners from the lawsuit....

1) How comfortable are you with the idea of investing in real estate? Will you be doing work yourself? Are you familiar with what needs to be done? Be very careful. There's an adage in the world of off-roading: Four wheel drive just means you get stuck farther from the road (with much bigger tow bills). More money in real estate (without proper planning) means you can get stuck with a lot more problems.

2) Don't pay cash if you don't have to. Look for deals with financing that still give you positive cash flow.

Would you rather:

a) buy a $500,000 property with cash and have cash flow of $1,000 per month (just a random round number - not an indication of a goal), and not have an interest deduction for your taxes; or,

b) use your $500,000 as leverage to buy multiple properties (let's say 7 as an example) that are financed, but still get you positive cash flow of $500 per month (again, just a random round number), and you get a tax write-off for your interest payments?

[Please note - the numbers I used are just to demonstrate a point - not to be actual expectations of performance.]

How is the business end of your deal structured? If you are all participating in the investment/business activity, it might not be a gift, it might just be part of your investment in the deal. Not enough information has been given to say....

Steven Hamilton II - OK, gotcha. Thanks for clarifying.

Steven Hamilton II - Hmm - I seem to be missing something.

I thought your comment "Farms and Foresting projects have different rules and regulations pertaining to that industry." was a claim that the hobby loss rule of 26 USC § 183 does not apply in farm and forestry situations.

Because the hobby loss rule was enacted specifically to address concerns about excess expenses deductions in farming, the hobby loss rule applies without exception to farm and forestry situations.

My original example of the tree farm was specifically geared to demonstrate a legitimate business that would trigger the presumption under the hobby loss rule, but which could potentially justifiably rebut the presumption under the hobby loss rule....

I think there was a disconnect somewhere along the way....