All Forum Posts by: Charles Press

@Jonath Twombly ,  you hit several nails on the head.  No need to reinvent the wheel so I'll just quote and vote for this post.

The plan I have devised (with working with my tax account) is to have each property within its own LLC. I.e. Property #1 LLC, Property #2 LLC, Property #3 LLC.There are all single member LLC's which then in turn is owned by a holding LLC. I.e.Big Huge Rental Company, LLC. So they all flow up to that holding LLC (that you own).

You get the protection of each property is then separate from the others.A incident on Property #2 LLC will only effect it then and keep your other properties in the clear.

Does it make thing more complicated? YES! You must maintain separate bank accounts for each property LLC and keep separate books. That is how you protect your LLC status and legal protection.

Comingling funds, is the easy way to lose your LLC status.i.e. Property #3 paid for repairs on Property #1.Worse yet, you use your property LLCs to pay your personal expenses.Property #1 LLC pays your dry cleaning bills.

Insurance is a must, no brainer right?But keep in mind the job of the insurance company is to try and avoid paying claims.They don't build fancy offices and name stadiums paying out claims.

Between insurance and keeping my investment properties in different LLCs, I sleep easily at night. This method offers extra levels or protection. That said, everybody's situation is different.Find a good real estate lawyer and great tax advisor and see what's right for you.

Ned,

Thanks for the clarification.  I was looking at it from the other side.  Not having your financing costs exceed 50%.  In order to be able to cover operating expenses.  See what you mean though.  Assume operating expenses will come out to 50% in the long run.  Then that leaves 50% for debt service and profit.   Thanks!  

The 50% rule (or guideline) says you should not exceed 50% of your gross income in debt service.I.e. Principle and interest payment every month. Example, your gross rental income for the month is $1,000.00.Therefore your total loan payment should be $500 or less.Thus, leaving the other $500 for potential operating expenses.The leftover is your profit to do as you see fit.

I've often seen that insurance and property tax are considered "operating expenses" in the 50% rule.And not part of the debt service side.Insurance and property tax are two items are items that you obliviously going to need to pay.

In my last property purchase, the loan payment is clocking in at 43%, taxes are taking 12.7% and Insurance at 5.15% of my gross rental income.So while I'm under the 50% rule for just debt, I'm at 61% in required monthly payouts in principle, interest, insurance and taxes or PIIT.( I pay the taxes myself not the lender.)

My question is, what's other investors opinion?Do you consider insurance and property tax "operating expenses" or do you lump them in on the 50% side of the principle and interest mortgage or loan payments.Thanks!

Safe bet. You should file a return even if you did not have activity. Some states can be bigger pains the federal on no filing of returns.

If you obtained an EIN, you should really file then.

Disclaimer: As with all tax questions, everybody's situation is different and consult your own tax advisor.

Hi everyone,

Buying my first nvestment property. It is a 7 unit building, 100% occupied. Nice neighborhood, many tenets have a long history 5+ years. It's 30 miles and 35-40 minutes from my primary residence.

I have a full time job (sometimes more) operating another business I own, family, etc. and no have experience in land lording or property management.

There is currently a property manager in place that the seller was using. I'm debating keeping them or attempting to do it myself.

I have been reading on this forum n how to be an effective landlord. I do think I have the temperament and attitude on dealing with tenets, firm but fair. And treat it like a business.

The time is what concerns me more. I don't want the 2am phone calls (who does?) or really any calls for that matter needing something. Comes with the turf I know. Naturally you could find repair service or contractors to have tenants contact. And then dealing with filling vacancies. Tenet screening is something I would not look forward to.

Long term, my plan is to be a real estate investor along with other businesses I am involved in. I'm buying this property to test the waters to see if real estate fits me or I fit it. I don't look to become property manger (that could change) if I purchase more investment properties I the future. hat said, I would prefer not to have to pay 6 to 10% to somebody else to avoid some hassles. Seems like a lot if you do have decent tenets.

Looking for opinions now from everybody else' place experience, would you go with a manger or attempt to do it yourself?

Thanks!