All Forum Posts by: Ben Stout

I have to agree with J Scott as usual. The problem is that once taxes go up/ spending goes down (Fiscal cliff) we're going to see costs go up which is going to drive investment down. I believe we'll see prices stay the same in the near term (low)... and I think rents will continue to steadily go up over the next 5 years due to a larger pool of renters and fewer buyers. Getting a loan these days is hard enough... I can't imagine how much harder it will be for someone with two part time jobs because his/her employer can't afford Obamacare.

I have a credit card with a $50k limit I run no balance on. I recently tried to use this as POF to make an offer. They wouldn't accept it. I thought that was kind of odd considering I could easily just write a convenience check for $50k and drop it in my checking account.

I ended up having to show a bank statement before they'd approve it. I would definitely agree with Kyle here; in the old days it would take a month or so before they'd realize what your total outstanding balances were, but everything is so digital and instantaneous these days that it could really jack your DTI ratio through the roof.

What J Scott said is good advice. You might look at how much you'd pay realistically--best/worst case scenarios. If your card is at 8% interest, it may very well be a better alternative for a flip than paying points on a hard money loan /origination fees, etc. Do the math and I think you'll figure out the right answer. Some cards also charge 2% more for a cash advance than a convenience check. Best of luck to you.

The markets will equal things out. Big bad CEOs don't send jobs to China, incompetent governments send jobs to China. People are going to get what they voted for and it's going to come in the way of tougher times. Gotta pay the piper--we need to be prepared for inflation/higher rents.

Patriot Act. NDAA. National Debt. Gitmo still open. Still wars going on.

Where do I get my free cell phone?

I'm trying to refinance a few properties and also get some financed I paid cash for. I was initially shocked when I was quoted an "investor mortgage" that required me to pay eight points. The woman stated "This is how the mortgage market is now for investors." Thankfully she was wrong and I found what appears to be a good deal with another lender.

I'm closing this month on a home that I intend to rehab and sell on a lease and also putting up another house for rent starting next week. I put it on Craigslist and had 4 calls within hours.

Ben

I agree with Brian. Without us seeing the property, knowing the area, looking at comps, etc... it's just impossible to advise. It could be the best or worst deal of all time. Pro forma rent is at best unreliable, at worst a blatant lie. Do your due diligence and snoop around. I'm assuming since you don't know the layout that you've just found this, look a lot more into it and do your research. Good luck!

Alright, I've been studying this for the past week for many hours every day and spoken with an accountant and also our resident accountant Steven Hamilton II. Here is what I've come up with.

1.) Land trusts are not recognized in TN. I have done a lot of study, some "gurus" say they're recognized,... 'Mr. Landtrust Randy' says they are probably authorized yet beats around the bush and doesn't commit. He wants you to buy his course to find out more.

I have found no documentation supporting their existence, but have found some where they were NOT recognized. I would not chance this. Thus, Land Trust with LLC as beneficiary becomes a non-viable option.

2.) How about a foreign LLC holding title? Sure, but you're gonna pay the same amount of tax (franchise and excise.) Read this if you are interested: http://www.tn.gov/sos/forms/fg-llc.pdf

3.) Hold it in a living trust? Doesn't protect your assets. My trust has my name on it. Most people's do. There's a small amount of help there, but not a lot. TN is very good about trusts, but a court can order your trustee to say who the beneficiary is. If it's an LLC, ouch. Your protections are gone and you'll be paying a massive fine for doing business in the state without authorization. And your veil is pierced and thus the LLC is rendered a complete waste of time and counterproductive.

4.) Jack up your liability insurance on each property and buy an umbrella? It's an option. I personally would go with different insurance companies for each so they can fight over who pays out (if you're that lucky in the event of a major disaster. You'll need to hold title in your personal name or your trust's name.

5.) FONCE. Looks like it's gone and a relic of the past. These states need your money. At least I can take comfort in the fact that I'd rather give it to TN than the federal government to send overseas.

6.) Start up a TN LLC. Are you going to pay a lot. Yep. If you've got considerable net worth though, I'd say it's a better alternative to the old holding it in your own name idea.

7.) If you're exceedingly paranoid, or have a huge net worth, my idea is:
a.) Open a TN Series LLC. Hold each individual property in a different series. Recognize this is part of the cost of doing business.
b.) Open an out-of-state LLC in a no tax/cheap jurisdiction like Nevada or Wyoming. Make that LLC the manager of TN LLC.
c.) You act as manager of out-of-state LLC and hold residence elsewhere.
d.) Get an umbrella policy/liability insurance on each property.

I'd say this is about as bullet-proof as you can get these days.

Is it a huge annoyance? Absolutely. Does it make me not want to own more TN property or sell what I've got? I haven't decided yet... cash flow is good.

Note: I'm not a lawyer or an accountant and this is purely info based on research I've done.

I guess there are pros and cons to everything. The internet has given us so much information right at our fingertips. It can be very powerful, but also results in less privacy for sure!

If there is one group that this will anger, it will be those who have interest in sites like www.foreclosure.com that charge a hefty premium for foreclosure information. I'm not sure how much zillow will ultimately post, but their information was able to help me put in an offer on a house that had hit the market the same day. This information was free and just required a walk down the street to check it out.

Steven Hamilton II,

I definitely agree with you on keeping it simple, but also have been threatened/denied insurance claims before. I have been racking my brain over the TN situation and done literally about 10 hours of google searches and reading. Surely there is another way investors in TN are taking title to properties without massive liability or franchise/excise tax? From what you've said, this might make sense?

1.) ABC Revocable living trust holds title to said property in TN.
2.) Beneficiary of ABC Living Trust is XYZ, Wyoming LLC.
3.) XYZ, LLC has a single member, John Smith Living Trust.

Although TN does not recognize Land Trusts, they do recognize and are very private about Living Trusts. Out of state trust owners also do not pay franchise or excise tax for TN properties in their trusts. I also read a lot of things that say "basically a land trust is a living trust."

I know I am way in the weeds with this one, but just thinking about potential solutions. Thanks as always for your tax expertise, you post a lot of great content here.

Ben

Thanks, Steven. So if you are operating it through a land trust, the property manager would be sending funds to ABC, LLC and you should be careful not to commingle funds and have your ducks in a row. If it's actually owned by your own living trust with LLC as beneficiary, then you would be operating as a trust first... right?