All Forum Posts by: Brad M.

@Layne R.

What about electric, water & sewer, gas, trash... are they included in the rent? A lot of the cheaper multifamily were converted from SFH at one point and are all on one meter. That drastically changes the numbers. Just looked at a similar one a few days ago, but it was a case of the seller fudging the numbers. In the engineering world we called it magic math.

@Cole Burley I wouldn't. I see it as robbing Peter to pay Paul, dismantling the west wall to repair the east wall, trying to cover yourself with a short sheet, cutting off your nose to spite your face, or kicking the can down the road... take your pick. 

Is FHA not an option?

@Shane Elias-Calles

Not sure if you're saying you eventually want 1 LLC with multiple properties. Each property would need to be it's own LLC. So the 1st property doesn't need one. At the end of the day, if you want an LLC, than get one. It won't hurt you, but getting loans through the LLC is semantics, because it's just a shell pass through entity with no financial history. LLC's are a piece a cake to get (at least in Ohio). I would suggest that you're trying to accomplish the right things, but in the wrong order. I would recommend talking to a CPA for you to get some better understanding of the tax regulations and benefits, specifically in your state. I talk to my CPA pretty much weekly about random business decisions that come up and its way better to get your tax info from a licensed professional than from strangers on the internet. It can get complicated the deeper you go.

@Lukas Zupan Was a junior in college for civil engineering in Fort Myers/Naples, FL where business was booming prior to 2008. When I started engineers were getting 20k signing bonuses, when I graduated I was working 4 part time crappy jobs for 1.5 years and plenty of engineers with 15+ years experience couldn't get a job at McDonald. My girlfriend (now wife) started lookink at property to live in because we thought it might be the only time we could afford it. Made soooo many offers, but was always trumped by cash buyers, even when we offered more. Learned a valuable lesson. In a down economy, cash is king. Finally found an off market deal that was about to be listed and got the realtor to agree not to take any other offers. Previous owner paid 265k and did a bathroom reno, we paid 82k (which maxed us out at the time). In the mean time, my now wife and I got good jobs in our respective fields, we started paying off debt. Once we had that under control we decided to give it another try and decided to buy rental properties. She did property management as part of her job and I was in land development, so we had a lot of connections and personal experience. Original plan was to buy a house, live there for 2 years and fix it up, buy another, rent our previous one for 3 years, sell it and not have to pay capital gains, repeat. Bought another short sale a street over a few years later. Did a complete reno. We both became frustrated with our jobs (like everybody who works for someone else), and started looking for options. One presented itself after a couple of years so we got out of real estate and into business ownership. Just now getting back into rentals 7 years later, but now for much different reasons....it seems prices have gone up slightly since I was last involved ;). On in all I was lucky to be able to start at the worst of times. I got a ton of knowledge and perspective with out having to lose a whole lot.

@Harith Hadi

If the knowledge and experience is worth $35k a year (and benefits too I'm guessing). I can tell you based on the carriers that I use, a CDL (assuming that's what you have) driver can walk in about anywhere and be hired on the spot. If it doesn't work out you can get another job driving. It would greatly depend on the amount of trust I had in the guy and whether I would really be learning or just cheap labor. There's nothing wrong with being cheap labor to learn, but there would have to be a clear plan of progression. Personally I would trade money all day long for knowledge if it was that simple.

I took a very similar approach to success. I quit my very secure and good job, moved 1,200 miles away, and took a 60% pay cut, to run a business. However, I had a very clear written agreement in place to buy the business on a certain date for a agreed upon price after I had added value to the owners. That being said, I was 95% sure I could trust them, and it worked out very well. But my entire deal was based on mutual trust and benefit. That is a HUGE key.

@Abel Curiel is also 100% right that whatever is agreed upon should be in writing and very thoroughly discussed. It makes everything so much cleaner and prevents the classic, "I don't remember saying that".

@Shane Elias-Calles

I'm no expert, but at this point I don't see what an LLC would accomplish for you unless you have significant assets other than that property. If someone comes after you for something related to that property the LLC only protects the assets outside of the LLC. The right type of insurance is more important. If you get more properties I would look into an umbrella policy. The LLC is worth considering, but I would wait. If you start getting more assets then go with the LLC route.

I own 2 LLCs, but they're both businesses. My 2 SFHs are not in an LLC. I would personally put a MF in an LLC.

@Arlan Potter

I see you have quite a few properties. If you don't mind me asking, what made you decide to pivot? Are you selling everything or just enough to pay off the debt on what you want to keep?

I know this is more a personal preference that is dictated by your goals and current financial situation, not a right or wrong answer. I would like to hear why you choose whatever debt to equity ratio you use. I mainly ask to see if anyone is in a similar situation as me and sees things differently or the same. I've got 2 potential deals in the works and before I finalize anything I wanted some input to assess my thought process.

This is my situation. For me, real estate is a safety net for my business, not a way to quit a 9-5. My 1st goal is to get enough cash flow to cover my monthly business loan should I lose a major contract and need time to react and adjust. Long term, real estate is my retirement back up plan should the business ultimately fail. I also went through the 2008 crash in SW Florida. My county was 2nd worst hit in the US, and it has admittedly influenced my thinking. I'm banking on a market correction to occur in the next 2-5 years. I would not expect it to be as extreme, but its a significant factor in my thinking all the same. All that being said, I don't currently use debt to purchase my properties because I want max cash flow. I like the flexibility and security, plus I can always pull it out if I need it via HELOC or a cash out refinance. This method allows me to add 10-20k a year in cash flow. I understand that I'm missing out on the appreciation of several properties versus one, but that pendulum can swing both ways. Right now, I'm working on buying properties for cash and waiting on a correction. I should have an extremely solid base at that point, an have the flexibility to scale quickly using my current assets as leverage and go with something close to an 60-70% debt ratio at that point (cause I'm still conservative). Am I crazy? Should I change my way of thinking? Don't hold back on me. I want constructive criticism on my thought process.

@Michael P. LOL. Glad we got that cleared up.

@Mark Welp

What areas in Columbus and Cleveland do you invest? I see from your profile that you invest in SFH and have multifamily.

In Cleveland I was looking in Solon, downtown, and Clark-Fulton near the hospital (I hear their about to start an initiative there). In Columbus I was interested in Southern Orchards, the western edge of Olde Town East, and Clintonville. Was told I should look at Worthington too, but hadn't looked into it yet.

Also, curious if you specialize in any particular area as a CPA? 

@Stone Jin

No where close to king of anything. Just a sucker for a good deal. 

If you don't mind me asking, what areas in Toledo do you invest and in what type of properties? I'm least familiar with Toledo of the 3 cities, even though it seems like I'm there all the time. I'm always going to the same places, but usually I'm on a non-real estate related mission. I've been in Maumee and Holland enough and it seems like nicer areas that are growing. I see new residential and commercial construction on the routes I travel.