All Forum Posts by: Brad Shepherd

Fabian, the answer to your question is yes. Your stated business purpose isn't legally binding. As others stated, once you get rolling and have a flip and a rental, don't do them in the same LLC. But for now you're just asking if you can use the LLC you set up recently for a different purpose than you designated at the time of formation. Of course.

Deferred maintenance is not uncommon, but of course it should be reflected in your offer. Those are great negotiation leverage points, and strengthen your value add options. Priced right, there's massive upside. So I treat deferred maintenance as a reason to investigate further and chase the deal, as long as the seller is reasonable. 

Why would you choose. All the good sites only charge per booking, and can sync each other's calendars. List on all of them and you pay for what they bring you. 

I have vacation rentals in Austin and my experience is completely opposite that of John's. 95% of my bookings come from Airbnb, and the occasional one from HomeAway. And every time I use the HomeAway site I cuss at it and wonder why they don't just copy Airbnb's because it's so much better and easier to use.  

I keep seeing ads for Tokeet which says they list your property on all the sites and help market. I'm curious if that'd be a worthwhile service.

National studies put the expense ratio of multi-family properties at 45%, meaning, for every $1 you pull in, 45 cents goes to cover expenses, not including debt service. Your numbers are at 39%, so I'd say you're in the ballpark.

But your numbers put the cap rate at over 14%, which is incredibly high. So that makes me think this is a very deep value play with an expensive rehab, low occupancy, both, or just a screaming deal. 

But as Andrew said, what you've shared doesn't give us much to go on. What are the value play options? How many doors is it? What class? 

That aside, just from the numbers you shared and a 14% cap rate, that'd get me excited.

@Justin Rice, don't forget that if you rent out your house you can use that income to qualify for another loan. They count a percentage, I think it's somewhere around 80%, of your rental income in their debt-to-income calculation. HELOC's are easy to get and are cheap money!

The beautiful thing about participating in syndication is that it doesn't matter where you live, you can put dollars to work in the best market and people for you. Keep in mind that most of these deals require you to leave your money put for several years. This is truly a "set and forget" type of play. Of course you'll get regular updates from the syndicator and you'll never be left in the dark, but you have nothing to do with the daily management of the property. That being said, it sounds like you're looking for an opportunity to learn. So find a syndicator who is willing to spend time with you, walk you through a couple of past executive summaries and explain what the numbers mean. 

You MUST have a third-party intermediary. Even though in this instance you described you're not touching the dollars, you could have. This would be like trying to have a self-directed IRA without a licensed custodian.

Sounds like the tax implications are minimal so it may not be worth the expense. And as Matt K. said, if you bought the property with the primary intent to sell it, you can't go the 1031 route. 1031 is for properties held as investments, not inventory.

Absolutely! That'll be attributed to the cost of acquisition of the property. I use Everlance to track mileage automatically which saves me a lot of paperwork.

Congrats and getting ready to dive in. A couple of thoughts, but these are all opinions as will be every other response on this topic, so mash them all together and do what's best for you.

In most good rental markets around the country buying existing properties can be done for less than building new, so there's not much motivation to build. Compare the pricing on both sides, check what the available inventory is, and go from there. Also, it can be easier to get a loan for an existing building as opposed to a construction loan if this is your first real estate endeavor.

Last, would your primary residence make a good rental? If so, hold onto it, and do a HELOC to access the equity to use for your next project.

And no, you can't do a 1031 on your primary residence, but you don't need to. If you've lived in it for at least 2 of the last 5 years, you can sell it and exclude the proceeds from your income calculation, up to $250k of gain, or $500k if married and filing jointly.

During the refi, if using a conventional lender, you'll be forced to retitle the property into your personal name. If you choose to move it back to your LLC later on, which is very common, then yes, technically you risk triggering the due on sale clause. In practical terms, nothing happens. The risk is low. You'll need a commercial or portfolio loan to keep the title in the LLC during the refi.