All Forum Posts by: Chase C Henderson

Eli,

Another piece of the puzzle to look at, similar to what @Payton Haight was discussing and your own financial situation. Is the cashflow your expecting to receive include repairs and vacancy set backs? While it works today. Lets look into the future, what can you expect your cost to be in 3,5, 10 years? As an example.... When is the last time the auditor reappraised the value for the purposes of taxes (in Ohio we have a 3 year (Triannual) evaluation period on property taxes, meaning they can adjust our property taxes and the amount due every three years and recently a lot of properties in my specific area saw increase between 15% to 35%. (Not to mention insurance adjustment, material cost and interest rate increases).

Another point of investing advice. If you plan to buy another property with 25k you get. Make sure it does at least 1 of the two things.

1. The replacement property/investment will net you at least 7.15% or better cash on cash return. (This covers the 7.15% interest you are paying on 25k loan you are taking out).

2. Make sure you financially are at a place you can afford to take on both mortgage or renovation if they were to become vacant. (Or at least have a plan for where you gonna get the money to cover these cost). 

Growth is a great thing, but if you over extend yourself, by the time you notice, it's often to late.

 Totally agree. 

The more and more I connect with our generation the more I see how many of us are facing the same issue and hungry for ***pick your buzz word*** "financial peace, escape the rat race, become an investor, etc".

I think it's because our generation has seen so much economic change and volatility in our life time, many of us are desperate to take control.

What's your thoughts? Why do you think so many young investors are stepping forwards?

That's awesome, I can normally be found at the Butler County and Cincinnati REIA meet ups. That being said I am always open to get a cup a coffee or bagel with another investor.

On your STR is it up and running or is part of the great deal you got require some value add or TLC to get it market ready?

Hey Cody,

Always nice to see another "younger" investor coming into BP. It's great to hear you already had some success an as an investor. I assume your Norris Lake project is a STR. How is that project doing?

Hope to see you around in Cincinnati and maybe catch you at a local real estate investor meet up!

Allan raises a lot of good points here. One more thing to think about if your keeping the seller LLC and name of his/her business is you will also be inheriting his or her reputation. This can be a positive or negative. Of course you can avoid the negative by doing a DBA(Doing business as) or fictitious Name Registration with your Secretary of State and change the businesses operating name. These positive or negatives won't show up on a balance sheet or the books (unless they have line in the balance sheet for Goodwill which is extreme rare in real estate). So get out on google and see how they look or even ask local people around town.

Also, to piggy back of Allan if your in the property tax saving game, check with your county auditor and see what it is currently appraised for. For instance if the county has it appraised/valued at $190,000.00 and you are purchasing the property/LLC for $200,000.00 its not gonna likely move the need much on your cashflow and underwriting and likely will not be worth the trouble.

Hey Isaac,

I have done a couple deals like Greg has mentioned. In our area of Ohio we typically call this a Asset Transfer or Drop and Swap. This involves the seller opening a new LLC and transferring the real estate into this new asset at closing then you simply purchasing this newly formed LLC. This process can be a great way to way to avoid reappraisal on purchase. However, it doesn't always work. For instance a 10 unit that I am an owner in we purchased it in 2021. The school district challenged the sale and the county reappraised us at 95% of the purchase price. We also got hit with 2 years in "back taxes" dating back to the date of purchase. That being said another deal we purchased 52 units in a neighboring county and school district via the same method was not "caught''. So ended up saving several hundreds to thousands on our monthly tax bill.

Now, if you are talking about just buying someone existing LLC that currently owns the properties. I would total agree with Mr. Scott attorneys. The other part of buying the LLC is you buy its liabilities and risk not just its assets. So if there is an old tenant about to sue for the current owner not paying back a deposit, or that tenant got electrocuted by an outlet that the owner refused to fix. The LLC you purchased would still likely be liable to my understanding. (That's why we always form a new LLC when we do a drop and swap or asset transfer).

On a good note if you just buy out their existing ownership in their LLC there should be no purchase recorded with the county and you should be able to avoid any property tax reevaluations. (Just be warned that be careful if you are funding the deal by getting a loan on the properties as crafty school districts and auditor will pull the mortgages and notes to try to obtain a value when they property come up for reevaluation. *** This is how we got "caught" on our 10 unit)

Hope this helps!!!