All Forum Posts by: Christopher Kolasa

My partner and I began our Florida LLC business partnership at the end of 2019 to purchase a rental investment property and we utilized an online partnership template to create a partnership agreement. Is this sufficient?

Recently, during discussions with my asset protection attorney, upon their quick review of our partnership agreement, the agreement appeared very weak and I was told to investigate the soundness of our partnership structure further with a Florida attorney who may have more hands-on experience with this sort of matter.

Has anyone had experience with structuring a partnership agreement, are the online templates weak? Should I hire an attorney? The few I've talked to have had very high fees, looking for a cost effective solution because going through the process myself, I can imagine the process can be fairly routine for an attorney.

Thanks.

@Michael Noto what about just for this winter? Issue with my dad is the distance.

First big snow storm in Connecticut came and went, I have a duplex in Middletown with a common driveway with my neighbor and a back parking lot. Normally a pretty quick job since the common driveway gets plowed by neighbor. My dad travels 30 minutes to the property to tend the landscape and snow removal duties but there was so much snow my upstairs tenant helped my father out. I wanted to give $30 for the assistance and the tenant offered to do the snow removal duties and landscaping duties in the future. He is a young guy and I'm weighing the risk/reward of utilizing his help. I wonder if I set up a separate contract from the lease to utilize his help, but I wonder if I kept this separate, this would decrease any liability exposure? 

For starters, I would like to word the snow removal section as something like:

"ensuring walkways, front stairs, sidewalks, driveway, etc. be free of snow and ice after 24 hours of any weather-related event, including putting down de-icing salts on ice or icicle removal as needed'.  $30 per snow/ice removal incident for anything substantial (ice events or snowfall over ~2", lasting over 24 hours) and id reimburse for de-icers or equipment as needed."

Thoughts on the language? Not sure on landscaping yet. As an alternative, do you go with a $50-$60 per incident snow removal/landscaping professional person (with insurance) however it is a pretty small area to remove snow. Your help would be useful! Thanks.

Thank you @Taylor L. for the thoughtful response. I have been weighing both options back and forth, and I think I should keep contributing and work on producing alternate funding strategies to being invested into real estate deals. I'm currently with my employer so investing in real estate with my 401k is a non-option. Maybe a better question is should I be aggressively increasing my contribution to max out my 401k contribution to the $19,500 limit which I am currently at about half that; and after that, with all the poor economic indicators and the disconnection of the stock market to the economy and high unemployment, when is it wise to take a cash position and how much?

@Taylor L.undefined

Hey all, with the begins of my rental portfolio underway, a duplex and a single family (partnered) with a built to rent property under contract that'll be ready Q1 next year (2021), half my net worth is sitting in my 401k. Last 11 years investing in my 401k have done very good for me, I have been contributing as much as I could, and maxing out the last couple years but now thinking is it time to revise the strategy. Is it time to take the 34% tax hit out my pay check and slog the money away into a bank account to get ready for some more real estate opportunities ahead? I'm going to match my employer contribution at 4% but does it make sense to keep maxing out or save up for the next real estate purchase? 

Market seems super inflated, forbearances soon to end, opportunities looming ahead... 

That's an interesting thought @Ryan Luby. My realtor was mentioning that there is 10x as many address transfers from NY to CT as this time last year. Connecticut is getting some much needed growth for the wrong reasons thanks to this migration out of New York City due to COVID. Would be very interested how much the property would go on the market. Where is it that you are investing? What's in store for Connecticut and where will the next opportunities be? Thanks for the message!

Thank you @Eric Perez, will be very interesting to see what I do next. Will be on the lookout for a strong cash flowing property. Good luck to you as well, I'll be waiting to see what you do yourself!!

Hey BP community! Cheers to you! I wouldn’t suggest lookin’ for love at the bar, but sometimes you might just find an investment property. In this case it was a wonderful duplex. It’s been a few years on the sidelines, soaking up podcasts, educating and looking for properties that made sense day 1, finally got it. It’s been a long road to get started but incredible connections, confidence and education gained in the mean time. Very grateful for the community here Biggerpockets.

Investment Info:
Duplex, buy & hold investment. My first real estate purchase!

Purchase price: $140,000
Cash invested: $32,000
ARV: $195,000 (Zestimate for whatever that counts for)

What made you interested in investing in this type of deal?

Numbers made sense, home with potential on a good street.

How did you find this deal and how did you negotiate it?

Met the seller at a bar, asked him what he wanted. Afterwards, negotiated repairs including removal of knob and tube, asbestos and buried abandoned oil tank.

How did you finance this deal?

Owner occupied property with an FHA - 30 year fixed.

How did you add value to the deal?

Remodeled: upstairs unit with new appliances, paint, complete bathroom remodel, fixed plumbing, refinished flooring. Downstairs unit with retouched flooring, new paint, new sink.

What was the outcome?

Built in equity, $225 per unit cash flow and 15.65% cash on cash ROI.

Lessons learned? Challenges?

Develop your criteria, then find the market or neighborhood to suit it.
Size of the start feels daunting, unsurmountable, overwhelming. Break it up. Write your goals daily.
Don’t judge a book by its cover.

Story:

Last April, at a local bar, my friend and I are talking real estate, talking to the bartender and a fella in the corner speaks up mentioning he’s got a multifamily for sale. Upon first glance you might not have expected what was about to unfold, this man held the opportunity I was searching for, and lesson: ‘don’t judge a book by its cover’ resurfaced again. No thinking much, we started talking, and I asked him what he wanted, the price that evaded me for so long (<$150k for a duplex), this home was bleeding him. He recently moved to a single-family ranch for his dogs, and left his unit vacant while the first-floor unit was paying half of market rent.

Here I thought it was impossible to find a deal that made sense, and from all possible places, talking real estate, here comes a man at the local bar, holding the deal I have been searching for. Not only that, he was a great human being, just did not want anything to do with the house/headache. Come to find out, seller spent his time protecting animal’s, volunteering his time refereeing woman’s lacrosse across the state, and was a local firefighter just was not cut out to be a property manager.

Soon after we arranged a time to go check it out, needed a lot of TLC but was a diamond in the rough. We proceeded to work on terms and how we could make this transfer happen off market. Upon home inspection, it was uncovered that there was knob and tube electrical in the house, there was asbestos pipe coverings, as well as unknown pipe fill and vent pipes (sign of an oil tank). Fortunately, I was able to negotiate with the seller that he take care of the issues before purchase. These repairs must of cost him $6,000 until it came to the issue of the oil tank. Evidence showed it likely lie in the yard, and the cost to locate and remediate the tank were steep. At this point I was investigating oil tank removal and remediation and costs are difficult to predict, costing upwards $100k if oil were to spill in neighboring properties. Exploring strategies of self-removal, and professional removal services, I decided that it was too much risk. I had to walk away from the deal, seller wasn't willing to remove the tank at this point. I let it go.

Weeks later, the seller called and said he found someone to use ground penetrating radar at the suspected locations for $200 as opposed to another company looking for 10x that amount. We found the tank, and seller was thankfully able to remove the [dry] tank for a total of $4,000. Game on.

Fast forward, I was able to purchase the property for $140,000 as owner-occupied with a buddy living in my unit with me, I remodeled the home with help from my father from December to February so saved probably like $10,000+ in rehab costs with his help and counting our time as zero dollars per hour. I was able to land tenants in both units by April of this year netting $2,320 per month with about $1,111 in PITI obligations. Taxes are very high here in Connecticut so looking at the 1% rule, it is more like a 1.2% rule round here.

Before (upstairs unit):

After (upstairs unit):

Numbers (using a $200k ARV):

@Ryan AllisonI would consider cash for keys for sure, thank you. Still awaiting rent rolls before I make my counter offer.

@Peter Sosnow I asked my lawyer, she mentioned $600 as a minimum and up to $6000 to carry forth an eviction, I believe these figures were including the Marshall's time to inventory items and moving fees but not holding costs and utilities. Concerned how much trouble and the upward cost of going through with an eviction in Connecticut during COVID times.

@Theresa Harris Leases are up already (month to month) so I will need to create new leases upon transfer. I can increase rents in 2 of 3 apartments easily. I will definitely be asking to have the "units delivered vacant, but that will cost and most owners would be reluctant in case you fail to close with a larger deposit and write that the seller keeps $X of that should you not close after all contingencies are removed", this little bit is SO HELPFUL, thank you, will pose that in a one of two options or ask for a price decrease to inherit tenants as is, does that seem appropriate? and how to value that amount? TY.

Thank you @Theresa Harris, the previous leases were lackluster, there was nothing in the lease about smoking except keeping the place "premises clean, sanitary, and in good condition and to comply with all laws, ordinances, rules and regulations and directions of government authorities". I would like new leases in place, do you recommend an Estoppel agreement for the transfer? I would write in no smoking.

Is it possible to do a background check on job history? I would have to reach out to the tenant and see if they are looking to move officially and document it.

Thank you @Peter Sosnow, I appreciate your words, how can I figure out how I can bring up the tenant situation at the negotiation table. I believe I am capable of handling but at what cost? Is there a way to quantify it? Thanks!