All Forum Posts by: Chris Levarek

@robert collins 

First iron out the goals of the partnership and the overall purpose. Why is it needed and what will be accomplished by creating a partnership? Then answer a few questions, What will the roles be of each partner? What will each partner contribute? What are the strengths/weakness of each partner and how will you complement one another? How will the partnership be exited for any reason, ie disagreement, life changing circumstances, etc. How will profits/losses be shared? Etc.

Once you have gone through those initial questions, I would visit a real estate attorney who specializes in entity creation or joint venture agreements with real estate. They will take the answers in the above question and put them into writing to which you and your partner will sign. You will most likely look at either joint venture agreement or a llc split ownership. Highly recommend consulting a specialized attorney for this purpose as you might miss a few items that will make future engagements difficult. Having everything on paper will make give much more strength and structure to the partnership and you both will feel better.

Additionally, you can use online services to create the same documents for cheaper but you do get what you pay for so do your research on how to structure the paperwork and look on BP forums or other sources for key items to include in such documents or partnerships before you go and create one on your own.

Hope that helps!

@John C Rider Additionally, perhaps you could refinance to a lower amount to be positive in cash flow and then HELOC the now greater equity in the investment property to future investments. Does depend on how good of a HELOC you find though but allows for no capital gain taxes and continued use of equity. Obviously, you would like to not leave money in the deal. Or other ideas might be taking different loan types for better rates, ie. shorter terms with balloon payments or ARM loans if you plan on a 1031 anyway. Some properties do work better as flips so the BRRRR game is a risk/reward but having more offered on the refi is always better than less!

@Benjamin Chambers As some of the previous comments mentioned, deciding your plan of action and goals going forward will help with the decision making on some of these items. A LLC really is for liability protection. Usually unless classified differently, this is a pass-through entity meaning the income passes through the LLC to a individual tax return so tax reasons do not always factor in, some variations are present. There are some additional benefits but if the main goal is to get started, a LLC might not be needed as an umbrella insurance policy on the property can be all the protection you might need. Additionally, a VA loan or other similar veteran loan packages are residential financing for buyers intending to live in the residence. These loans which have great advantage for the military or veteran member, would be unusable when purchasing through a LLC.

This being said, you can always purchase a home with a VA loan and then use a quit-claim deed to transfer title to a LLC for protection purposes. The catch, is banks will see this and have the opportunity to call the loan due with what is called the "due-on-sale clause", although not very common. Still good to be aware of this.

Now, if you are still looking for a LLC for cheap. You can create one yourself with your state commission office for under $50 bucks in some states. In arizona, $85 will have a LLC created in less than 30-45 days with a rush filing fee, $50 for the creation and $35 for the rush. I haven't found any pricing that can beat that. This is really only establishing the "Articles of Organization" but the EIN(like a social security for tax purposes & commercial lending), is free from the IRS and can be done yourself as well through the IRS website. 

If you would rather someone else take care of it, next cheapest options are some online filing third party companies that range from basic filing for $150-$200 and can be completely done online with minimal involvement. Just search in a search engine for "start LLC" and you will be on your way.

If you really want protection though and want to cover all your bases regarding the LLC paperwork, Articles of Organization, Operating Agreement, EIN paperwork, etc, I recommend paying the $400 or more to an personal attorney specialized in this and getting it done right, (especially if this is a partnership venture).

Hopefully that helps. :)

@Brendan M Brown This is good creative investing. As Nathan mentioned, you would have to ensure that "Loan To Value" percentage the bank loans at covers the purchase price. So if you buy for 200k, and property appraises at 250000, you break even at a 80% LTV loan because 80% of 250k equals 200k. Note, you will most likely need to wait 6 months to 12 months for a "seasoning period" before you can refinance unless you buy with private money or with hard money lenders and even then some banks want 6 months seasoning.

Some banks will loan at lower/higher LTV rates so do your research. This is similar to the BRRRR method but what I would do first is run the numbers. Make sure the new Mortgage payment plus expenses(vacancy rate, capex, monthly repair costs, etc) still allows you to make some cash flow from a renting tenant ie. tenants rent covers the new payment + expenses and then some.

If the numbers work not only do you make some cash flow, you can pull out equity on the property in the form of a HELOC for the difference between appraised value and owed value. The amount you can pull out is dependent on the Home Equity Line of Credit but it could be anywhere from 70%-100% of the equity depending on the HELOC lender.

Chris Levarek 

Valkere Investment Group | https://www.valkeregroup.com

@Morgan Cooley If you are just getting started, how about you find a deal provider with some experience and form a partnership or joint venture agreement. Deal provider provides the deal and know-how(receives equity or profit on flip), you get the commission and learn and your friend learns and gets the interest(or equity) on loaned money backed by the property as collateral for example. There are many possibilities and arrangements that could be done whether through partnership llcs, joint venture agreements or simply a promissory note with deed of trust.

Alternatively, you could arrange such a deal yourself and learn along the way but I would caution working with friends/family money until you feel confident in the investing principles, know your weaknesses(outsource these) and strengths and have a plan of action. Provide a good return to your friend whether through equity or interest with security(collateral) and ensure all partners understand their roles in a operating agreement or joint venture. Additionally have a start, middle and exit plan. Always protect your lenders money first. Investing in real estate has some risk but this can be mitigated by education, experience and ensuring the numbers make logical sense, (not emotional). Buying properties with the BRRRR method can allow for equity to be built within a property, which can protect the investor loaning money if the numbers are done correctly.

Chris Levarek

Valkere Investment Group | https://www.valkeregroup.com

@Jonathan Cox Any idea why Unit C is rented so low? Anyway to remedy this? Add value and up rents? Whats the average rent in the area and are these units on par with this average if similar state?

 At first glance, it looks like you can raise value through higher rents and maybe some easy fixes in the short term. Not as familiar with that area so its all dependent on what value can you add and how much can you increase the income streams through higher rents, storage units, additional features, etc to get you to a desired cash flow. 

Additionally, in my opinion cash flow is not always the deciding factor. Build a little breathing room for downturns(i.e. avoid too little cash flow) but if you only making $170 cash flow and you building equity with no money down as well as gaining experience, I see no issues with it. Plus, you can pull the equity out with a HELOC in 1-2 years or have other options with the equity someone else paid down for you for no money down.

Also, are you planning on living in one of the units since this is a VA loan? If so, be sure and take out that units rent as it will be coming out of your pocket...

@Christopher Rivers Investing in a rental property is probably the most important at this point whether in one spot or the other, getting it done is most important. You will find out what works best for you but there are many the military member who use the VA loan and then refi, to a VA IRRL for example, to reuse the VA loan and build rental properties like this as they get stationed in new locations. Doing this allows you to buy with no money down and reuse the VA loan over and over.

That being said, I think "ease of management" is in the mind of the beholder. Having a property local to you or remote just requires different toolset. Similar to @Frank Geiger comments, I suggest building a network in your current duty station consisting of contractor, property manager, real estate agent, lender, etc. When you pcs, simply transfer the mgmt over to the property manager if not already done. Whether you make less cash flow initially or not is really not the issue, as the experience and other benefits such as equity, depreciation and appreciation of owning property far outweigh the extra $100-$200 in management costs. In addition, being able to take a HELOC on a rental property that someone else paid down for you which allows you to further invest in property is far more beneficial.

By doing this, you will have an effective team everytime you pcs. Some locations will work better then others. You can decide which locations work best for you and your goals and sell off the rest if need be.

Hi @Zane McLaughlin. If you haven't listened to Podcast 301 and are able to go back and listen to this one, I highly recommend. Active investor @Alexander Felice has some great inputs on investing in Fayetteville NC that worked for him even while out of state. Should give some further insight and motivation!

@Jaysen Medhurst Sound advice. Thanks! 

@Jon Allen Exactly! Competition across the street does have rents at our potential estimated rents but a few more amenities are offered such as pool, pets, vending machines, etc. We did start the offer at the estimated price using existing NOI and current rents to arrive at around 425k and now have climbed to 488k. Interestingly enough, they haven't countered previous offers and are set on that 600k number which is unrealistic, hence why the property has been sitting for 120 days. Seller-financing is an option as well which is always a plus so we shall see.