All Forum Posts by: Cindy Joseph

Hi @Cindy Joseph,

Congrats on the goal to purchase your first home! When do you close? Is it still your plan to live in one side?

Regarding LLC...its a super grey area because technically quit claiming ownership into an LLC can trigger a Due On sales clause ....though extremely unlikely is still a risk. The best way to figure this out is just to ask your bank! Most banks, especially if you are getting traditional financing (Conventional, FHA, VA ect) will make you close in your own name if thats how you are buying it. It is up to their discretion what happens after.

Assuming you do move ownership to an LLC....S vs C corp really depends on how you will operate this "Business" and I would defer to your Tax professional on specifics however there likely wont be a major difference especially with this being your first property. Although the differences will not be huge for your situation is still good idea to understand the Tax landscape.

On the rehab question, it shouldn't make a difference if you own under your name or LLC. When the roof company comes to replace roof for example, they will make sure you are owner and then go pull permits with county and handle.

Being that its your first property, I would really recommend using Zillow to do the basic back ground/credit screening and applications submissions. This service is currently a free service and super valuable! You will make your listing, add pictures directly though the zillow rental manager portal which is super easy. I have a draft of a FL lease I have used over the years I can send you, feel free to PM me. This is something you as the landlord can sign directly with the tenant however if you want a PM company or attorney to do so, you can hire out. 

If you are not looking to be hands on/ vet potential tenants ect you can always hire a Property Management companies such as my self who will typically charge 8-10% for full service, placing tenants, signing leases, income verification, collecting rent, dealing with maintenance ect.. 

Best of luck!

Hi Cindy! Congrats on your first deal! Here are my thoughts on your questions. 

- You cant use an S corp, C corp, or LLC for a primary residence secured by an owner-occupant mortgage because they bank can call the loan. There is something called a 'due-on-sale' clause that basically says that if the property is 'sold' to a new owner (i.e. your S corp, C corp, or LLC) they can call the loan due and you would either have to refinance or sell. Granted - this is rare, but they most certainly can. You just need to inform you insurance agency that you are renting the other side and ask them to update your policy to cover this. I would also get good commercial liability umbrella insurance policy. You can require your tenant to get renters insurance if you want to go a step further.

- The tax benefits are the same in this situation. Just because it isn't a formal LLC doesn't mean its not a 'business' since you still have business income, business expenses, etc. The tax treatment of sole proprietorship income (what you will have) and a single-member LLC income is the same because single-member LLCs are "pass through entities" so the income essentially flows through to your personal return.

- You don't need to have a corporation to have people work on the property. 

- Best way to get tenants? Depends on your market. Zillow, Apartments.com, local college facebook groups, etc is a good place to start. Biggest thing is to screen them well. Background checks are absolutely necessary. You don't need to hire a lawyer to draft a lease agreement. You can find lease templates online. Make sure they cover what your state requires. You do need to understand tenant-landlord laws in your state such as how you have to hold a security deposit, how much you can charge for a security deposit, how many days notice you have to give for certain things, etc. Many websites have quick guides to each state's laws. 

- Advice in general: There are no dumb questions (cliche, I know). Everyone feels overwhelmed when they first start off. Keep asking questions and try to be "comfortable being uncomfortable" until you get through the learning curve. The first one is the hardest. Never cheap out on insurance. Keep records of literally any money you spend on or related to the property for when tax seasons rolls around. 

Hope this helps!

Hi Cindy! Congrats on your first deal! Here are my thoughts on your questions. 

- You cant use an S corp, C corp, or LLC for a primary residence secured by an owner-occupant mortgage because they bank can call the loan. There is something called a 'due-on-sale' clause that basically says that if the property is 'sold' to a new owner (i.e. your S corp, C corp, or LLC) they can call the loan due and you would either have to refinance or sell. Granted - this is rare, but they most certainly can. You just need to inform you insurance agency that you are renting the other side and ask them to update your policy to cover this. I would also get good commercial liability umbrella insurance policy. You can require your tenant to get renters insurance if you want to go a step further.

- The tax benefits are the same in this situation. Just because it isn't a formal LLC doesn't mean its not a 'business' since you still have business income, business expenses, etc. The tax treatment of sole proprietorship income (what you will have) and a single-member LLC income is the same because single-member LLCs are "pass through entities" so the income essentially flows through to your personal return.

- You don't need to have a corporation to have people work on the property. 

- Best way to get tenants? Depends on your market. Zillow, Apartments.com, local college facebook groups, etc is a good place to start. Biggest thing is to screen them well. Background checks are absolutely necessary. You don't need to hire a lawyer to draft a lease agreement. You can find lease templates online. Make sure they cover what your state requires. You do need to understand tenant-landlord laws in your state such as how you have to hold a security deposit, how much you can charge for a security deposit, how many days notice you have to give for certain things, etc. Many websites have quick guides to each state's laws. 

- Advice in general: There are no dumb questions (cliche, I know). Everyone feels overwhelmed when they first start off. Keep asking questions and try to be "comfortable being uncomfortable" until you get through the learning curve. The first one is the hardest. Never cheap out on insurance. Keep records of literally any money you spend on or related to the property for when tax seasons rolls around. 

Hope this helps!

@Cindy Joseph You don't have to run the new ABS where the old Cast Iron is. Just run it down the side of the house, and punch through the walls to get to the baths and kitchen. You can go through walls and ceilings easily. This could be easier than you think....

@Cindy Joseph You don't have to run the new ABS where the old Cast Iron is. Just run it down the side of the house, and punch through the walls to get to the baths and kitchen. You can go through walls and ceilings easily. This could be easier than you think....

It's going to depend on what you are doing here.

If you are renovating other parts of the house then absolutely replace them now. 

You don't want to have to do a retro fitting of new pipes once you have new floors, new tubs, etc. 

If you aren't doing any renovation and they aren't leaking then I would leave them for now. 

However.....Based on your second post about the inspection you had, it sounds like they are in bad shape and need to be replaced.

@Cindy Joseph

What’s you plans with the house? If flipping to sell I’d talk to some realtors and and see if it’s possible to sell a house with this situation when you disclose.

If holding for rental then I’d assume you can live with it until a actual problem arises.

Regardless I’d look to see if an exterior reroute is possible.

I had to do a 2300 sq ft house, bids were 35-45,000 for working under the house and liners. Got down to $17,000 doing the work on the exterior. We did have to open the slab floor to replace one coupler, luckily it was under carpet and not where I had just put down new lvp flooring.