All Forum Posts by: Steven Woon

I leave two new rolls of cabinet shelf liners in my rentals.   Hopefully they will use them :).

Misdemeanor over 10 years ago, maybe.

Felony conviction, no.

Registered sex offender, definitely not.

Not legal advice, but something I learnt over the years.

The moment you put your name as party to a contract, you already exposed yourself to potential liability. You can however sign the document as a representative (manager, employee or agent) for the LLC.

Also, in every written communications always add your title (position), company name and company contact number in the signature of the email or letter.  Use company email address if you have for added protection.  It amazed me to see many individuals, including some from title companies I have dealt with, use their gmail or yahoo account to communicate with me, and not providing proper signature on who they are representing!

Check with your CPA or attorney.  If you win a judgement, you may have to pay taxes on the amount, even if you are not able to collect what the judge decide you are entitled to collect.  It will be years before you can prove to IRS that you were not able to collect the full amount.

I just set up a family limited partnership (FLP) and Series LLC to house my rentals. If you are not familiar with these, suggest you read up and consult an attorney.

My FLP owns the "safe" assets, i.e. assets that are very unlikely to be hit with liabilities, e.g. stocks, shares in my own Series LLCs and cash.  My LLCs are to manage and hold risky assets and businesses, like rentals and property mgmt companies.

I am told I must keep all these entities at arms length, e.g. any loans between FLP, LLCs and family members must be accompanied by a "FORMAL" loan application and promisory note (preferably notorized), meetings minutes documented with sent out by email to all members, seperate business banking accounts and so on.  Also, LLCs must be sufficiently captalized (but not "rich" enough to attract lawsuits) depending on the operating requirements.

Not sure about your state, but primary residence in TX has homestead protection against most creditors.

FLP, like the name suggest only has family members as partners as defined in the agreement.  I have my wife, eldest child and myself as partners.  My other kids are too young to legally be partners, so we are planning to set up a revocable trust for their benefit and make that trust a partner in the FLP.  We will also plan put our primary residence in the trust to avoid probate.

 Google "Texas Property Code, Chapter 92".  I am not a lawyer but I find this document quite easy to understand.

You do not need a written agreement if the lease is less than one year, although it is highly recommended to have one done ASAP.

Verbal lease agreements are enforceable in Texas, so make sure you follow the procedures listed in Texas Property Code or seek legal help when you need to raise rent, terminate the lease or evict your tenant friend. I am not an attorney so this is not legal advice but speaking from my experience. I have been to Texas eviction court where I see landlords occasionally failed on eviction cases due to failure to follow procedures. Worst part is, one landlord end up having to pay the tenant's attorney fees which comes out to be $1800.00 and still not getting his rent dues paid for another month while he has to restart the eviction process.

I highly recommend that you keep all email and text exchanges with your tenant/friend regarding the lease, and document any verbal conversations in writing and if possible, emailing to your friend what was verbally agreed.

That said, I personally would not rent to a friend or relative because it is so difficult to make hard business decisions without the risk of jeapodizing the relationship.

The only advantage to paying off a mortgage is, you can transfer title to an LLC (or one of the series in a series LLC). If set up and managed correctly, your liabilities are limited to what you hold in your LLC.

You can also transfer your property to LLC without paying off your mortgage but be prepared to receive a "Due On Sale" notice from your mortgage lender. If I have the cash to pay off the mortgage anyway, I will probably do this.

If someone wants to sue you, whether the (non-LLC) property has a mortgage or not does not matter. They can go after your other assets too. A good insurance policy will cover the some of these potential liabilities.

LLC, if set up and managed correctly is the best way to protect your assets from most judgement.

However, if I understand correctly, you can only get mortgages for properties owned by LLCs from commercial or portfolio lenders. These lenders often charge a higher mortgage rate than a conventional mortgage lenders. So, if you have no issue with paying higher interest rates, or has the ability to loan to your own LLC to purchase the properties, then LLCs or Series LLCs is the way to go.

For now, I go with the 2nd best approach, which is to cover myself with Landlord and Umbrella policies.  When my properties are closer to being paid off, I may consider transfer title to LLCs and take the risk of being invoked with "Due On Sale" by my lender.  By then, I would have no problem paying off the mortgage.

I agree with Michael about cash being not a differentiator for investment property today, esp. if the ARV of the property is expected to be below appraised value.

I recently got an offer accepted for a property which required some cosmetic rehab.  Went to view the property with a home inspector and was able to offer cash and closing cost, with no option period. 

There were 15+ offers for this property.  The seller was able to accept my offer even though there were higher offers because it was all cash, shorter closing and no other conditions.

Nevertheless, I am working on getting a mortgage for this property, but I am prepared to close the deal with cash if the mortgage approval is delayed.