All Forum Posts by: Keith Kaufman

I have found several posts that address the pros and cons of an LLC versus a Land Trust regarding the type of protection they provide. That is not my concern because I believe that if a tenant is injured on my property and that injury is a result of my actions or negligence an good attorney will find a way to go after me and not just the business entity. And therefore carry both property insurance as well as a general umbrella policy. That being said, I am still interested in the tax benefits of structuring my buy and hold rental business in the appropriate business entity. My question is simply are there any tax benefits to holding my properties in an LLC vice holding them in my name? My properties are all out of state, so flying to inspect properties is a business expense. That is straight forward enough, but what about other expenses, i.e. a company car? I will be driving out of state for business as often as flying, if not more, can an LLC, or other business entity, buy a car and deduct it as a business expense? Any thoughts and suggestions are welcome.

As @Terry Lao stated, you need that Rental Agreement.  First, you need it to show that you will be occupying the new property in order to qualify for a residential mortgage vice commercial funding.  Secondly, you need it to show that it is fully rented and you have an income from that property in order to help qualify for a new mortgage with regard to your debt-to-income ratio.  With regard to renting to family members, bottom line it doesn't matter who the tenants are if you handle everything as a business transaction, i.e. Rental Agreement, receipts, deposits, etc.  Treat your tenants professionally and they will treat you the same.  Rentals should be a business, not a personal arrangement.

@John Lowry Irving to Oklahoma City is a good distance.  Six hours round trip gets to be old in a big hurry.  Are you planning on hiring a local Property Manager?  If so, that is the person that will have the best knowledge regarding occupancy rates and turnovers.  If you don't already have a PM, start your screening process for a PM now and make that one of the questions you ask.  Even if you don't end up with this particular property, having a PM in place before you acquire a property gives you a "boots on ground" team member that can eyeball a future acquisition from the standpoint of whether it will be a good property to manage or not.  I invest long distance and my Property Manager is the primary reason I can do so comfortably.

@John T.,

Why are you not using a Property Manager?  Property management is a pain in the rear.  And having your family do it is a good way to hurt familial relations.  Unless of course they are part of the deal, i.e. they are the boots on the ground/sweat equity and you are the finance part of the team, then it makes sense.  My point is property management is a job and people should get paid for doing a job.  I have a Property Manager that also just happens to be my RE Agent.  He had a tenant in the house the day after I closed.  His fee is reasonable and he has a very thorough screening process for finding good tenants.  I have managed my own property in the past and that is one of the reasons I am an out of state investor, I don't even want to be tempted to get involved with the property management part of the job.

Just my .02.  I mean no offence, and I wish you well with your investments.

@Keith Torsen, thank you for the welcome. I decided to go Pro mainly for the calculators. I like to be able to save the calculations and go back with better numbers to see how that affects the deal. The ability to watch archived webinars is also a big plus. With regard to out of state investing. I started down that path accidentally. I had done a couple of deals in Southern California, selling the last one this last September and just had the proceeds from that sale sitting in a Money Market doing squat. My wife and I started visiting San Antonio as a possible retirement location. The agent I started working with is also a property manager and the idea was that I would buy my retirement home and he would rent it out in the mean time. However I quickly decided that people that could afford to rent in the areas that I wanted to retire in could also afford to buy there. So I decided to look at strictly rental properties. Properties that would provide a steady stream of income, but not transition to a future home for myself. I eventually found a deal in an area close to a major medical center, the University, and a military base. The school district is top notch and the homes are of a modest size 1500-1900 sqft single story. Well, I bought the first property in July and am looking for the next property as soon as the storm blows through. My goal is to have five long term rental properties in the area before I retire there in 2019 and then start employing the BRRRR strategy when I am closer to the properties.

So to finally answer your question, kind-of turnkey, as in the property that I am looking for is rent ready, but I don't work with a turnkey company as I prefer to use my own property manager to screen tenants.

@Tyler Bedashi , Welcome to Bigger Pockets. This is a great place to learn and to network. With everyone on here putting deals together everyday, you may feel pressured to jump in before you are ready and make some very costly mistakes. My recommendation is through the people you meet here, find someone you can trust to run your numbers by. This is a great place to find a second set of very experienced eyes. Good luck.

@John Barr. Mostly looking north and northwest. Just bought an SFR that is providing positive cashflow in Helotes. Also looking toward Bulverde.

@Shenice B.  Haven't looked at Houston only because I will probably retire in the San Antonio area.  That being said, I am more interested in a good cash flow than I am a particular city.

Thank you both.

I invest out of state, so I work with a realtor. Although I recognize the value of working with multiple realtors, i.e. more eyes equate to more deals, I think you lose a lot by working with multiple realtors. Successful business people, in any field, know that in order to build wealth fast you need a team. If you try to do everything yourself you get bogged down. Face it, there are some things you are good at and some things that you are better off leaving to others. That being said, if you plan on doing repeat business in the same area, be it flips, buy and holds, wholesale, whatever, and if you plan on working with a realtor, then I recommend working with just one. Unless there is a reason to find someone new, you want to build a relationship. A win-win relationship. They should know that when you call, you are serious and that your money is where your mouth is. Also, if you want off-market deals, you need an insider who sees those deals first and who knows, and likes, you enough to pass those deals on to you. Of course, if you are in multiple markets, then you will be working with multiple realtors. Just my .02, hope it helps.

My understanding of Renter's Insurance is that it covers their possessions against loss due to damage or theft.  This should have no impact on the property.  The only scenario that I can see would be if a tenant filed a claim for loss due to damage that was caused by the property, e.g. a pipe leaked into their television.  For the most part though my property insurance covers my assets and their renter's insurance covers theirs.

@Kevin Fox,

Thanks. I am not saying I will never invest in California.  However, for a buy and hold strategy, the initial investment is pretty high and the cap rate is low.  From what I have seen, my cash income would be about the same as what I can expect for houses 1/3 the cost in the San Antonio area.