All Forum Posts by: Craig Moreau

After their first deal I hear a lot of people say "I wish I had gone bigger". I want to go big on my first deal to make it worth while but I am also being realistic. I found a deal that I haven't moved on yet but I would need to raise capital in order to do so. The property is a portfolio of 10 condos in the same association (11 total units). I currently manage a condo association of 127 units in which our company owns 97 of them. I think something of this size would be good to start for my own portfolio. 

I wanted to reach out to the BP community to get some advice on how to begin raising capital. I had a couple questions I wanted to see if I could get some advice on. Should I form the LLC and get the documentation in place prior to raising the capital? If this is the case I am concerned that the deal will be gone by the time I get this all in place. Do you need a license to raise private money and hold it for clients? How much capital would you need to raise to get your foot in the door of a $2.5M property? $500k?

I feel with my background in management of condos and apartments I'm ahead of the game in that sense but need help jumping into the investing game. I appreciate any feedback and insights you have. 

Thank you

@Ray Harrell That makes sense. It's just the fact that he doesn't have a SSN so I don't believe discrimination applies in this case since it's objective. It has nothing to do with nationality/citizenship. 

I'm managing this on behalf of the landlord who does not like to sub-let and prefers to do a re-lease. In my opinion I feel a sublet works best in this case, but he would prefer that we draw up a new lease. This is where I'm running into trouble. 

Hey BP,

I ran into a scenario where a tenant is moving out of his unit from now until the end of August. It is a three bedroom apartment so there will still be two other tenants in the unit paying the rent they agreed to. The sublessor wants to sublet to an international student through the end of the lease (6 months). The catch is that this subtenant moving in does not have a social security number and will not have his social for about 4 weeks. Obviously given the circumstances and the time sensitive nature of the situation we aren't able to run a background check on this subtenant moving in. Since the sublessor is moving, and still responsible for the rent of the unit, I had planned to add an addendum to the lease with a provision that the subtenant's tenancy is subject to a background check once he has a social security number. 

To limit the liability on myself is it fair to also add into that addendum that this subtenant must pay the 6 months of rent up front? Those 6 months of rent would be forfeited if the background check does not pass. The problem here is that the subtenant is only responsible for 1/3 of the monthly rent in the unit. They pay $3100 total per month so the sublessor is responsible for $1,033.33. If we added this to the addendum would the other tenants already living in the unit have to pay as well since they pay with one check? I just want to try and limit the liability for myself so that if the background check doesn't come back approved than we still get paid. Would we need to include in the addendum that the other two tenants only need to pay their portion ($2,066) through the end of the lease since the subtenant paid theirs up front upon moving in?

Has anyone else run into a situation similar to this? If so how did you handle it? 

I appreciate the feedback!

-Craig

@Ashish Acharya This is very helpful. Like I've said we will eventually establish one, it's just a matter of timing and when we will get the most benefit out of it. When you say that my personal situation might require one, what do you mean by that? It seems like the small scale investing just to get off the ground doesn't necessarily need an LLC especially if we plan to hold the properties. On the other hand it won't make or break us if we do establish one for our first property. Once we have the plan mapped out we'll get in touch with an attorney to run through the pros and cons of setting one up early. The last thing we want to do is create headache's for ourselves right off the bat. I appreciate the response!

@Jay Levy It's always good to hear the perspective of someone that has done it before, so "trained" advice or not it's much appreciated. We will definitely establish an LLC at some point, but it's just a matter of when it make sense to do it. It may be best once we have a second property and we've refinanced the first property out of the initial mortgage before establishing a business entity for it. We will definitely consult an attorney as well but I like to hear the feedback from those with experience! Thank you!

@Aaron Gordy I appreciate the insight! Coming from Boston I'm sure the traffic situation is one in the same. The commute can be tough getting across town... Location of the jobs will definitely play a role in where we eventually buy, so hopefully by renting to start we'll get a good feel for the city and where the best areas are. Sounds like a great rental you've got there but unfortunately given that we're trying to cut expenses prior to purchasing that may not be the best move for us. 

It's interesting the different perspectives out there on the 203k loan. What are typically the conditions that allow someone to secure a 203k loan? Does there need to be a scope of work established prior to getting the loan so that the bank knows how much additional funds are needed? We'll continue to ask around but if you do have someone you could refer me to, I'd love to talk with them about our plan. 

Hey BP,

My business partner and I are getting started purchasing our first duplex to live in. We have started other small online businesses as sort of a "side hustle" but never in the real estate space with real assets. As our portfolio grows, we want to make sure were getting the most out of our investment. I've done quite a bit of research and worked with some of my mentors in the real estate space on establishing an LLC for real estate holdings. We want to grow our own portfolio into a business and even further into a property management company (down the road).

Everyone gets into real estate by different means but one of the most popular is house hacking. We plan to purchase our first duplex and house hack until we can double up and buy another one the following year.

When is an appropriate time to establish an LLC for these real estate holdings? We will be generating income from our first property but also living in it, so I'm seeking advice from anyone with experience in creating these entities that may be able to provide some insight. Our plan was to establish it after we purchased our second property since the first one would be solely an income property.

Also, how would having two co-owners impact the taxation (ex. Mortgage interest deductions) if it wasn't a "single-member" LLC? Would this help us or hurt us as we got going trying to build our portfolio?

We want to begin taking advantage of the benefits of creating an LLC along with purchasing our first property, but I don't want to jump the gun if it did not make sense for the first property.

Any insight would be much appreciated!

-Craig

 Hi Everyone,

My roommate and I are looking into moving down to Austin, TX this coming year from Boston, MA. We are planning on purchasing a duplex down there and house hacking. We’ve been networking with local investors, lenders, realtors etc. to gain as much knowledge about the market as we can. We’ve talked to a few lending specialists to narrow down savings goals and see where we need to be financially in order to get that first property. We’re considering renting initially to get used to the market and learn the city prior to purchasing, but if we find a deal why wait???

I haven’t posted on BP about this yet but I wanted to get some perspective on the different options we’ve been presented with. 

To give you an idea of the numbers we each make between 50k-$60k/year and were looking to purchase a duplex around $300k.

One lender told us that we would each be able to qualify for an FHA Loan on our own given our current financial positions. This would allow us to purchase another duplex the second year if the other roommate applied for an FHA loan opposed to both of us applying for the first mortgage. I liked this approach personally and hadn't considered that we'd each be able to qualify on our own.

Another lender had told us that we'd only qualify for a $200k home on our own (they didn't factor in rental income) and $400k together. Again, the only problem applying together would be that we can't use the FHA on the second property.

I hear a lot about the FHA 203k loan on BP but after discussing this with one of the lenders they did not recommend it. That was our initial inclination to get into a property but now I'm second guessing it.

To get into a duplex the first year using the FHA loan as a solo applicant and the other applying the following year seems to be the best option for us at this point, but I wanted to hear from the rest of the community to get your thoughts. I also plan to document this journey from getting into our first property and beyond and sharing with the BP community.

I appreciate the feedback!

-Craig

Hi Everyone! 

My partner and I are looking for smaller portfolio's of multi-family properties to manage. We would be happy to discuss with any landlord looking to buy back some of their time. We take advantage of modern PM software to ease the experience for Landlords so they can be as hand's off as they would like while still having all the information they need. 

@Christian Nachtrieb

@Christian Nachtrieb Shoot me a message if you're interested and we can work out more of the details. 

I look forward to connecting!

@Matt Moylan Hi Matt, that sounds great. I work pretty closely with an insurance group now, but I would still be happy to connect to see how we can benefit each other down the road!

@Jonna Weber I will make sure to take advantage of as many resources on here as I can. I appreciate the response to my post!