All Forum Posts by: Shaun Carl

My partner and I just sat down with an accountant in Buffalo and were not impressed with them. We are in the process of closing on one property and will be picking up the paperwork on another in a couple days. Any help with some questions below would be greatly appreciated or even a recomendation on an accountant in the Buffalo area would be awesome.

I have heard that for an s-corp you should take a "salary" throughout the year. Is this correct or can you wait till the end of the year?

Once the year is over, is it best to leave the "profit" in the checking account or should this be paid out to my partner and I. How does this affect taxes for the company vs our personal taxes.

We are just starting and are trying to not mess anything up and screw ourselves over come the end of the year.

We use a P.O. Box. All bills and rents are sent there. It costs about $60 a year and is near my day job. I have a partner so this works extremely well incase one of us is out of town, the other can easily access.

Is that 625 per unit? What are the terms of the mortgage? We would need more info.

Making some assumptions:

That would be 1250 per month / 2, gives you 625 per month for all expenses other than mortgage. For a mortgage of 65k at 20 year term at 6% gives you a payment of around $215 a month I believe. So you would subtract 215 from 625. This gives you a cash flow of $410. 410 x 12 months equals $4920 per year.

Just Payment Insurance and Tax equaling 6000 / yr seems high. This would not account for any maintenance, vacancy or repairs.

Still could be a good deal. However, if it is $625 total rent which includes both places, then that would not be a good deal.

I just formed an S-corp. Much easier and cheaper starting costs when you have partners. I would recomend using a lawyer. My lawyer has a company that he ships the forms to and they stand in line to "push" the paperwork through, otherwise it could take weeks to get filed as it would sit on someone's desk until they got to it if it was just sent in.

Also another option than getting multiple LLC's would to just get a large umbrella policy. This would cover all assets say up to 5 properties. Then start another for the next 5 or so.

Good luck!

Using the 50% rule you are cash flowing 275+ a month per unit. Those are deals all day long.

The only problem I see is little kids can be good as far as keeping tennants in there long term, but raise your maintenance costs. Also the 3,000 in repair costs seems low, but I guess if there are tennants in there now it won't be bad. Either way, nice deal.

Something that can be a great start is getting your first property where you can live in one of the units. This is something I wish I would have done, rather than getting a separate house. You can save money, learn, and start your buy and hold strategy. And not to mention you can get a much better loan on a place that you are going to live in with something like 3.5% down. If you can find a multi with a one bedroom that you can live in (a multi with a 1 br is cheaper) then you can have a place to learn and build equity. Save the cash flow from that place with your annual income and look for another Multi unit that you can move into (usually wait 2 years between properties), and maybe upgrade to a nicer multi. Now you have two multi unit properties that should be cash flowing at least 150+ per door.

A 4 unit would give(150 x 3 (your living in one) x 12months) 5400 per year. After 2 years 10800 to go with the 20000 you can save. Then take that 30800 and go but a down payment on another 4 unit (you now have 2 years rental income) that you can put a lower down payment on while living in one of the units. Now you add up the total rent and the savings you should have after 4 years and you could have around 100K in savings. Once you get there, purchase properties with CASH (I prefer multis) that you can get for 60-70k including purchase and rehab, that have an ARV of 90-100k. The properties should also have a cash flow of $150 per door. With a Cash purchase everything is easier and cheaper. Then you refi those properties and pull out the money you put in. Do this as many times as you can until you hit your limit on the number of mortgages. Also, dont forget all the money your saving from your current job plus all the cash flow from each property you have. Add all that with the equity you have and your exceeding the 5K net easily. You have to use as much leverage as possible while being comfortable with the risk.

This is the strategy I am currently taking. You have to be pretty specific in your property search and patient.

I just started my company and will be closing on my first property. It will be a 4 unit CASH FLOWING 1100/month that I purchased including rehab for 60k.Once I finish the rehab I can refi and pull most of the 60K out of it to start again. It took a bit of looking to find and I got a bit lucky, but that is what you need to do to start out. I already found another 4 unit that the owner just wants to get rid of for under 30K. You just have to be patient and look everyday as much as possible at as much as possible.

Anyone see any benefit between an S-corp or an LLC for this deal?

We are meeting with the lawyer tomorrow to file. Do you get taxed twice in an S-corp vs an LLC? I hear a lot of people doing an LLC, but our "Mentor" says he uses an S-corp for all of his properties.

Well there are 4 separate doors 4 separate water tanks and electric meters and gas meters. Still can't believe it is happening. It definitely is the hardest part to take the first step.

Makes me want to not trust anything someone writes and look at everything first hand. Never know what mistakes people make and use them for your benefit.

He will be taking a loan out for half of everything put in from me. We are splitting the equity and profit even. He will use a portion of the monthly cash flow that he receives to pay back the loan. And if we sell. I would then get a balloon payment for the remainder. I could easily have done the deal myself but he has been doing a lot of the upfront work now. We will be forming an s-corp so he has been working on this.

I figured this takes some risk away from me as I am not the only one in on the deal, but gives me more cash flow per month. He is family so I don't mind helping him out. It gives him some experience and should teach us both a lot.

hi guys,

Its been a while because I have been working on getting my first property. I think I finally found it. Let me know what you think.

I actually found a place that looked like it needed some work on Craigslist. So my partner and I went to look at the place with another guy who will do the rehab and then most likely manage the place. He has been doing this for years and has many of his own properties. He is a family friend and soon to be family so I trust him and his opinions.

We first arrived and the outside looked in pretty good shape. But there was garbage outside. The sellers gave us the code to get in the place to look around. I believe they bought it as a foreclosure and are reselling. It was listed as a 9 bedroom 5 bath 3 unit place. It is located in south buffalo which is not the best area but not the worst.

The first unit had pretty new flooring in the kitchen and bathrooms but needed all new carpeting. Some bedrooms were small but not bad with tons of closet space. This unit also led down to the basement. Down there we found brand new hot water tanks hooked up.

Second unit was actually a 2 bedroom unit with the shower and toilet in separate spots. This one needed new carpeting also.

Third unit was also a 2 unit with one bath. Again needing new carpeting.

Lastly we found that there was a 4th unit in the back. This unit had a separate basement again with a brand new hot water tank. It is a two story with the whole upstairs as a master bedroom.

This place also had a brand new high efficiency furnace.

Now the place needed a ton of cleaning but everything major was there with many new things. Maybe someone started to fix it up then stopped. Not really sure. The selling company is out of Austin I believe. Amazing that they had it listed as a 3 unit and it ended up being a 4. What luck!

So the numbers.....

They were asking 50k

We countered and they ended up accepting 44k including all their fees to close.

I am paying cash for the whole deal (equity partner) while my partner is taking care of all the work making calls etc and running things by me. This is our first deal.

The rehab should cost 10-13k to get rent ready. Total rent for the 4 units is estimating to be about 2200/ month with a cash flow of 275/unit using 50% rule. Hopefully after the place is fixed up I will list it for 135k willing to take offers around 115k and collect rent till I decide to really get rid of it. I am also thinking of refinancing to pull back out my equity to look for another deal. Which is what I want to do full time.

I feel like this is a steal. Anyone see anything I could be missing? Or any other problems that may arise?