All Forum Posts by: David C.

@Bill B. @E. C. "Stony" Stonebraker  @Bryan Mitchell 

I agree. Especially for newbies, this can be very misleading and can lead to them pouring money into syndicators who have far less experience when you break down what they actually have done. In fact, I was just on a business call last night with a representative of a well known REI coaching service within the multifamily and syndication arena. When I actually found out what the actual acquisitions track record of the individuals were, it was far less impressive than what I felt it was built up to be.

@AJ Anderson   P.T. Barnum made a lot of money too....

@Jason Wray Not to bicker about this, but I just don't want any readers to be misinformed. Let me preface this by the fact that I am not a lawyer, and am not offering legal advice. That being said, I would *never* (I repeat) *NEVER* recommend that a person hold an investment property in their own name, and would always opt for ownership in an LLC for liability protection. Feel free to scour the BP forums (or other sources), and you will find that this is the recommended model.

As for your points:

#1) If someone was to cause a fire(other catastrophe) at a property - Yes, they could be liable personally.  But the person would be in the same boat if they performed arson as well. Or if the owner committed violence at the property, or if the owner threw a stone through the window or (insert crazy situation that most sane owners would never encounter).

#2) As for an unlicensed/unbonded handyman - this would come back to the handyman and would stop at the LLC. But you would be a moron if you hired any professional who was not licensed and bonded, even at your own personal home. Ultimately, the LLC limits the liability to the entity itself(with the exception of extreme examples as you suggested, I suppose). It only extends to the individual if the corporate veil is pierced.

#3) Each property DOES NOT have to be under a different LLC. You can have 50 properties under the same LLC if you wanted. Is it wise? - No. The reason why is that if you had a large judgement against your LLC, the prosecution could go after the equity contained in all 50 properties. As such, most people opt to either have a few properties under an LLC and then create another, or have an umbrella policy high enough to cover the properties within that single LLC.

But this is way off topic........

Thank you @Richard Loniewski @Bryan Mitchell and @Mike D'Arrigo Your advice is very helpful. I find that the initial leap into my first SFH purchase many years ago is not nearly as unnerving as the leap of faith from SFH to the Multifamily unit arena. Though I have read many books and resources on the subject and listened to lots of podcasts, the multifamily arena seems like a "whole different animal". Does that make sense ?

@Charles Seaman  Thank you for that clarification.  I had a feeling that this was the case, but it almost seems as though it sounds much more impressive when someone says that they own X amount of units or $YYY million dollars within their holdings.  To me it would be far more accurate to tout the actual equity or say that I am "partnered in ownership of 1100 units".

@Jason Wray The purpose of an LLC is to protect the individual from a lawsuit generated by the investment property(i.e. an injury occurring at that property). Essentially, this prevents a renter from going after the owner's *personal assets* outside that contained within the LLC. So in my opinion, an LLC makes sense for any investment property, regardless of insurance. This may also answer @Chinazom E Onubogu 's question as well.

This may sound like an odd question, but so many times we hear that (insert name) has gotten up to 1100 units, or has a portfolio containing $400M in multifamily real estate.  But how many of these folks only "co-own" these properties?  

For example, Guru X states that "he/she is up to 1100 units".  Does this mean that they actually own each of these 1100 units themselves, or does this mean that they are involved in multiple deals, where the total 1100 units are actually owned across *all partners* within these deals(thus exaggerating the true ownership of the individual)?  It may seem like splitting hairs, but this certainly makes a difference to me.  Any thoughts?

@Brian G.  I'm not sure what your comment was referring to.  However, if you were stating that the stacking process has been used exclusively for multi-units, this is not true, he has used this concept in SFHs as well.  

But lets take multi-units, since you brought it up.  Do you think that going from a 2 unit to a 4 unit has the same capital requirements, challenges and risk as going from a 16 unit to a 32 unit?  The process is oversimplified in my opinion.  One should take it as a concept of growth.  Otherwise, people can easily become discouraged if they don't meet that "milestone" in 5 years.

Debt is a tool that is very useful and very powerful when used properly, but can be a very real game-ender when utilized foolishly.  One of the biggest mistakes I have seen people run into is racking up "good debt" without adequate cash reserves.  Should something adversely alter your investment property, having too much debt without reserves can knock you out of the game forever.  And that, my my friends is the "Pie in the face".

@Benjamin Magnie  Very well said, my friend.  I couldn't agree more.  

As to the OPs question, I will offer this.  Remember that all goals/plans are not always the same.  While one person may be looking at 100k properties, another may be looking at 300k properties.  It is all up to you and what your goals are.  Be bold, but don't be reckless with debt.

As a side note, while I absolutely agree with Brandon's teachings and concepts, his examples of "stacking" tend to be a bit much to swallow.  By that I mean this:  For someone to go from 1 property 16 properties in 5 years (as one stacking model suggested) is very tough.  I would think that this would require partner(s) to accomplish this unless someone began cash rich(which is not the case for the vast majority of us)  Likewise, by following this model, in year 6 you would need to acquire 16 more properties (finding and closing more than a property a month).  While I am not saying that it is impossible to accomplish this task, each person has to take these proposed "models" in perspective and to their own situation.  Pie in the sky can also lead to a Pie in the face!

@Grant Schroeder  I was curious as to where one would be able to find a 30 year fixed loan for such a property?  In my experience, all investment properties are falling under the auspices of a commercial loan, and not residential.  Please comment on this, because I would much rather have a 30 year conventional fixed loan rather than a 5-7 year fixed (20 year ammortized) with the need to reapply each term for my properties.  Thanks!