All Forum Posts by: Ed Matson

An LLC permits you to separate your personal assets from your real estate assets, so in the event you are sued relative to your real estate business, your personal assets should not be subject to claim. So, if you will be investing in rentals or flips, I would say yes. A business account provides no asset protection. It only keeps your business and personal finances separate which you should always do.

@Dennis Tierney - I purchased a SFH for a flip. Had it termite inspected. Inspection found evidence of old activity but no new activity and no apparent damage. During demo we found armies of very much alive and hungry termites and $17K of extra work including replacing three walls of the garage while temporarily supporting the roof which had just been redone. . Since then I do not purchase a property if there is evidence of any activity without actually removing drywall and/or sheathing to inspect sills and lower studs for damage. I do this at my expense. If I'm not permitted to do this, i walk. Seller did permit me to remove sheetrock on three family at my expense.

@Anthony Winchcombe - I think @Jason D. essentially answered you.  In my area in CT I am lucky to get rents of 1.2% of purchase price with operating expenses 45-50% of rents. 

What are the rents?  What are your goals? Are you looking for X$/door or a certain return on cash? How long is your hold period? Is this an improving area or a stable area or a declining area?  Where are you in your investing career?  I am all about cash flow and do not factor in appreciation into any calculations.  My answer may be very different than yours. 

Look in BP under Events.  There is a Central CT meetup, and others.

A couple of thoughts .  The insurance looks high.  We are paying $2750 for a triplex in a CT city.  Also, I always like to know that I could sell such a property to another investor as one exit strategy.  With gross rents of $4350 and a purchase price of $570K, would an investor be interested?  I certainly wouldn't. 

In addition to the other points, I concur with @Steve K. Everybody is a syndicator today. For example, I was speaking with a guy about 3 years ago who had a small fund of low cost SFR's in the midwest. I declined to invest because of their relative inexperience and my concerns about maintenance and CapEx costs hurting returns on $30-40K rental homes. The sponsor kept trying to tell me how my concerns were misplaced. They have now gone away from this model and are in MF. If the original model was so good, why did they pivot? Especially during good times.

@Patrick Tudor - PM was recommended by the lender originally and has worked out fairly well.

We have a 46 unit MF that is professionally managed.  We give the PM general direction and monitor their performance. We also handle the insurances.  The PM does everything else. Leasing, maintenance, etc.  I think our PM is very good, but this is not as passive as investing in a syndication.  For example, PM's can be more concerned about keeping high occupancy than keeping up with market rent increases, and you may end up charging under market rents.  So, the owner must know rents in the market and work with the PM to strike a balance between maintaining high occupancy and not leaving money on the table.  So, if you want your investment to be maximally profitable, you need to act as the asset manager, or hire one if your holdings warrant that.  Having said all that, we (two of us) probably spend a total of 2-4 hours/month on the property.

Personally I would not buy a small MF with a 5 CAP. What would your returns be at the $9200/month gross rent? Small MF's generally do not support professional management, so I imagine there will be work to do on your part. Plus potential CAP Ex. That's a lot of work and risk for a 5 CAP. Especially when there are passive options that can yield 8% taxable with no work required with a diversified base.