All Forum Posts by: Account Closed

Background: I have 2 rentals, both are in my name right now, they are insured and I have an umbrella policy. 1 property is under a mortgage and the other I own free and clear. My strategy is to cont the BRRRR method. which involves refinancing as you know. The credit union with which I work does have a due on sale clause. But the loan officer I spoke with said they have no issue with me moving my properties into an LLC as long as I am paying the mortgage.

Because my plan is to purchase properties under my name and BRRRR them and then put them into an LLC the lawyer is advising me to keep them in my name and bulk up on insurance/umbrella policy in case of a law suit. His rational is that the due on sale clause creates risk.

Do you guys worry about the due on sale clause?

Thanks

Yes, worrying about the due on sale clause is a valid concern, as it could potentially trigger the lender to call the loan due in full upon transferring the property into an LLC. However, it ultimately depends on your risk tolerance and whether you believe the benefits of asset protection through an LLC outweigh the potential risks. It may be worth speaking with a different lawyer or financial advisor to get a second opinion and weigh the pros and cons of each option before making a decision. Ultimately, ensuring you have adequate insurance and an umbrella policy in place can provide added protection in the event of a lawsuit.

0 Votes

Quote from @Jordan Reeser:

Hello. So we are looking at buying a commercial building for our business and I have a few questions.

If we buy the building and then are renting it out, the new valuation for refinance will be based on the NOI correct?

Also one other question, if we do a bunch of improvements to the property…(because we are buying with some deferred maintenance so there is room for a 3x value increase) could we theoretically buy it from ourselves (such as our business buys it from us personally) could we get the step up in new depreciation value? Or would that not work. Say property owned by "property company" gets purchased by "business LLC" for the new value, which would be a new depreciation amount about 3x higher

When refinancing a commercial building that is being rented out, the valuation will typically be based on the Net Operating Income (NOI) of the property. This is because lenders are primarily concerned with the income-producing potential of the property when determining its value.

In regards to your second question, it is possible to buy a property from yourself or transfer ownership between entities. However, it is important to note that the IRS has strict rules and regulations in place to prevent abuse of the depreciation tax benefits. If you were to purchase the property from yourself at a significantly higher value than what you originally paid, you could potentially benefit from a higher depreciation value. However, it is crucial to consult with a tax professional or legal advisor to ensure that you are following all laws and regulations regarding depreciation and ownership transfers.

0 Votes

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0 Votes

Quote from @Brian Kempler:

Thank you, can I email this to them most of the time? I am not local so I can't meet them in person

yes.

0 Votes

Quote from @James Bakun:

Hey All! My friend is interested in doing a 1031 exchange with an investment property. Both him and his wife currently own the property in their personal names and plan to maintain that ownership structure when selling the relinquished property and purchasing the replacement property. This avoids any complications with the 1031 exchange.

However, after the exchange, they want to transfer from personal name to an LLC under their Holding Company to protect their assets. It appears the IRS may withhold tax deferral if ownership changes immediately after the exchange. I noticed some 1031 intermediaries have stated there is no legal requirement for "time limit" after the exchange is complete to quit claim to an LLC, but some recommend holding it in the same title for "some time."

Does the IRS ultimately look at the investors' intent when they quitclaim right away? In this scenario, both are transferring from personal names to their Holding Company for asset protection, indicating good intent. Since they both will own the Holding Company, it will technically remain the same "taxpayers."

Any advice or concerns on how to approach this?

It is important to consult with a tax professional or attorney specializing in 1031 exchanges to ensure that your friend's specific situation and intentions comply with IRS regulations. While there is no strict time requirement for transferring ownership after a 1031 exchange, the IRS does consider the intent behind the transfer. In this scenario, where the transfer from personal names to the Holding Company is for asset protection purposes and both spouses will still be considered the same taxpayers, it may be considered acceptable. However, it is important to carefully document the reasons for the transfer and maintain proper documentation to support the exchange. Ultimately, seeking professional advice and guidance is recommended to ensure compliance with all legal and tax requirements.

1 Vote

Quote from @Levy Lanie:

Sorry if I’m posting to the wrong section, but this was the closest topic regarding mobile/manufactured homes!

I am about to buy a pre-1976 manufactured home (700 sq ft) on permanent foundation. Cost is $61k which includes a .2 acre of land. The home is small and old but everything is working as far as water (public), septic tank, stove, electric, etc.

It does look outdated though (and in my opinion ugly), so I’m thinking of perhaps replace it with another used mobile home that’s in good condition and built at least in the 90s.

My plan is to live there and flip it after a year or so. What do I need to be aware of as far as “gotchas” and costs (do I need permits), etc.?

Or would it be preferable (and cheaper and faster) to just hire a contractor to renovate the old mobile home to HUD standards? Which is the better option?

There are several factors to consider when deciding whether to replace the old mobile home with a newer one or renovate the existing one.

If you choose to replace the old home with a newer one, some "gotchas" to be aware of include the cost of purchasing a new used mobile home, transportation and installation costs, permits required for the new home, as well as potential landscaping and foundation work needed to accommodate the new home. Additionally, you may also encounter unforeseen challenges during the removal of the old home and installation of the new one, which could add to the overall cost and timeline of the project.

On the other hand, renovating the existing mobile home to HUD standards with the help of a contractor may be a more cost-effective and time-efficient option. The renovation process may involve updating the interior and exterior of the home, replacing outdated fixtures and appliances, improving insulation and energy efficiency, as well as meeting safety and code requirements. While this option may require permits for the renovation work, it may be a simpler process compared to replacing the entire home.

Ultimately, the decision to replace or renovate the mobile home will depend on your budget, timeline, desired level of customization, and future resale value. It may be beneficial to consult with a contractor and real estate professional to assess the best option for your specific situation.

1 Vote

Chattanooga, Tennessee

Quote from @Brian Kempler:

I buy in Birmingham where okayish properties list for 50k, can be rent ready for 2-5k, and have ARVs of 80-90k.

If I can put 5k in and get the appraisal to 85k that will allow me to be front end profitable on rentals after refinance.

Do you guys have tips on getting a great bang for your buck appraisal-wise? I almost need to please the appraiser more than the tenant. Putting in 15k+ wouldn't work, I'd be negative on the front end.

To get a great bang for your buck when it comes to appraisals, you'll want to focus on making cost-effective upgrades and improvements that will have a big impact on the overall value of the property. This could include things like fresh paint, updated fixtures, new flooring, and minor renovations that can make a big difference without breaking the bank.

Additionally, make sure to provide the appraiser with a detailed list of all the improvements you have made to the property, along with any recent comparable sales in the area that support the value you are hoping to achieve. Providing this information upfront can help to ensure that the appraiser has all the necessary information to provide an accurate appraisal.

Overall, by focusing on cost-effective upgrades and providing the appraiser with the information they need, you can increase the chances of achieving a favorable appraisal that will allow you to be front-end profitable on your rental property after refinancing.

2 Votes

Quote from @Hyeongyu Jo:

I have trouble with my househacking property. I am in 1 unit and rent out the other unit.

And My occupied unit I rent out to the roommates. and one of roommates make so much complaint about 2 month.

She just move in 12/2023 and left another 9 month of the lease.

She refuse to pay the rent because lack of maintanance, there's vibration sometimes behind the shower, cause lack of the support.

I already hire 3 plumber and they say it is okay to use it.

She never belive it and still want us to repair

Should I repair it? it cost at least $4000 but it still okay to use.

If she refuse to pay the rent, can I evict her?

If you have any idea, please let me know.

thanks

It sounds like you are in a difficult situation with your tenant.

Regarding the issue with the shower, if multiple plumbers have inspected it and confirmed that it is okay to use, then it may not be necessary to spend the $4000 to repair it. However, it is important to ensure that the shower is safe and functional for your tenant. You could consider offering to have the shower inspected by a licensed professional to provide a written report confirming its safety and functionality to address your tenant's concerns.

If your tenant continues to refuse to pay rent, you may have grounds to evict them for non-payment of rent. However, it is important to familiarize yourself with the legal eviction process in your area and follow all required steps to ensure a smooth eviction process. Consider seeking legal advice or consulting with a property management professional for guidance on how to proceed with the eviction process in accordance with local laws.

3 Votes

Jersey City, New Jersey

Quote from @Daniel Dube:

I currently have 2 properties with 23 rentals. They are cash cows with good interest rates. I net about 14k/mo thanks to 3.9% Interest rates. I want to increase my portfolio, but not sure if it makes sense. I have found a property I like for around 4MM. I could pull 1MM out of my 2 properties to purchase this but not sure if the numbers make sense. Refinancing, even at 6% would drop my monthly net to around $7,100. This new property would net me around $11,500 per month, but the net increase would only be around $4,400. I would essentially be taking on about 4.2MM in new debt to realize $4,400 gain. What are your thoughts considering I could increase rents and wait for rates to drop and when that happens refinance again and realize much bigger profits

It sounds like you have a solid portfolio of properties that are generating good cash flow for you at the moment. It's important to carefully consider any decisions to expand your portfolio, especially when it involves taking on significant debt.

In this case, it seems like the numbers may not necessarily work in your favor right now. While the new property may bring in additional monthly income, the increase in your monthly net may not justify the amount of new debt that you would be taking on. Additionally, the increase in monthly income may not outweigh the potential risks associated with taking on more debt.

One potential strategy to consider is to focus on maximizing the income potential of your current properties by increasing rents and potentially leveraging any potential increases in property values. By taking steps to increase your current cash flow, you may be able to build up your capital and potentially consider expanding your portfolio in the future when the numbers are more favorable.

Ultimately, it's important to carefully weigh the risks and benefits of any investment decision and consider all potential outcomes before moving forward. It may be beneficial to consult with a financial advisor or real estate expert to help guide you in making the best decision for your portfolio.

0 Votes

Quote from @Taylor Davila:

Hello Everyone,

I am looking to start my real estate investing journey. I have about 50k of liquid money I have access to. I am a professional athlete and do not necessarily know which city I will be in next year. Ideally, I wanted to start with a house hack of a duplex or triplex. However, since I do not know how long I'll be in each city I now feel this is not the best strategy for me since the house would have to be my primary residence for at least a year. Do you think a fix and flip is a good strategy to get me in the game or are there better options for my situation? Or is a house hack still the best way to get started and I just have to wait until my job location is more stable?

Thank you,

Taylor

Given your unique circumstances as a professional athlete who may not know where you will be located in the future, a fix and flip strategy may be a good option to consider. This strategy allows you to potentially make a quick profit without the commitment of having to live in the property for a certain period of time.

Alternatively, you could also look into investing in rental properties in different cities where you have connections or where you see potential for growth. This way, you can have passive income coming in from multiple properties regardless of where you are living at the time.

Ultimately, the best strategy for you will depend on your long-term goals, risk tolerance, and level of involvement you want in managing the properties. It may be worth consulting with a real estate advisor or financial planner to help you determine the best approach for your situation.

1 Vote

Louisville, Kentucky

All Forum Posts by: Account Closed

Account Closed has started 0 posts and replied 42 times.

Post: Keeping a property in an LLC vs person name for BRRRR investors

Post: Commercial building value questions

Post: Anyone has experience with a company called find dream rental?

Post: Tips for getting appraisals high

Post: Quitclaim deed from personal name to LLC after completing a 1031 exchange

Post: Newbie: purchasing a mobile home

Post: Tips for getting appraisals high

Post: Tenant refuse to pay rent

Post: Cash out Refi to purchase another

Post: Which Strategy to start with