All Forum Posts by: Emma S.

@Roy N. that's a really good breakdown of expenses. I would not have thought of garbage & landscaping but makes sense of course.

I was going to ask if it would make sense to offer something like $85k to compensate for the heat & water expense but on 2nd thoughts, the vacancy rate may be even higher than average if you end up with college students as tenants.

@Donna Rishel

Re: the restrictions on collecting from non-performing borrowers, does that also apply to people who are holding notes they purchased from note brokers? So if someone purchased a performing note for their own portfolio & it later becomes delinquent, can the note holder contact the homeowner directly to try and work out an agreement, modify the loan etc. to avoid a foreclosure? Or must he/she hire a servicer for any collection attempts?

@Phillip R. check out this thread:

http://www.biggerpockets.com/forums/49/topics/74608-cashing-out-401k-to-invest-in-re

Some folks on that thread talk about why they cashed out their 401k's to invest in RE. I know that's not exactly your question but their reasoning (to favor REI versus 401k) may be helpful in understanding the pros/cons of each.

@Dion DePaoli I appreciate your points & I truly want to understand when it's necessary to study something versus when it's more efficient to pay for specialty services. Perhaps you could give specific advice on this example:

Say I'm looking to buy a seasoned performing note to hold in my IRA account & I've studied and performed due diligence on the note (title, property value, equity, borrower etc.). I'm going to utilize a loan servicing company like FCI which by the way also offers specialty services including collections & foreclosure nationwide. If not their services, I would utilize a FC attorney in the event of a default. So what else do I need to research & what can I leave up to the expert in that field?

What comes to mind is that someone with a portfolio of RE properties would use a tax accountant instead of doing it himself. Yes, it's important to have a basic understanding of the law but then it's smart to know when to use an expert in the field. Is that a fair analogy or am I misguided again :)?

Another analogy comes to mind: folks who say never buy RE site unseen or pay a premium for turnkey providers & others who routinely do that and quite successfully too. You perceive one group who deliberates the risks & the other group who is not concerned about the risks. Perhaps there is another group of folks who do not discount the risks but account for it & are prepared to pay for services to mitigate those risks.

@Account Closed go to the site: http://www.pprnoteco.com/

then click on the tab "How it Works" you will see they offer both performing and non-performing notes. Then go to the tab for FAQs and the 3rd question states PPR prefers to buy 2nd mortgages. If you still have questions after reading that FAQs, I would call their 800# and ask if I were you.

@Account Closed you can find the answer to your question by visiting Dave's website.

@Nate Crump don't be discouraged AT ALL! Persevering & being resourceful are key to becoming successful in this business. Everybody started as a novice somewhere, sometime so just set your mind to learning the niche you are interested in and pursue it.

Since you are interested in Note investing (like I am), I'm sure if you've listened to Dave's podcast from a few months ago. Make sure you read the comments on the podcast page where Dave answered more detailed questions. You can also post your own question there or go to PPR website which has a wealth of info about their specific program as well.

As far as state laws, why would you need to know individual state laws unless you are originating notes in that state or brokering? If you are simply buying a note to hold it in your portfolio, my *guess* is no. If you have to foreclose, then you would utilize a foreclosure attorney in that state anyway. That's my understanding after weeks of reading up on notes but I'm just a newbie.

Sure for states that allow that but after reading Ali's article, I found out that CA requires you have an LLC in CA. Here's the comment by Jeffery Hare:

"...If you are a California resident and set up a Nevada LLC own property in Nevada, which hires a Nevada property management company, and you give directions to the management company and otherwise manage the LLC, you are considered to be "doing business" in California and mus file a California FTB Form 568.

https://www.ftb.ca.gov/forms/misc/3556.pdf

Your point about adequate insurance is well taken. Thank you.

Ali, excellent article (would not have started this thread had I read it first). The comments were also highly informative esp this one by Toby Johnston

"... I am a CPA and do a lot of work with real estate investors. The idea that you can get substantial tax savings from an LLC (again in the passive investment context) is sort of a myth that I have to educate many of my clients on. If it were the case, then the extra fees for tax filings and accountants would pay for themselves with tax savings. From a professional perspective, I love the extra fees I can charge for doing LLC tax returns but I only recommend clients use them for one or more of the following reasons:

1) multi member ownership
2) substantial personal net worth liability protection
3) valuation discounts for transferring ownership in an estate planning context
4) privacy / identity protection"

None of these apply to me except #4 but certainly NOT worth $800/yr not to mention other states fees, tax filing etc.

Thanks Ali. Along the same lines, how do you handle financial transactions with your PM's? Do you have a bank account in the states you invest in where your PM's deposit money?

p.s. property will be in Indiana.

I'm about to set up an LLC to purchase my first out of state rental property.

Then I read some forum posts saying that an LLC based in one state & operating rentals in another has to register as a foreign entity in the other state too. That means double the paperwork & license fees ???

Secondly for CA LLC's, the Articles of Organization which has a $70 filing fee (in addition to the business license fee $151) also states on the form that: "LLCs in California may have to pay a minimum $800 yearly tax to the California Franchise Tax Board" Whoa!

Can those of you in CA in similar situation share your experience? Just seems like a lot of trouble & wondering if I should just buy the property in my name & forget about the LLC for now?