All Forum Posts by: Everett Fujii

Not 100% sure what your distinction between the two options are.

In any LLC a member/manager can be another LLC. So theoretically you can form an LLC with your partners on a specific property and your partners can use their individual LLC's to represent themselves in that LLC.

My recommendation is to use a Series LLC. You draft a master LLC agreement and you can create sub-LLC's which can be treated as individual LLC's (different partners, equity splits, etc.). This cuts down on the cost as you don't have to continue drafting LLC's and the registration is mostly painless (still needs to be registered with your State and get an EIN).

So basically, once I have the main LLC docs created, I create sub LLC's; once a good template is done it's a pretty simple find and replace to rename the sub LLC, register with the state, get my EIN, and voila I've got a new LLC to put a property and partners into.

Short answer is you can structure it anyway you want in terms of payout, provided everything is agreed upon and signed.  

The long answer is there needs to be more information before really suggesting a good solution. 

Who is doing the work on the deal?  Who's going to deal with property management?  Who's taking on the loan guarantees? 

There's a ton more issues that aren't associated with the payouts to address (no clue if you are aware of the potential issues that need to be figured out or not).  

I've found Fixd to be extremely responsive and reasonably priced.  

I wouldn't rely on rentometer and even HUD fair market rent.

You're on the right track by comparing your units to what is available near you.  

The amount you increase the rent by is going to reply a lot on the interior condition of the units (at least in my opinion).  How much work do the interior units need to get to current fair market rent?  If it's very little then you can be very aggressive with the rent increase.  If it's a lot, then you probably want to be a little more conservative unless you have specifically planned to repair/upgrade the units (including carrying costs since that would mean less income for a bit).  

I would continue to look at your competition.  Use things like realtor.com, zillow, etc.  Not for their estimates.  But to see what's listed for rent now.  That's going to give you an idea of what type of finish out potential tenants will expect.  Remember, most tenants will visit a couple of potential units (unless it's a super hot area with insanely low vacancy) so they will be comparing your unit to what else is out there. 

I would highly recommend paying a lawyer for a few hours of their time to review the lease that was signed and your options.

Unless you have it in writing that she is abandoning the place you cannot know for sure that it is her plan.  The worse thing you can do is not go through the eviction process, clean the unit, re-rent it, then sometime between now and before her lease agreement is up she shows back up.  You are then well and truly screwed.

At the very least you need to get lawyers opinion.  It is probably advisable to go through the eviction process.  Document everything, including posting a 24 hour notice to enter the unit then documenting that everything is gone.  

Unfortunately this is the best and safest way for you to ensure that you don't open yourself up to damages for wrongful eviction. She could even have some crap laying around in the house that you dispose of and then comes back claiming you threw away her Picasso. When I did foreclosures for a REIT we threw away someones stuff after 3 months of trying to get in contact with the previous owner. Did not go through a judge or any other official channel. Person came back 3 months later saying they were out of the country. They got a check that was worth multiples more than what was thrown away.

Short answer.  No.

If the unit was there when you purchased the home it was on you, your agent, and your inspector to figure out if the unit was undersized or not. 

In general the law of caveat emptor (buyer beware) applies.  If you were given the opportunity to conduct inspections, there is no possible recourse you have here.

Even if the previous owner took out the AC and installed a new one, if you did a final walkthrough then you essentially accepted the home as it was/is.

Quit claim deed is probably the most commonly used in your situation.

I would call up a local title company and ask if there are any issues with using a quit claim deed.  Some places, title will flag it and it might cause an issue.  

Otherwise a special warranty or or warranty deed would be used.  You can google those to get a template, it's pretty simple (literally fill in the blanks).  From there it's just getting it recorded with the taxing authority. 

Very market dependent.

I see you are in Rockwall.

Refrigerators are pretty much expected in DFW.  Washer/Dryer are more of a 50/50.  But you will probably have an easier time finding a tenant if you provide them as there are more tenants who need them versus those that have them. 

@Peter K.

As has been mentioned you have the low/high cap rate and who it benefits backwards.

It's an inverse relationship.

A high cap rate is good for the buyer because they get a good return on their money.

A low cap rate is good for the seller because they get a higher sales price relative to the NOI of the property.

To use some numbers to illustrate the relationship.

Let's say a property has an NOI of $100k.

At a 10 cap, that property is worth $1M; 100k/1M= 10%

At a 5 cap, that property is worth $2M; 100k/2M= 5%

So from the buyers perspective they obviously want the higher cap rate, just as the seller wants the lower cap rate.

@Andrew Johnson

Your reasoning could be one way to look at it, but not the most common or standard method.

Cap rate is nothing more than another way to value a property.  A low cap rate doesn't necessarily mean an under performing property anymore than a high cap rate is indicative of a property with little to no upside.  

Remember, cap rate is nothing more than the cash on cash return if the property were to be purchased for all cash. 

Asset class (A, B, C, D) and, as you mentioned, location plays an enormous factor here.  

In general, the cap rate is primarily indicating the risk of the asset.  

It can also be used as a quick guideline when determining which deal to focus on.  If you get a number of deals to underwrite you would focus on those with higher cap rates (if buying) first as those are the ones that supposedly offer the best return.  Of course that's an oversimplification of what happens as there are an enormous number of factors that also go into whether a 4 cap investment is worth spending time on or not.

To put it another way, the lower the cap rate the less margin of error in both income and expenses you can absorb before the property turns negative.  So A class properties with high/stable income tenants who are theoretically less likely to default on their rental payments are considered safer.  Therefore A class properties sell for a lower cap rate.  The other side of the coin are D class properties with people to live pay check to pay check (and more often than not with government assistance) and are liable to miss their rental payments and require eviction in any given month.  That is why D class properties require a high cap rate.  They have higher risk, so the return must compensate for that risk.