All Forum Posts by: Martin M.

@Janiece DeFreitas

An HOA attorney in your state would know for sure but this is likely more hassle for you than it's worth.

Even if the bylaws don't currently prohibit it there's nothing to stop the HOA from trying to change that. There's probably something in the bylaws (and a state statute) that spells out what the HOA would need to do to amend the bylaws to prohibit it.

If they have enough unit owners in favor of prohibiting it they can get it done. Amendments are typically... if x% of owners approve the amendment it can happen etc. Good luck with it

@Michael Oliver

A good insurance policy more important than the LLC with this being 1 property.

General rule of thumb with LLCs that works for many investors with a handful of properties.... the LLC that contains a property, typically works out best when the LLC is in the same state where the property resides.

Technically yes, you could have one of the big three be the owner of an LLC in another state... e.g. WY LLC owns a FL LLC that contains a FL property, but that may be too complicated and too many LLCs when just starting out. Insurance is the more important piece. Hope that helps

@Kevin Alvarado

Hi Kevin,

I second what Chris has said. There are hundreds of great posts on this topic in the forums and searching through them you can learn a lot.

Some investors prefer 1 LLC per property, others prefer multiple properties in 1 LLC.

You'd asked about rentals vs fix and flips. There is an important distinction between these two types of investment to be aware of... they are taxed differently.

Your tax classification of an LLC that holds a rental or rentals vs an LLC that holds a flip likely will not look the same. As such, you typically don't want rentals and flips in the same LLC. Most reputable CPAs can discuss those tax differences with you.

You get taxed harder on flips basically. So you want to structure your flip LLCs to account for that.

@Ian Kinder

Speak with a Real Estate attorney as others have pointed out.

I would not jump to using a quit claim deed to transfer the property. Quit claim deed can nullify the title insurance policy that you paid for at closing in many instances (I'm making an assumption that you paid for title insurance, if not then disregard my comment about it).

Warranty deed (most ideal) or grant deed (still good) is the way to go.

If you're going to be doing a cash out refi, in order to pull most of your money back out of the property, do this prior to transferring it into the LLC. This typically leads to more financing options being available to you.

Best of luck!

Quote from @Tyler D.:

I'm looking to pick up a lot of rental properties this decade. My strategy is going to be focused on long-term rent appreciation vs short term cash flow, so I will be buying in nicer areas with a focus on rent appreciation over the next 30 years.

I like Naperville for this reason, as it regularly tops rankings for multiple metrics, but has houses available in the 400k range.

I also like the idea of buying in Chicago. The idea of buying condos downtown seems enticing, but it looks like the HOA fees really hurt the math. MFHs seem ideal, but there are almost no good options available. SFH are an option as well.

What do you recommend as the best area/ property type to focus on?

Condos are challenging... whether or not you can rent the unit etc is controlled by the HOA. That's not to say that you can't rent out a condo. You can, but if you buy one, just go into it eyes wide open that at any point the HOA can decide that you can no longer rent it and at that point you'd likely want to exit/sell.

If buying a condo, you'd get more appreciation in the near north side and near west side 'neighborhoods' as opposed to right downtown, were condos tend to have significantly higher HOA fees.

Your largest annual expense in the Chicago metro overall, mortgage aside, is almost always going to be the property taxes. Factor that into the purchase, especially when looking for a long term purchase. You may know that already.

Naperville as an area is nice. Solid schools and because the city is so large, there's an abundance of housing stock and this seems to keep property prices in check - except for the last year of course with inventory for sale at all time lows. One neighborhood that you might look into is Lisle. Specifically, the section that is within Naperville school district boundaries. Best of luck with it

Thanks very much for responding guys. I'm going to take your advice and avoid the place. Based on what you're saying around the reverse mortgage, the balance on it could very well exceed the equity

Correction..  reverse mortgage was taken out for $180,000. Not $280,000

The facts:

I’m looking at a property in foreclosure in IL. In 2010, there was a reverse mortgage taken out on the property for $280,000. Additional details:

Page 1 of the Mortgage reads…

ADJUSTABLE RATE HOME EQUITY CONVERSION MORTGAGE

and above that there is…

FHA Case No. 145-7452891-823

I made up the case number, but you get the gist.

For example’s sake, let’s assume that there is $200,000 outstanding on the remaining balance for this reverse mortgage.

In 2012, there was a line of credit mortgage taken out on the property for $30,000. Let’s call the lender for that one Main Street bank.

Main Street Bank has foreclosed and the property is due for auction in 2 weeks. I am aware that this is junior in lien position to the reverse mortgage. For example’s sake let’s say Main Street Bank’s opening bid is $23,000.

My Questions:

1. What action would I need to take to determine if the reverse mortgage is FHA insured? Or is that assumed because there is an FHA case number listed on page 1?

2. If the winning bid at auction exceeds Main Street Bank's opening bid, let’s say for example the winning bid is $26,000, does that mean….

A)  The excess $3,000 (above what Main Street bank are owed) will go towards paying the reverse mortgage and the winning bidder will ALSO need to pay the outstanding balance of the reverse mortgage to get clear title, i.e. $197,000

OR

B) The excess $3,000 will go towards paying the reverse mortgage and the winning bidder will NOT need to pay the outstanding balance of the reverse mortgage to get clear title – and the reverse mortgage lien is simply removed/detached from the property, because it's FHA backed.

3) UNITED STATES OF AMERICA is listed as a defendant in the case. I understand that this will be listed when IRS liens are attached to the property, but do you also see this listed as a defendant when FHA backed mortgages are interested parties in a case? There are no IRS liens recorded with the county for this property.

Thanks in advance for anyone who takes the time to answer

@John Ringgold

Just to add to what Clayton's wrote, I'd say, first and foremost, analyze your competition, i.e. the quantity and quality of other storage facilities in that area. Is the area over saturated with other self storage facilities that'd be drawing away from your business, would there be enough demand for your business?

BP has had a few good podcasts on the subject, maybe listen to those. Also, there's a few short books on the subject out there, maybe google those and read before purchase. Best of luck with it

@Davin Manfredi

Hi Davin, it's good that you're thinking about an LLC... stay on that path. However, what's more important than an LLC, if you're going to be a landlord, is having a solid insurance policy. You want both... an LLC and insurance, but if you had to select just one of the two, it'd be the insurance. That's where the real protection is. Good luck!