Skip to content
×
PRO
Pro Members Get Full Access!
Get off the sidelines and take action in real estate investing with BiggerPockets Pro. Our comprehensive suite of tools and resources minimize mistakes, support informed decisions, and propel you to success.
Advanced networking features
Market and Deal Finder tools
Property analysis calculators
Landlord Command Center
$0
TODAY
$69.00/month when billed monthly.
$32.50/month when billed annually.
7 day free trial. Cancel anytime
Already a Pro Member? Sign in here
Pick markets, find deals, analyze and manage properties. Try BiggerPockets PRO.
x
All Forum Categories
All Forum Categories
Followed Discussions
Followed Categories
Followed People
Followed Locations
Market News & Data
General Info
Real Estate Strategies
Landlording & Rental Properties
Real Estate Professionals
Financial, Tax, & Legal
Real Estate Classifieds
Reviews & Feedback

All Forum Posts by: Todd Hoffman

Todd Hoffman has started 1 posts and replied 31 times.

Post: Experienced Investor Clubs/Networking In Denver?

Todd HoffmanPosted
  • Real Estate Lender
  • Littleton, CO
  • Posts 32
  • Votes 15

Does anyone know of any experienced real estate investor clubs (networking groups) in the Denver Colorado area?

I have found CAREI and IRR to great, but it seems to me most of the events are attended by people who are fairly new or are wholesalers or sponsors.

New and experienced would be fine. Thanks.

Post: How to Avoid Lending Scams

Todd HoffmanPosted
  • Real Estate Lender
  • Littleton, CO
  • Posts 32
  • Votes 15

I believe charging a small upfront fee ensures the borrower is serious, covers the real costs in case the borrower decides to go a different direction (loan from friends & family etc.). Remember Real Estate agents typically have an exclusive agreement to buy or sell and will get paid if a transaction gets done independent of who other parties involved are, while lenders only get the origination fees if the transaction is done with that lender.

As a “Colorado Hard Money“ lender for non-owner occupied investment properties, we feel it is fair to charge a small fee to cover expenses related to estimating the value of the property, estimating the repairs, inspecting the property, and credit and background checks. We use the credit check to verify certain application information, but do not look at the credit score. We do not charge any other upfront fees such as appraisal, underwriting etc.

This post is only my personal opinion. I make no claims, promises or guarantees about the accuracy, completeness, or adequacy of the information. None of the content should be considered a binding offer or agreement. Any terms or rates mentioned are subject change without notice. I am not an attorney nor am I a legal or tax professional. You should consider seeking professional legal, tax and other professional advice before acting.

Post: What start-up costs did you fail to anticipate in your business?

Todd HoffmanPosted
  • Real Estate Lender
  • Littleton, CO
  • Posts 32
  • Votes 15

Are you referring to start-up costs or operating costs? I assume you are primarily interested in real estate related businesses.

Post: Anti-Flip Clause

Todd HoffmanPosted
  • Real Estate Lender
  • Littleton, CO
  • Posts 32
  • Votes 15

You will also want to pay attention to state laws. In Colorado, a law referred to as, The Colorado Foreclosure Protection Act, essentially creates a 14 day holding/seasoning requirement for property purchased during foreclosure from the owner/grantor, before an agreement to sell the property is permitted.

This post is only my personal opinion. I make no claims, promises or guarantees about the accuracy, completeness, or adequacy of the information. None of the content should be considered a binding offer or agreement. Any terms or rates mentioned are subject change without notice. I am not an attorney or other legal or tax professional.

Post: When does forming a multimember LLC count as a security transaction

Todd HoffmanPosted
  • Real Estate Lender
  • Littleton, CO
  • Posts 32
  • Votes 15

In regards to the request for references to a few court cases involving LLC's owning property and management/operation.

Per my initial post referencing "WHEN LLC INTERESTS ARE SECURITIES" by Robert J. McGaughe, the author mentions the Investment Contract Test from SEC v. S W Howey Co(pre-dating LLCs), but apparently used with LLCs cases.

Additional cases involving LLCs can be found at this site:
http://www.lawnet.lk/docs/articles/international/HTML/BA14.html

Post: When does forming a multimember LLC count as a security transaction

Todd HoffmanPosted
  • Real Estate Lender
  • Littleton, CO
  • Posts 32
  • Votes 15

I believe Chris is generally correct, but it is a little more nuanced, in that it is my understanding that courts have found LLC's owning and operating properties to be securities. It appears that according to "WHEN LLC INTERESTS ARE SECURITIES" by Robert J. McGaughey you are probably reasonably safe if all the following are true:
(1) Member Managed LLC
(2) The Members vote you in as the Managing Member and have the power to vote you out
(3) You keep all the Members regularly updated with material financial information and risks
(4) You do not commit fraud or intentionally keep material information from the Members

You may not need all of the above to be safe.

Again I am not an attorney or legal professional and I would suggest you consult an attorney before acting.

The aforementioned is personal opinion and none of the content should be construed a binding offer or agreement. I make no claims, promises or guarantees about the accuracy, completeness, or adequacy of the information. I recommend consulting a qualified professional before acting.

Post: When does forming a multimember LLC count as a security transaction

Todd HoffmanPosted
  • Real Estate Lender
  • Littleton, CO
  • Posts 32
  • Votes 15

Excellent question and one a lot of people don't think to ask.

If you google :
"WHEN LLC INTERESTS ARE SECURITIES"

You will find a short pdf by "Robert J. McGaughe" on the subject.

There are state and federal laws to consider.

From the SEC website:


The federal securities laws define the term accredited investor in Rule 501 of Regulation D as:

a bank, insurance company, registered investment company, business development company, or small business investment company;

an employee benefit plan, within the meaning of the Employee Retirement Income Security Act, if a bank, insurance company, or registered investment adviser makes the investment decisions, or if the plan has total assets in excess of $5 million;

a charitable organization, corporation, or partnership with assets exceeding $5 million;

a director, executive officer, or general partner of the company selling the securities;

a business in which all the equity owners are accredited investors;
a natural person who has individual net worth, or joint net worth with the person’s spouse, that exceeds $1 million at the time of the purchase, excluding the value of the primary residence of such person;

a natural person with income exceeding $200,000 in each of the two most recent years or joint income with a spouse exceeding $300,000 for those years and a reasonable expectation of the same income level in the current year; or

a trust with assets in excess of $5 million, not formed to acquire the securities offered, whose purchases a sophisticated person makes.

The aforementioned is personal opinion and none of the content should be construed a binding offer or agreement. I make no claims, promises or guarantees about the accuracy, completeness, or adequacy of the information. I recommend consulting a qualified professional before acting.

Post: If you were me....

Todd HoffmanPosted
  • Real Estate Lender
  • Littleton, CO
  • Posts 32
  • Votes 15

I am not an attorney or tax professional and below only represent my personal opinion. I do recommend you talk to a legal and tax professional before acting.

Taxes (This is a Federal Designation):
Sole Proprietorships, S-Corps, Partnerships, and the default tax status of LLCs are all pass through tax entities. Meaning you do not get “Double Taxed”. “Double Taxed” usually refers to the profit/losses beign taxed once as corporate/company profit and again when distributed to the shareholders/owners/members.
C-Corps are double taxed.

Independent of the entity type, the wages you provide yourself will incur employment related taxes (FICA FUTA/SUTA). If you do not pay yourself a reasonable salary for a repeated and ongoing active investments the IRS and State Revenue Agency may come after you.

LLC's are by default treated by the IRS as pass-through partnerships (or disregarded entities if a single member/owner), which means profits and losses flow right to the owners and are added on to their income to be taxed and are not taxed first at the company level (i.e. no double taxation). You can elect to change this by filing a 8832 form. This would cause the company to pay corporate taxes on profits and then when profits are distributed to the members the members pay taxes. There are some cases where you would want to do this, but it is beyond the scope of this post.

Liability (This is primarily a state designation although it is fairly standardized across all the states):
Sole proprietorships and general partnerships are essentially a person(s) acting as a business provides no liability shield.
Any company of any form can have the veil pierced and lose the liability shield if it is not treated as a separate entity from the persons owning the owning the business. A judge may say that intermingling funds or using company accounts to pay personal expenses, or representing yourself as the business or other things may effectively pierce the veil. I have been told be careful not to pierce the veil and always have a notarize Operating Agreement that specifically stating that members cannot be required to put in more money and are not responsible for debts (although watch out for personal guarantees) or liabilities etc (many other things should be in the operating agreement beyond the scope of this post). Single Member LLC's have been in the news for failing to provide liability protection in 2 ways. (1) Someone sues you and gets ownership of the LLC or rights to distributions of the LLC; and (2) someone sues the LLC and you are liable because the veil had been pierced. Some attorneys suggest that you form an LLC with at least one other owner (member) with some material but small interest in the LLC that does not live in your house and that the distributions are at the discretion of the members. The idea being that if someone sued you personally, the judge would not give someone else your ownership with voting rights in the LLC because it would unfairly affect the other member of the LLC. Also the person suing may not want the ownership because the company may not distribute anything but the owner would be liable for taxes. Some suggest having one entity own assets (e.g. property) and have another entity be responsible for operating and maintaining the assets, so that if someone makes a mistake operating etc. there is some liability shield and the plaintiff cannot get the assets(again the idea of "piercing the veil" is important here).

If you are really concerned about liability you should use the right entity (entities), but also make sure you have the correct relatively inexpensive insurance coverages (including but not limited to structure and liability on the properties, O&E on business, personal umbrella policies)

The aforementioned is personal opinion and none of the content should be construed a binding offer or agreement. I make no claims, promises or guarantees about the accuracy, completeness, or adequacy of the information. I recommend consulting a qualified profession before acting.

Post: Do I need a license to broker private/hard money loans?

Todd HoffmanPosted
  • Real Estate Lender
  • Littleton, CO
  • Posts 32
  • Votes 15

Today at about 9:10AM M.T. the Board of Mortgage Loan Originators (under DORA of Colorado) stated that they do not intend to challenge or appeal the court ruling that stated "......Board exceeded its statutory rule-making authority and Rule 1-1-6 is invalid.". The Board then voted to repeal Rule 1-1-6.

Rule 1-1-6 essentially said that loans on all residential real estate would be regulated as a consumer "residential mortgage loan". However the statutes stated a "residential mortgage loan" is for "personal, family or household use". In essence the Rule would have prevented private lenders and even friends and family from making loans to businesses and people to invest in non-owner occupied residential real estate or at least force them to use a mortgage broker (who in all likelihood would charge fees) and require disclosures, processes and other regulatory acts that were intended for consumer loans and could complicate, increase cost and slow down the loan process.

Regards,
Todd Hoffman
Good Funds Lending, LLC
[SOLICITATION REMOVED]

This post is only my personal opinion. I make no claims, promises or guarantees about the accuracy, completeness, or adequacy of the information. None of the content should be considered a binding offer or agreement. Any terms or rates mentioned are subject change without notice.

Post: Colorado - Proposed DORA Regs on Hard Money Lending

Todd HoffmanPosted
  • Real Estate Lender
  • Littleton, CO
  • Posts 32
  • Votes 15

On December 7th, 2012 the Denver District Court ruled in case number 2011CV2811, "... the Board exceeded its statutory rule-making authority and Rule 1-1-6 is invalid."

The Board of Mortgage Loan Originators (DORA) is holding a public hearing on Feb 15, 2012 at 9AM related to this.

This post is only my personal opinion. I am not an attorney. I make no claims, promises or guarantees about the accuracy, completeness, or adequacy of the information.