All Forum Posts by: Jeff Copeland

In the scenario you described, no one is absorbing or taking over his $164k loan. It would get paid off at closing out of the seller's proceeds. Your lender would have a new mortgage in your name in place in first position for $200k. 

From your $45k down payment and the lenders $200k, the seller would walk away with $81k (before closing and settlement costs) after paying off his $164k mortgage. Plus he would be the owner of a mortgage note in second position for the seller financed portion. 

See https://www.biggerpockets.com/... for some of the possible benefits to the seller and to help explain the process to the seller and/or your agent. 

You can't file a homeowners insurance claim every time you need something repaired, for a couple of reasons:

1. Homeowner's insurance is for casualty damage caused by an accident or act of god. 

     5 year old roof damaged extensively by a tornado? Yes, insurance claim. 

     25 year old roof starting to leak? No. That's a normal wear and tear and a capital expense for you as the landlord.

2. Deductibles. You are likely to have a $2500 or $5000 deductible on any homeowners claim, meaning you pay this first, and your insurance only kicks in after you exceed your deductible. So even in the tornado damage example above, it's its a $2000 repair, you're still paying for it yourself. 

3. Claims history. If you keep filing repeated homeowner's claims, your insurance carrier will raise your rates or drop you, leaving you scrambling to find a new insurance company (often at a much higher price). And the other carriers can often find out about your claims history, making it doubly hard. 

As for home warranty policies, while you may get some conflicting advice (you'll always have the 10% of people who had a good experience and love them), the other 90%, which includes most experienced investors and property managers, generally despise home warranties. See http://www.evicttv.com/episode...

Quickbooks Online. 

You literally just described why rising mortgage rates put downward pressure on real estate prices: Consumers do not have as much buying power, so they either need to pay less for the same property, or have the seller offer concessions to buy down their rate (which is almost the same thing from the seller's perspective). 

In your case, owning and living in one side of a duplex for $200/mo out of pocket (after paying your taxes, insurance, operating expenses, and debt service) still sounds like a pretty sweet deal. How does that compare to the rent you are paying now?

I can't speak to STR insurance, but flood insurance (although there is a separate private market for it) is a federally-backed program, so the premiums are pretty standardized and carriers aren't generally going to cancel flood policies, because they don't pay out the claims. 

I personally had a flood claim in 2020 from Tropical Storm Eta, and it was an interesting (and mostly positive) experience. The insurance adjuster said "Look, I'm not here to figure out how little [big national insurance company] is willing to pay, I'm here to figure out how much FEMA will reasonably pay".

Sent you a PM. Happy to help. LMK if you have any specific questions. 

Creating an LLC actually has nothing to do with real estate. You could create an LLC to operate a food truck, sell shoes, or build websites.

The LLC becomes a separate legal entity, which can generate income and expenses, pay taxes, and own assets such as vehicles, furniture, fixtures, and equipment, or real estate.

Whether to hold real estate in your personal name versus holding it within an LLC depends on a lot of factors, such as the type of property, the type of financing used to acquire it, and your tax and liability protection strategies.

If you are planning to acquire commercial property, it often is a good idea to go ahead and get your LLC set up (because you might not have time to create a new one during due diligence on a real estate transaction). 

If you are going to acquire residential properties using conventional residential financing, you may need to acquire them in your personal name (because conventional Fannie/Freddie financing is for individuals, not for companies) and employ other liability protection strategies (such as insurance). 

These are all strategies to discuss with your CPA, attorney, and lender. 

But note they will often give you conflicting advice! For example, an attorney will often tell you to create an LLC for liability protection, but your mortgage broker will tell you that you can't buy properties in the name of your LLC if you want to lock in a 30 year fixed rate with conventional financing.

So you have to take all of their advice under consideration and figure out what works best for you.

They advise, you decide. 

To answer your original question: Yes, you can generally transfer assets into or out of your LLC at any time. Joe Smith the person would simply transfer ownership of the asset to Joe Smith Enterprises LLC. You would do this with a deed for real estate, or with the title for a vehicle, for example. 

 The seller financing itself would have zero impact on your credit score (if anything your credit would probably improve when you pay off the existing mortgage)*, and it would increase your income. 

You would be the owner of a "performing note" - a mortgage note that pays you a monthly amount in principal and interest for the next 5 or 8 years in the scenarios you outlined. 

Side note: You could actually sell the mortgage note if you needed your cash sooner. There is a market for note investing. 

*This is assuming you got a down payment large enough to pay off your existing mortgage. If you did a subject-to or a wrap, the existing mortgage would remain in your name and remain on your credit, and you'd be relying on the buyer to make the payments on time, so there is some obvious risk to your credit in that scenario. 

How much do you owe on the existing mortgage? Unless you can pay off your existing mortgage with the down payment of $37k or $45k, you can't really seller finance this deal (at least not without a much more complicated wrap or subject-to arrangement). 

Check out https://www.biggerpockets.com/... for a detailed overview of seller financing. 

Assuming you could pay off the existing mortgage and seller finance it, you would no longer be responsible for the taxes and insurance, because you would no longer own the property. 

1. Trust by verify. Ask her for documentation from her employer, doctor, etc. 

2. Start the eviction process (which usually starts with the serving of a pay or quit notice), but have the notice expire on the 18th or 19th if possible (Note that if it is a CARES Act covered property, it will still require a 30-day notice anyway, so the sooner the better). 

The point is, don't wait 18 days to see if the tenant follows through on their word, because they often don't. Start the process now, so you aren't almost three weeks behind the curve if she still hasn't paid by the 19th. 

Communication is also key. Don't just post an eviction notice and leave her confused (because then she almost certainly won't pay). Tell her "I understand these things happen, and I'm sorry to hear about your injury. I'll give you until the 18th, but I also have to serve you this pay or quit notice so if you don't pay, we have the option of moving forward with an eviction or an early termination of your lease. But as long as you do what you say you are going to do and pay on the 18th, this will all go away".