All Forum Posts by: James Ohliger

I am about to purchase a short-term rental property and I'd like the property to be held within an LLC (as my other properties are). My lender tells me that since Sallie Mae guidelines allow a transfer to an LLC that is owned by me without triggering the due on sale clause, he is recommending I get a conforming loan at a lower interest rate under my name, and then use a quit claim deed to transfer into an LLC. This seems like a strategy that is used a lot by investors in these forums. However, given the high interest rate environment, my lender is also waiving future origination fees for re-financing to encourage people to get loans now and re-finance if and when rates drop in the future. In a future re-finance scenario, my property will be held within an LLC. My lender tells me that I can just quit claim deed back to my name, re-finance with a new conforming loan, and then quit claim deed again back to the LLC. He says this happens "all the time". It may be just me, but this seems a bit shady and seems to actually expose me to additional liability. For the entire time of the re-finance, the property would not be under the protection of the LLC and I would simply have to hope that I'm not exposed to litigation during that time. Ultimately, I get that people may do this to get lower rates, but it really seems messy, complicated, and risky. Is this really a strategy people would recommend to go in and out and back in to LLC ownership just to get lower interest rates?

I'm curious about people's experience with property management fees for mid-term rentals? Typical property management fees for long-term rentals are anywhere between 6-12% of rental income while fees for short-term rentals can range between 20-40% of income. Is it as simple as just finding a middle point between LTR and STR fees for an MTR? Like 10-20%? Or have people found success with other fee structures with their property management for their mid-term rentals? I'm an out-of-state investor so using property management in some fashion is a must.

I'd recommend talking to a CPA to address your situation. (*Disclaimer* I'm not a CPA. Take all of this advice with a grain of salt). From what I can tell, you opened an LLC but you're not getting any of the protection that an LLC offers since you still own the property under your name. If you don't have plans to move the property under the LLC, there wasn't really a need to create one in the first place. You should still be able to claim all the related tax deductions, but it will all have to be done under your name. And unless your partner has some official ownership of the property or you move the property to the LLC that they are a member of, they are probably going to be out of luck come tax season. But I would say the situation you're in now (you own the property but the LLC is taking income and paying expenses) is very messy and is not offering the protection you may think it is. You're going to want to move everything to the LLC or move everything back to your personal accounts.

Another thing to be aware of is that if you do a quit claim deed to your LLC, technically your lender can call the loan due, since your loan contract stipulates the property is in your name. This is a risk that anyone takes when taking out a residential loan and then quit claim deed to an LLC. Whether anything happens or not is up to each individual bank and if they find out, which they probably would if they're escrowing your property taxes for you. So just something to be aware of. Certainly a lot of people have done this. But it's cleanest/safest to have a commercial loan underwritten for the LLC specifically.

I'm looking for any tips around how investors price off-market transactions. Typically, a listing on the MLS will use comps to set an asking price and then the market will eventually settle on a final price. Given that an off-market deal never hits the market, how do you settle on a fair price? I'd assume that one of the main benefits of getting an off-market deal is that you could get it below market price, but that may be a myth? Presumably, you could negotiate a discount to market value due to the fact that the seller will save on agent commissions. On the other hand, a buyer of an off-market deal is getting exclusivity in the deal and I could see a situation where the seller would actually want to charge a premium for that exclusivity. So I was curious how people handle this process. Thanks.

I'm looking to begin real estate investing as an out of state investor.  I have family in the city where I'm looking to acquire real estate and a family member is willing to help be my "boots on the ground" support as I look to acquire deals.  He will check out places that I'm looking to buy in person, provide recommendations on potential improvements required, and coordinate inspectors, general contractors and any other person that we would need at the property.  I see him being a very active resource during the acquisition and rehab phase, and then I would transition full time management to a property management company when the place is ready to be rented.  This would not be his full time job (at least not yet as I'm just starting out).  I was curious how people compensated their team members who may have similar roles?  Perhaps just pay him by the hour for the specific time he's actively working on the property?  Paying him a percentage of rent (like a property management company) doesn't seem to make sense since he'd be involved prior to the rental portion.  If by the hour, what's a fair wage for that type of work?  I also assume I would want to pay him as an independent contractor and not an employee of my company as I assume having an employee adds a lot of extra complexity that I probably don't need starting out.  Thanks for any advice.

@Wesley Thompson - How did you find/connect with coaches in your market?

@Sam Wilson - My goals at the moment are just to take that first leap and buy my first property.  I'm considering small multi-family in the Midwest.  While I'm sure no third-party service is absolutely necessary to achieve success, I was curious what others found were useful in their journey.  For example, as I'm very much in the deal analysis phase right now, the Bigger Pockets Pro calculators have been wonderful tools.  One service that keeps popping up on my radar is Rentometer Pro.  Does this service offer something above and beyond what the Bigger Pockets Pro rental estimator does?  Additionally, as I secure my first deal and transition into landlord status, are there tools/services that people have found invaluable for managing their property/tenants/finances/legal, etc.  I agree with most folks on here that I shouldn't go out and buy a bunch of memberships before I even get my first property.  But it certainly would be informative to have a few on my radar for when I'm ready.

As I've been starting my real estate investing journey, I've been overwhelmed with the amount of tools/services/memberships offering some capability for 'x' amount of dollars.  At this point, it's hard to know what's worthwhile to pay for now, what is worthwhile to wait and pay for later as I scale, and what is probably not necessary to pay for at all.  I just signed up for the Bigger Pockets Pro membership which seemed to offer a plethora of benefits, but isn't entirely cheap either.  I'm curious what memberships/services a newbie like myself should invest in beyond a BP Pro membership as I start to look for my first deals and hopefully start operating as a landlord for the first time.  Additionally, what are some services that people have found very beneficial but are probably worth waiting for until I start scaling beyond a certain amount of properties?  And what services just aren't worth it?  It seems so many of these sites offer overlapping functionality and it's difficult to know what benefits they may offer above and beyond a different service.  A few examples that I've come across are Rentometer Pro, Neighborhood Scout, AirDNA, RentRedi, DealMachine, Rentberry Tenant Screening, etc.  Do any of you have your own package of "must-have" services?  Thanks for any advice/help!