All Forum Posts by: Jim Kalish

Hi BP Family,

I'm looking for advice from the accounting community.  Here is the scenario:

My son and I are 50/50 owners in an LLC.

We own 5 residential properties with a total of 9 doors

We account for all of the income and expenses in our LLC

But, right now 4 of the properties are in my name and only 1 is actually deeded to the LLC

What is the tax impact of transferring 2 of the properties currently deeded in my name to my Son.

Also, what is the tax impact of transferring the property currently deeded in the name of the LLC to my Son.

I was thinking of using a Quitclaim deed for all of this.

The reason for moving things around is so we can get HELOCs.

We are in Charlotte, NC.

Thank you in advance for your thoughts.

@Andrew Burgess you can indeed get a HELOC on a duplex. Call PenFed, TD Bank and Harris Bank. Start with PenFed. 80% LTV on investment properties and the has to be in your name. Will not do one in an LLC. All 3 have restrictions with regards to the number of properties in your name. Good luck.

@Rob Duhon well first let's define single family and multi family so what I say next will make a little more sense. From a banking, loan, and building permitting standpoint a single dwelling with up to 4 units is single family. 5 and up is multi family. So from the standpoint of obtaining a loan it's 2 very different worlds. Single family get residential loans. The bank gets an appraisal based on comparable sales and gives you a percentage. LTV. I know you understand all this. And the loan is almost always in a personal name. 5 and up are commercial. The loan is all about income. Or more specifically DSCR. Which is debt service coverage ratio. You have to be able to show that your income is usually 1.25 times the debt. But when they figure the debt they identify a lot or expense than most of us would. So it's tougher to get the loan. And when you need to pull a permit, which we all do eventually, the commercial property needs a contractor with a higher grade of license. With all that said even though I only own properties with less than 5 units I truly believe larger is the way to to. Everything gets spread out over more doors for each property. The purchase price per door should be less. Expenses are spread out over more doors. Cap x savings and expenditures are spread out over more doors. And you should be able to handle a higher short term vacancy rate with turn overs before you have to dig into your reserves. So if you can the leap go for it b

@Thomas Hoyla I'm pretty biased since I've lived on Matthews for 20 years. Housing prices are reasonable. 2400 SQ feet 4/2-1/2 will be under 400 on a lot of areas. Commutes to uptown aren't too bad because you have several options. Coming in from the north (Concord) or west (Belmont) can be good or a nightmare. 85 and 77 can turn into a parking lot in a heart beat. Matthews uptown area is quickly becoming a great spot to eat and enjoy the nightlife. A lot of money has been spent on restraints and bars. But the other towns you mentioned are very friendly and reasonable as well.

I have to say a lot of the responses to this thread make me cringe.  First, make sure you actually read the post.  Imeh didn't say the fact a piece of vinyl was coming up was the reason for pointing out poor workmanship.  It was simply a very glaring example of poor workmanship.  The fact that she asked for it to be repaired and it wasn't even though she was told it was but instead got worse just underscores the fact that whomever did the work couldn't be trusted.  Maybe it was a good thing they failed to repair it.  Had they repaired it that red flag would never have come up.  Yes, mistakes and problems happen.  But when they do a reputable rehabber fixes them and does it right.  If they ignore it or lie about it, I would have no choice but to assume there is a lot more they did wrong.

As for buying a rehabbed house to add to your rental portfolio, what's wrong with that?  If the numbers work it doesn't matter who hired the subs or swung the hammer.  At the end of the day all that matters is the numbers work.  Buying a rehabbed house (not this one) and immediately renting it can be a good business move.

Now for those that say every developer and every landlord cuts corners, well that tells me a lot about how the person making that statement does work.  My company does NOT cut corners. We put or reputation ahead of profits.  We put the needs of our tenants ahead of making a few extra dollars.  We are not out of the ordinary.  Most of us in this business do things the right way the first time.  Unfortunately it's the few who don't that give all of us a bad name.  If you think everyone does shoddy work, or worse yet you do shoddy work and think its OK, do us all a favor and find a new career path.

@Mike Crissy first, You should look at what you plan to use it for. If you are going to use it for a down payment or purchase that you plan to flip or refi and then pay off the line to reuse, great approach if you are going to use it as a long term note, not so much of a good idea. You definitely can get a HELOC on an investment property if the deed is on your name. If it's in an LLC then you need to get a businesss line of credit secured by the property. I know it sounds the same but the requirements are very different. A BLOC is a lot tougher to get. As others said, start with PenFed. 80% LTV on any property up to 4 units. They do have restrictions. You can only own a total of 4 properties even if they are free and clear. Sounds like you should be ok with this if you just own the one. Get the line for ad much as possible. You only pay interest on what you draw, not the value of the line.

Two other lenders are TD Bank and Harris Bank.

Thank you for sharing. Unfortunately what you experienced is getting way too common. Too many people watching too many shows on flipping and thinking it's easy. The seller you ran into gives us all a bad name. And if anyone new is reading this thread and thinks it's just a little vinyl, think again. If they can't do that right you have to believe there is a lot wrong that you can't see. Very smart move walking away. 

@Donna Henry Yes, that's way too high. It should take less than 1 hour to pull the old, install the new and caulk. 1 person can do it but if it's on the second floor it helps to have 2. But if you figure 300 in material that's 700 in labor. My attorney doesn't even charge that much. Doing it yourself is a great way to save money now but when you ramp up your business you are better off having it done. Get a few quotes. And since it doesn't need a permit you don't need a GC. They get pricey too. I know. I am a GC. A solid handyman ( or handy woman) can do it just as well or even better for a lot less. Yes, everyone needs to make a living wage. So don't expect to get it done for next to nothing. But places like home Depot are meant for people with stupid money and won't put in the effort to find a good price. Folks like us are willing to put in the work. We are willing to pay a fair price but aren't willing to get ripped off. So kudos for doing it yourself! When you don't have the time reach out to your local REIA and get some recommendations.

@Rick Pozos In case you missed it, we are all here to help one another.  Not to bet anyone down.  If that's what you need to do to feel like a big shot this is not the place for you.

@Darryl Joyner Welcome! There are a couple of ways to leverage your equity. You can get a cash out refi or a HELOC. I'm assuming the property is in your name. That will matter. For a cash out refi there are several banks that will do that depending on where you live. I'm currently working on that with Loan Depot and Truist. Rate on a 30 year refi is 3.5 - 3.625. LTV on these 2 lenders in 75%. HELOCs are a lot tougher. I've found 4 that will do it. BMO Harris, PenFed, Quorum, and TD Bank. I recommend starting with PenFed. They have the highest LTV, 85%.

Now the question is which do you use, refi or HELOC. Refis have a lower rate. They are great if you plan to use the money to buy and hold. But if you are planning the BRRR route HELOCs give you ready access to short term cash. With a HELOC you can use th emoney to buy in cash or use it for a down ayment coupled with a fix private money lender or conventional lender. Thats the B - buy. Then you use the HELOC money to rehab. Rent the place. And then there is the next R. Refi. If you are all in at 75% LTV you can refi and get all of your money back. Then you pay off your HELOC and do it all over again. That's the last R. Repeat. I prefer to do HELOCs if I'm not goin got be using the money 365 days a year. If you do a refi and let it sit in your account you are paying on money you aren't using.

Oh yeah, in case you are wondering why I'm doing a cash out refi, I'm consolidating 3 notes into 1.  That will free up 2 properties so they are free and cleat along with some others and I can go after the HELOCs on those without having to dal with a first mortgage on them

Good luck