All Forum Posts by: John K.

In Wisconsin it's $130 to open a LLC, so I opened mine before purchasing the first property. Capital accounts were established for partners, and we put our personal money into the LLC, and the down payment check was cut from the LLC at closing. I personally believe it's cleaner to start with the LLC and then purchase your first property AS the LLC. That way you avoid having to transfer and change stuff later. Just my opinion, probably the best thing to do would be to consult a local small business attorney.

I'm not an accountant - but this is how I would do it. As long as you used the gift cards all up and promptly, I would probably staple your gift card receipts (showing you paid $90) to all your receipts of items purchased, and then just put it all in as one general journal entry with the $90 to your capital account (or if it came our of your business out of your biz checking account), and then the items you purchase multiplied by 0.9 either to repairs OR to increase the basis of the improvements which you would then depreciate.

Hey dude! I'm in Madison - welcome! John

@Derek T. - the key is to find a computer programmer (like a college kid), and have him write some scripts to compile all the data, and then export it into a excel sheet or build a simple tool to analyze the data.

Years back I wrote a script for someone that crawled local court cases (via a RSS feed) that were people with homes that were about to be foreclosed on and put them into a excel file - instead of hours of sorting through the data after a few simple clicks what took days could be done in seconds.

I met some investors a while back that had created a LLC, and had ownership interest divided up evenly in a past partership, but they then shift around what percentages of which parties get income, depreciation, etc.

Example:

Partner 1 - 33% ownership, claims 80% depreciation, gets 20% distribution of profits

Partner 2 - 33% ownership, claims 0% depreciation, gets 50% distribution of profits

Partner 3 - 33% ownership, claims 20% depreciation, gets 30% distribution of profits

I think it's all just in the operating agreement how distributions and other things get divided up. You would probably want to consult a professional accountant / lawyer to figure out the details of executing this strategy.

@Eric Gutierrez - As long as you were using it and it was not an investment, I wouldn't see why you couldn't get a 30 year on it - as long as the price was reasonable, you could probably even approach it as a "second home" when applying.

I'm walking through a for sale by owner income property in the near future - is it appropriate to have a casual conversation with the owner about if they are firm on price or does it really need to be done with a written offer?

Personally I think you need to balance risk/reward. Leverage is Risk, so you don't want to "leverage to the hills" if you want to reduce some risk. My opinion is a good balance, so paying down properties some, but always keeping a % financed based on your situation to keep your ROI high (think rule of 72). I think having about 40% equity and 60% debt is a good target.

I'd love to hear tips and tricks of trying to be organized during the leasing process. My city requires some extra forms to be delivered regarding fire detectors, and such.

Do people put together folders for tenants? Checklists for tenants on "next steps" or "the process"? Or just staple big piles of copies of everything the tenant signs. Any pro tips for the leasing process that makes you stand out from others and make it a smoother process?

I always love when the tenants are present when you are doing the initial showing of a unit. I learn more from casually talking to the tenant for two minutes than I can learn from the real estate agent in a lot of cases. They are quick to point out any defects and sometimes you can uncover hidden reason for the seller selling the unit.

After closing, I always promptly deliver (by hand or drop in the mail so it gets there next day) all of the new information. Our latest trick is to also do refrigerator magnets with property management information - they always end up on the fridge and then the tenants don't lose the number.