All Forum Posts by: Joseph Leonard

@Joe R. from what I have been told, if you have a mortgage on the property from a bank they don't look to fondly on someone holding a property in an LLC and can call for the "due on sale" clause which means you would have to fully pay the mortgage at that time if they decide to do so.

This is a pretty debated topic here on BP. A lot of people say that they've never seen a bank actually use the "due on sale" clause but the question is, do you want to risk it?

Now, if you own a property free and clear, then yeah it would be a good idea to form an LLC to hold that property in if you're wanting it for asset protection reasons. From what I've been told, holding a property in an LLC doesn't really give you any special tax benefits, but rather just protection for your personal assets should you be sued by a renter.

I'm a newer investor and own two rental properties in my name. I have an umbrella policy for $1M to cover everything and I recommend you do the same. It's also a good idea to require your tenants to get renter's insurance.

Hope this info helps.

@Sunny P. - exactly. Although you may buy a property that is in good shape, eventually all things wear out. If you haven't put money aside for repairs and upgrades then it will be a painful hit to your wallet to have to pay for all of those things at once. 

If you just have a huge chunk of money sitting aside and you aren't worried about having to pay for those expenses later then maybe you could put the cash flow to use in another way. Maybe you could buy another property or use it to pay down a loan if you took one on that property. 

I'm currently in the situation I just mentioned. I just closed on a rental house and I got a 15 year mortgage on it. I have cash flow from it but I don't really need the cash flow because I have a really healthy amount of money in savings and I have a high paying job. I'm trying to decide if I want to use that cash flow to pay down the mortgage quicker and own the property free and clear or to just take the cash flow and use it toward something else. 

@Sunny P. - There is some debate on buying condos. I personally own one in California and like the idea of it for the fact that the HOA maintains the outside of the structure (roof, exterior walls, etc). To me, that helps cut down a little bit on your Capital Expenditures (although technically that is what your HOA fees go toward).

In this deal, don't forget to figure in things like vacancy, repairs and you should still sit some money aside for Capital Expenditures because you are at some point going to need to replace some big ticket items in the condo such as floors, kitchen cabinets, countertops, etc. 

Consider this rough calculation: $1,500 rent - $124 (8.3% vacancy) - $120 maintenance (8% repairs) - $135 (figuring for 9% Cap Ex money set aside) - $150 HOA = $971 before paying taxes and insurance.

@James DeRoest - I'm a newer investor wanting to make sure I have all my bases covered. Wasn't sure if this is a big liability for me or if there is anything I need to watch out for on this. 

@Wesley W. - thanks for your input. My lease (which I obtained from BP) also states no boats are to be stored on premises without written consent from the landlord. The tenant had not mentioned the boat until yesterday when I gave him the keys and he was moving in. I agree that I should probably charge something for this as you're correct owning investment properties is a business. 

@Roy N. - thanks for your reply. It is a 21 ft boat he said. 

Rent is $800 per month. Maybe I could charge him $50/month if I end up permitting it. I like your idea of him having insurance on it which was my first thought after he mentioned it. 

Honestly I don't like the idea of him parking a boat in the yard even though it is a very large backyard but I need to figure out how to best protect myself and also keep the tenant happy. 

BP community,

A tenant just moved into my second rental house today. After I gave him the keys he asked if I would mind if he stores his boat in the backyard of the house. 

He had not brought up this subject up until that point. I did not give him an answer on it. To me it sounds like a liability for me and it also is something that could damage the backyard. 

Do any landlords out there permit this for tenants and if so, what are some best practices? 

Thanks all. I'm going to analyze the market and see how much I indeed would lose if I was to sell it. If I am able to break even or even make a small profit then I'm definitely going to sell. 

@Meeta Lele - thanks for the idea. I do have enough cash to comfortably put down a 20% down payment on a smaller house so I'm not sure that I would need to pull out any equity from it. 

@Account Closed - good points. Thanks for the perspective!

@Justin Fox @Lee Smith @Account Closed - Appreciate all of your input. I was off on this quite a bit and I'm not sure why I called it $300-500 in cash flow. Here is how the numbers would work out:

$1850/month is my mortgage, insurance and taxes currently.

It could rent for $2400. Figuring 8% vacancy ($192), 6% repairs ($144) and 10% CapEx ($240) I would be losing about $25 per month.

This obviously isn't a good idea. Frustrating because as I mentioned I don't really want to sell it and lose money on selling it but again we have realized it is just too much house for 2 people.