All Forum Posts by: Jeff V.

Dave,

FYSA If you purchase a rental in your own name, you are already operating as a sole proprietorship. 

If you take on a partner that would be a general partnership. 

Both scenarios offer no liability protection against your personal assets.

Back to your original question. .. I believe the intent of the question is are there benefits to operating in an entity vs sole proprietorship? Correct me if I'm wrong.

Other than the liability protection you gain, it's cleaner way to do business as well a's being ready to take on partners. Also you will run into less desirable financing options with an entity.

As sole proprietor you have the ability to get better financing such as 30 yr mortgages and interest rates similar to owner occupant financing with lower down payments.

You just need to have a checking account separate from your personal account. It can be a single account for all of your rentals to use. You will need some good liability insurance because again SP doesn't offer liability protection. 

Personally I have a partner so we run in an LLC. Therefore we gain liability protection and loose the better financing options.

If I were going at this solo I would be doing as your doing and using the better financing until it ran out after 10 deals and maintain a general liability and umbrella policy. 

Cheers hope this helps.

Jeff V

Just an idea.

Have the property investment entity take out a heloc using the business building equity as collateral.  Then use the heloc as you need for investing in real estate. 

Heloc could be used for low cost fix and flip funds, down payment funds, brrrr strategy funds ect.

Hope this helps.

You could also use Haystack. Just take a pic of card and it adds card and contact info to your smart phone. You can easily share cards with friends and partners digitally.

Jeff V

Andrew,

We never used the traditional mortgages, we have always used the commercial financing. Like Joshua said, they don't have the same requirements and are easier to obtain but terms are not as good.  This is not a bad thing, being it forces you to find better deals and negotiate harder because you have to have a good deal for the cash flow to come out right.  When you get a deal that the numbers work its great because they tend to pay down much faster being terms are normally 15 - 20 yr with a 5 yr balloon.  In 5 yrs you can refinance and get about the same payment that you would have had with a 30 yr or pull out a chunk of cash to use for growth and keep payments the same.

So basically the commercial has bot some benefits and drawbacks but mainly no limit on how many so long as your DTI remains in tact.

Jeff V

Short answer is we do not use renters insurance...  the tenants do.

Investors will use landlord insurance that covers the property against hazards and liability.

Renters insurance will cover tenant's contents and is provided to the Tenant.

The reason behind this is there is a hole in landlord insurance because it does not cover the contents of the property because the landlord doesn't own the contents...  the tenant does.  So for the tenant to be covered they have to buy their own policy to cover just their personal items.

Hopefully this helps.

Jeff V

Jack,

Your well ahead of me, but when I get there I plan to keep the equity working by investing in performing notes.  Have you given any thought of entering into the note industry?

If so @Dave Van Horn may be able to help get you going in the right direction on that.

Just a thought.

Jeff V

Michael,

I would recommend forming an entity...  I wouldn't operate in a General Partnership with anyone other than my spouse.

Note you will have access to better financing in your personal names, but greater liability.  On the other hand you will have better liability protection with some sort of an entity but not as good financing options.

In regards to a partnership with a friend...  During the establishment of an entity be sure to prepare an operating agreement that defines duties, responsibilities and limitations for each partner as well as cover all of your bases for resolving disputes between partners and dissolution of the entity.

You and he/she are friends today, but what if he/she decides tomorrow that they don't like the red socks you wear and want to dissolve the company?  Reason doesn't matter, it should be defined ahead of time how the business will be evaluated and split in the event partners want to go their separate ways.  Also, in the event you or partner is hit by a truck...  Will his/her shares go to you automatically, or will you pay out his/her interests to his estate so it can be split between the heirs.  Will the primary partner have life insurance to cover the business's loss in the event death occurs ect ect...

Don't go into this lightly, be prepared and cover your bases.  Once you hash all of this out bring it to a lawyer to get his/her take on it and add in things that you didn't think of.

Play devils advocate and mitigate as much risk as you can before going in.  To put this into perspective, you are basically getting married on paper when taking on a business partner...  especially if both are active in the business.  It's that important to cover all of your bases.

Just my 2 cents. Hope this helps. (I'm not a lawyer and this isn't legal advice, just my opinion based on my experiences.)

Jeff V

David,

I don't think it matters what type of bank account you use.  When you get more people in your organization it may be easier to have a business account so that you can authorize employees for some of the banking tasks...  You'd really have to trust them through lol.

If you have an LLC or business entity then I would definitely have a business account. You don't want to mix personal and business funds. By mixing funds you open yourself to liability by someone being able to pierce the corporate veil by saying there is no difference between you and your business because they both are using the same funds.

However, if you are investing in your own name then a personal account would be best, though it should still be separate than your personal spending account.

You didn't ask, but investing in your personal name opens you up for better financing, but more risk due to personal liability, while investing in an LLC or entity has less risk but you are forced to use less attractive commercial financing.

Short answer is it depends on your entity that your investing in and one should first evaluate which entity is the best for your situation and go from there.

Hope this helps,

Jeff V

Jaime,

We use Smart Move and/or Cozy for tenant screening....  moving more towards Cozy now days for ease of rent collection, but we really like Smart Move for the screening.

Never used or heard of Houserie... Sorry.

Jeff V

Michael,

I just bought the book from https://landlordaccounting.com/ and learned how to do the bookkeeping myself and only go to the CPA at year end for depreciation schedules and tax returns.  I find that I understand what's going on with the finances better by doing it myself.

If your just looking to offload some of your workload and have no interest in learning, then by all means try upwork or task rabbit to find someone for your bookkeeping.

Hope this helps,

Jeff V