All Forum Posts by: Ken Nyczaj

Jerry Adams If I’m reading your post right you could net $600 cash flow by renting your property out? Not only are you $600 to the good side but you don’t have the expense of a mortgage and taxes. That’s a $1900 change up. You could be saving at least $20,000 a year by having someone else pay down your debt. Remember the only good debt is debt someone else is paying.

Try a variety of tactics and keep track of your response rate for each tactic. Maybe first try yellow letters handwritten (pastel color letter to make it look like it’s from a relative, with a unique stamp= higher chance of an open), 3 to 4 weeks later try a post card, 4 weeks later try another post card and so on. I’d recommend J Scott’s book on flipping properties, it’s about a different investment technique, but it has a good chapter on Direct Mail.

@Stephanie P.

Thanks for your advice. I agree a good umbrella policy is necessary, but due to the assets my business partner and I do hold, we will be compounding that with an LLC. Due diligence on the lease and tenant screening is a top priority. We will be sure to screen our tenants with all the recommended criteria from bigger pockets. On the lease we'll have the tenants initial after every addendum.

If for some reason our LLC operating company is negligent, it should be set up to isolate itself from all other assets held by separate LLC's. Even with a search from a lawyer, if set up to have your business HQ address the same as your Resident Agent address (assuming it's not your own address), it would be difficult to determine what else the owners own. Of course there could be no co-mingling of finances as well.

Luckily, we have a lender that has no points or fees for the commercial money we're looking to borrow. Residential money vs commercial money has a 1.5% spread, significant but not detrimental.

I may be overanalyzing, but I'd rather have it set up right in the beginning than trying to sort it all out after we're a few properties in.

@Joe Splitrock

Joe you're absolutely correct about being a proactive and responsible landlord. If you are sued, and in the courts eyes it looks like you were doing everything you could to provide a safe and respectable residence for your tenants the results are more likely to be auspicious to the landlord.

Making a note to document times of all service calls and repair times.

Appreciate your time. Thank you

@Tom Gimer

Could you elaborate, if we have a Delaware LLC mustn't we have a Delaware Resident Agent? From what I've heard from a lawyer is you can have a Delaware series LLC register as a foreign entity (out-of-state) and buy property in Maryland. He didn't mention anything about it should be registered with MD SDAT, and the implications of not doing so could lead to Maryland withholding tax. From what I know about MD withholding tax:

Withholding tax is not an additional tax, but merely a collection device. Its purpose is to collect tax at the source, as the wages are earned, instead of collecting the tax a year after the wages were earned.

I was told by a lawyer as of now: Maryland (up to now) has looked askance at series LLCs.

Thanks for your comments.

@Scott L. I agree completely. We will be buying all properties under an LLC, fortunately we have a local portfolio lender with rates around 5.5% that's 5 year fixed with a 25 year amortization for commercial loans.

Maryland law does not allow for a series LLC, to my knowledge. Maybe an investor in Baltimore or Annapolis could confirm that. I'm sure our real-estate lawyer will know when we meet with him later this week.

That being said, we could create multiple LLC's, one to manage all the properties we plan to acquire (the lease will be between this entity and the tenant), and then use a separate LLC to hold each property. Which will be expensive to file and can get convoluted quickly. What we may do is talk to our lawyer about forming a Delaware series LLC and have our Registered Agent in Delaware but purchase properties in Maryland.

@Jeffrey Holst That's why I was thinking to have a separate LLC for all management operations so we aren't negligent personally. And, then hold all the other real property in separate LLC's.

@Will G. That's a good point to bring up, that the owners of the LLC are still on the hook for the loan even if the LLC's property is lost in a court case. But, that specific loan is all they are on the hook for, and personal assets haven't been targeted. Our real estate lawyer will be defending any suit against our operational LLC that is strictly doing self-managing of properties. In my opinion that is most likely the LLC that could be sued since it is actively managing. While the actual property is just held in another LLC.

@Tone Church That's a fantastic idea to have tenants responsible for snow removal and salting and have it written in the lease with the tenants initials next to it. You could have an addendum that tenant assumes responsibility for routine maintenance that would cover additional items like landscaping, smoke detectors, air filters etc. Renters Insurance is a must as well

@Ryan C. Like you said, finding good tenants and take care of your properties is a priority.

@Scott L. "Even if you self manage, there is significant liability that attaches to the OWNERSHIP, not the management of the property." Could you elaborate on this? We are thinking to have a separate LLC to do all the managing if necessary. I've heard Texas is a Land-Lord friendly state while Maryland may give the upper-hand to Tenants.

@Will G. Agreed an umbrella policy in addition is necessary. We will be sure to have a lawyer review our operating agreement, which is not required in Maryland but recommended to show an LLCs merit. Also, will have a separate bank account and a Registered Agent through either our lawyer or another online registered agent service or perhaps our CPA.

From what I've read on prior posts it seems many have the opinion of by self-managing your rental properties, you will not gain any liability protection by owning the asset and performing the property management under an LLC. For example say in the case of "we" the self-managers forgot to de-ice and the tenant slips and falls, we are now liable because we self-manage therefore nullifying the corporate veil.

I'll be partnering with a local friend/ contractor in Maryland, and we plan on doing all the rehab plus self managing at least for the first few properties. We want the LLC for protection for our personal assets (primary residence, investments, cash)

He is a licensed/ bonded/ insured contractor. I'm thinking we could set up a series LLC and have one manage the properties while the other LLC's hold the real estate.

We are meeting with a Real-Estate Attorney this Friday and I'd like to be prepared as possible.

I'd like to hear if anyone else has opinions on this. Thank you.

If you do go the LLC route. Look for a local portfolio lender that will loan to an LLC. In my area we found two local banks, 4-20 locations that will lend to LLC’s on a commercial conventional financing plan of rates around 5.5% amortized from 20-25 years. Other banks we scouted like the national chains, wanted nothing to do with lending to local real estate investors. Hope this helps, good luck.