All Forum Posts by: Laura Smith

@Patrick Senas The financing isn’t an issue in this case I’m putting 20% down with a conventional loan and my lender has pre-approved me without tenants. I would love to have a conversation with the seller but all communication so far has been with our real estate agents so it seems like a very combersome process. I don’t know how to start the conversation either because I’m afraid if I start asking about the current tenants then I’m opening the door for them to stay when I haven’t decided if that is what I want yet. At what point does the responsibility of getting the tenants out become my problem instead of the sellers? 

I’m currently in the process of buying a 3B1B home that has tenants. I’m curious if it is better to let the tenants stay or “start fresh” with a tenant of my screening and choosing? The house needs work in my opinion (like a new roof) but the current tenants are happy and want to stay. If I let them stay I would put off some of the work that isn’t necessary like opening up the very small kitchen, which would be cheaper up front for me but my biggest fear is inheriting a horrible tenant that either trashes the place or doesn’t pay on time. What have you done in this situation? The seller has accepted my offer and the home inspection report came back so I’m waiting to see what the sellers response to my “list of demands” is. My real estate agent hasn’t mentioned if the seller will have the tenants out by closing or not. It all seems very vague and is making me nervous. How does a transaction like this usually go down?

@Charles Jones Thank you so much for the info and the link to that article. I knew there had to be more rules and regulations than just paying for a license and saying now I have an LLC so you can't touch my personal assets.

@Matt Horwitz thank you also for your insight. It sounds like by transferring my PR to an LLC it would only increase the chances of losing my home if I were to be sued and not benefit me in anyway.

@Natalie Kolodij thank you for the accountant perspective as well. I was thinking it could be easier to write off home improvements if I rented from the LLC but it sounds like the only way to do that would be to show that I've advertised the property for rent and/or rent the property to a 3rd party. I've been concidering buying another property as owner occupy and then renting out my current PR as my 1st rental. I know that some home improvements are tax deductible even as my PR but I was under the impression that under a corporation it's a write off vs just a deduction on personal taxes. As far as which is more advantageous would depend on how financially well the LLC is doing versus my personal income, right?

@Michael P. I'm glad someone else said what I was thinking about the depreciation. If I take care of my properties and the market doesn't crash then I wouldn't expect my properties to depreciate and if they do maybe I'm not picking the right properties or the right tenants. I think that is part of why I can't wrap my brain around the whole paper losses. I'm not buying used cars, right? 

@Frank Chin thanks for all the great info and personal insite. As a pharmacist by trade I understand fully the importance of having personal liability insurance and that people can sue me personally as well as the company I work for no matter if it is a large corporation or my personal business. 

I'm more just looking for information on tax benefits and general information so that I will be able to know when is the best time to start an LLC for me if at all. I know I can ask an accountant or a lawyer some of my questions but that would only give me their opinion based on their education and experiences. I'd really like to not only find ways to learn for myself and do my own dudiligence but also get insites from people like you who have had person experience.

I don't know the difference between an LLC and an S-corp or C-corp. And I don't fully understand what you mean when you say paper loses due to depreciation. I'm obviously very green to investing and I'm really still in the investigating and educating myself period so that I can do what will work best for me and my investing goals.

My significant other is 100% for putting the real estate investments into an LLC and I am thinking that it's a little early to be thinking about that part (since I haven't even purchased my 1st rental yet) but because I don't know anything about starting or running an LLC I don't even know what questions I actually have or where to start to find information. Maybe I need a basic economics book or creating a business for dummies so I can fully understand the terminology.

Thanks again for your information. 

So I understand that having an LLC is beneficial but I have no idea where to start learning about the benefits and how it works. Any suggestions on business finance books or online classes (preferably free) so I can start to wrap my brain around how it separates my personal finances from my business. I keep reading/hearing that showing a loss is a good thing for taxes but is it really a good thing for business? For example would there be any benefit to putting my PR in my LLC and technically renting from my LLC? As I understand it I would just lose the tax write off on my personal taxes. Is that correct?

I might be visiting a friend there and so I checked out the houses for sale there on a whim and they are a quarter of the price compared to Oregon so I assume the area is unpopular like Detroit, but I thought I'd post something on here and see if anyone is actively investing in the area. Just curious really

@Nate Hammond Where in the Midwest are you buying? I've actually been looking at some properties in Grayling, Michigan. I know there are a lot better markets out there than ours. My biggest concern with out of state is being able to manage the properties. That is why I've been looking in Grayling. I've got contacts there and in the Carolinas.

@Troy H. I have also heard that it is a bad idea to rent to family and/or friends. Renting to my mother isn't necessarily my plan for making money. It's more my plan for not throwing money away. My mother is 63 years old and hasn't planned for retirement at all and she was renting a 2 bedroom in a 4 plex and the rent went from $650/month to $850 in April and then is to jump again to $925 in October just this year. If she chooses to retire now and live on social security alone her income would be less than $900/month and if she waits until she is 67 then she will get a whole $1100/month. No matter what it isn't enough to live on if the rent keeps going up. My goal with this first "rental" is to create rent control so I won't end up supplementing her rent/income in the future anymore than I have to. Plus I'd rather pay myself rent than someone else.  The act of researching and looking for properties has got me excited about investing in real estate and purchasing more rentals to rent to qualified strangers and I've even thought about starting with the strangers so I can make enough money to be able to rent to my mother at a discount, but the market in Salem, Oregon right now is a sellers market and it is really hard to find a good deal on anything, even in a higher price range.

I've been looking at some potential properties in Grayling, MI but was curious if anyone knows if there is much of a rental market in the area. Thinking of taking a trip out there but it would mean investing out of state and relying on property management. Anyone have any suggestions for realtors and/or property management companies to check out. I know Detroit gets a lot of flack but I'm hoping Graying is far enough away that it might have some potential.

@corey westermann that sound like good advise. The lender I just started talking to is the one who brought up rehab loans to me so I assumed he had experience writing them. I originally was looking for a HELOC on my current PR in order to purchase a property for cash so I could rehab it on my own and then refinance into a conventional loan get a renter and then repeat the process. Do you know is a rehab loan the better way to go? Or should I stick with my HELOC plan?