All Forum Posts by: Liam Goble

@Arthur Banks I talked with my attorney regarding each property in a separate LLC, and he said that was overkill. He suggested up to about 10 properties per LLC.

Sometimes money needs to be seasoned, meaning it's been sitting in you bank account for a specified period of time. With the new lending rules, banks have been even more aggressive when asking for additional paperwork to support large deposits. I have a friend who was applying for a mortgage and the bank requested documentation to prove where the large deposit made in August 2013 was from (bonus at work). Banks used to only look at 60 days.

So far, my bank doesn't have any limits on the money that I personally invest in my company. I generally take out a personal loan from my friends, not collateralized by any of my properties, and then I invest 'my' cash into my business.

To date, I've been able to deposit the cash into my business account and use it the next day.

@Amy Meza I have a very similar goal that I want to accomplish, shooting for $40-$50k/year pre-tax within 5 years. It's a very aggressive goal, but I think it's doable. I used to be a 'find the deals in my local market' guy, but recently, the price increases in my local market have destroyed any deals to be had. I'm now looking out of market at some turnkey providers.

I am a contractor, so I have the ability to purchase run down properties, fix them and rent them, so the cash per door number can be way up. I have a duplex right now, that after account for vacancy and repair reserves (I manage myself), I cash flow about $200/door. I bought that property last year and haven't seen another one come on the market that comes even close to that deal in the 365 days since.

Some of the turnkey providers I've been researching have some properties which appear to cash flow up to about $150/door, depending on location, down payment, etc. I need to still verify some additional information, but it looks like I will be picking up a few out-of-market properties.

In addition, if you have $100,000 and a relatively stable job with good income, I would very seriously consider leveraging that money to purchase multiple homes. If you run the numbers, you'll see that your additional cash earned per month by an all cash purchase will not even come close to make up for the total cash out lay you made to purchase the house.

Personally, I agree with the whole discussion here. I invest in my SIMPLE IRA to meet my company match, which is then a 100% return on my money and any increase in stock value is over and above the 100%.

I then invest $100/month into a stock fund for my daughter (div. paying stock). I'm considering that if/when I increase that amount, to switch her investments into real estate.

Lastly, I invest another ~$150/month into the stock market via a DRIP account. This amount basically keeps me honest and out of Starbucks, otherwise I'd spend the $150 there every month (I know, I'm an addict).

Most of my monthly free cash flow budget ~$700/month is invested into my RE activities. I have an aggressive financial independence goal, so I'm maximizing my REI right now.

@Arthur Banks The way I've worked it with investors in the past is to get a personal loan from the investors (most recently 5% for 10 years). Then, I simply used the money as the down payment for a rental property because I knew the rental property would 1) pay the mortgage and 2) pay my friends back and 3) leave a little cash for me.

I own all of my rental properties in an LLC, so would set up a personal loan between my friends and I and then make an 'ownership investment' into the company. I also never gave my investors a lien on the house. I would always use some other form of collateral, or try to work for a no collateral loan.

With my parents, I offered to take out a loan at 4% for 10 years, which may even be below the current IRS standards, and my parents thought it was too stiff. We're now talking about forming an LLC together, they put up the cash and I manage.

@Steven Devoe In my experience, yes, your financing options would then be limited to commercial lending. For me, this lending is generally 5/5/5 ARMs amortized over 10, 15 or 20 years.

For the commercial lending, there is generally no foreclosure process, the bank has all the paperwork to simply take the property. You also assign the rent to the bank in the case of a default.

@Duncan Taylor I wasn't planning to move the properties out of the LLC, but I was considering future purchases.

Thanks for your insight.

@Duncan Taylor , when you suggest purchasing liability insurance, is that in addition to the policy on the rental property itself? Can you provide some more information about the insurance?

For myself and my wife, I found there is a mental shift that occurs when we have a 'company', which is beneficial to our portfolio.

I assume that when you operate outside of an LLC, you have separate bank accounts, policies, work areas in your home, etc?

Thanks.

Liam

I purchased my first SFH in an LLC. My partner in the LLC is my wife and we both have a 50/50 split of the company. We did this so that if there is an accident or something happens at our rental, our liability is limited.

By running your properties in an LLC and as a company, you will treat the money more as a business and less like a personal piggy bank.

My wife and I used to run a small farm business (VERY small business) and figured it wasn't important to have a separate corporate structure. Needless to say, after about 2 years, the business had to fold up because we just didn't have the records to support the viability of the company. I loved the business, and may reopen it in the future, but for now, it remains closed as we work on our REI business.

You can probably file all of the LLC paperwork yourself and save money. My first LLC was filed through my attorney who charged a 'reasonable' $1,550 to do so. That included the fictitious name registration, etc, but all in all, I think I could have saved some significant cash by doing the filing myself and maybe paid my attorney to review the paperwork.

Also, it goes without saying...separate bank accounts for your business. DO NOT use personal accounts.

@Arthur Banks Thanks for the follow up. I've partnered with friends in the past, and they are really on the whole interest thing (laughing). My parents are in a similar place as yours are. I offered terms that are quite reasonable for me as an investor to my parents (4% for 10 years) and they thought that as too stiff.

I'm thinking I'm going to start an LLC with my parents. They provide the capital and I provide the management and deal location, we split profits/tax benefits 50/50. What do you think of that?

@Mamie Phillips I live in Pennsylvania and started investing in 2012. Not quite as successful as @Bobby Beard but I have three properties for five total units and have signed papers on my 6th. My greatest performing properties are my duplexes (if I had a 3 or 4 unit, that would probably be my best). The duplexes cost a little more than my SFH, but the cash flow is about 2x the SFH.

Bobby, you ever consider opening a turnkey company? Do you do most of the work yourself or sub out?

Lastly, Mamie, when I purchased my first SFH, I picked up the keys and thought I was going to vomit. Didn't know what I had done. It gets a LOT better.