All Forum Posts by: Scott Long

Hey Shane, I have struggled to make the numbers work in the Rochester area as well for my first place. Looks like where you are looking is farther out than me so hopefully the numbers work better for you. Seems like rent has already been brought up but i'll give my 2 cents. Its described as fully occupied and you have the rent at $1400 so I assume that is $700 each. Looks like the rentcafe link is for downtown Rochester which might not be comparable. I would check out Craigslist and see if there are any 3 br attached houses for rent and see what those go for. If the tenants are paying $700 that maybe low but if you jump it jump to $1000 each they might move out and vacancy will go up, at least in the short term. Maybe its better to have your own tenants in there anyways though. Last thought is your closing costs maybe low depending your financing. Inspection, attorney, lender charges (origination, appraisal, title insurance, tax transfer) can add up plus escrow money paid up front for taxes and insurance (possible for a full year). Good luck let me know if you have any more questions. 

I talked to a person in the housing department last week and they said it would be on a case by case basis and would submit it to their lawyer. I didn't give the address because I didn't want to get the owner in trouble. Can someone give more details into the risks? Can they block the sale, fine me, force me to sell, force me to rent out only one side? The housing department wouldn't give me to many details. 

Thanks

@Thaddeus D. @Terri Williams 

Thanks for the quick feedback. ER was not my target area, The city of Rochester was but I liked the area and the house better than the current ones available in the City. Regarding the area the taxes seem to be the biggest hurdle but the prices are the cheapest of the suburbs. I do not own any investment properties at the moment so going through the offer process was a learning experience and I know now of a couple more things to take into account.

I put an offer in on a small 2 family residential duplex that was not accepted. However, I am still interested in the property but found out that it is Zoned to be owner occupied. The current owner bought it and lived in one side but moved out last year and is fully rented now. I am an out of state investor, but from the area, and would not be living in the property. 

My question is,if it is zoned for owner occupancy what issues might arise if I don't live in it or is there a way to get it rezoned to a non owner occupancy property?

I may not get this property but any information will be helpful in determining potential properties to go after or stay away from in the future.

Thanks

Time line update: Submitted an offer on 5/24. 

@Matt Honeyford Thanks Matt. Regarding "You are your LLC (kind of). You have access to that money as an officer of the company. You can take that money out and spend it on a sports car (company sports car of course) or you can purchase more real estate."- The thought was having access to the money I would repay my 401K loan. Which would not be company related.  Yes If I left my job I would have to repay it. I'm not to worried about that though. 

@Basit Siddiqi Thanks that information is helpful and what I was hoping for. 

I am now looking into the process of pulling the money back out which seems to be not set in stone.Everyone I talk to recommends something different.  On a $66,000 commercial loan I was told by a lender that it would be $1500 for an appraisal, $3000 for an Attorney and 1.5% of the loan in fees. The property that I questioned about is a small duplex and the loan only $66,000. Loan terms were fixed for only 5 years as well. Are these normal numbers for a commercial loan? I figured the appraisal to be around $600 and why are attorney fees so much? I have reached out to others and looking into different options. 

@Larry Turowski Thanks Is there much of a difference between setting the LLC up with only $1,000 vs the full amount say $100,000? This would bypass the loan or make it upfront.

As of now i was thinking of only pulling 60-65% out and leaving the rest in for a higher cashflow.

Thanks for the seasoning period info. I heard about that but never really looked into it.  I was thinking of doing it after 4 months but sounds like they might not let me that quickly. I'll have to call up some lenders and see what they say. I have heard that small local lenders are more flexible. Does anyone have a recommendation for a small local Rochester commercial or portfolio lender?

Wanted to update my timeline and post a couple of outstanding questions I still have. Any feedback is helpful. 

4/18/18 Talk to an Attorney-completed

4/18/18 Talk to a CPA- partially completed

4/25/18 Set up LLC- Was told to hold off until I have a property close to closing

5/2/18 Set up Bank account under LLC- decided to hold off on this as well until I have the LLC set up

5/17-5/20/18 Check out properties in person-Completed . Looked at about 7 properties and may make an offer on an off market property that I was able to see. The property is not in my target area, and is out of the city, so still doing some research. The numbers are not anything to get excited for but could give me some experience. 

6/20/18 Have an offered accepted 

7/11/18 Close on a 2 unit multifamily in Rochester 

I wrote another post looking for some answers or direction but only got 2 responses. 

Should I get a CPA who practices in both states as I live in Alexandria VA and will be investing in the Rochester NY area? Do out of state investors recommend this as well or should the CPA be located in the state I live in, Virginia or the state I am investing in, New York?

2nd question: If I close on a property under an LLC and pay all cash but then want to finance a couple months later to pull money out. Does that money have to stay in the bank account for the LLC to use or do I personally have access to that money?My situation is I am able to take a loan out of my government retirement account at a very low interest rate which goes back into my account with no penalty. This will only cover about 15% of the property but it would be ideal to pay it back after I finance the property. Then when I want to buy another house I can borrow the money from retirement account again but only after the first one is paid back. My attorney said he believed I would be able to withdraw my initial capital contributions without the tax implications but said to check with a CPA.  

Any feedback on this issue would be help as I would like to know this prior to making an offer. 

Thanks

@Doug W. @Brian Schmelzlen Thanks for the info and recommendations. I have been checking out houses this weekend so I have been slow to respond. I never really thought about a CPA in a different state but knows VA and NY laws. I looked into @Brandon Hall but it seemed that the options provided online were for investors who were more established. Please correct me if I am wrong. I talked to an attorney shortly after my first post. He said that he believed I was able to pull out money from the LCC to my personal accounts after financing with no tax implications.  He said he believed it would be reimbursing myself for capital contributions and therefore the withdraw from the LLC account would not actually be income. He did say to check with a CPA though. 

Does anyone have any information regarding withdrawing your capital contributions and the tax implications? 

Thanks

Hi BPers,

I am a Newbie and this is only my 2nd post. My first one led me to my realtor who then led me a real estate attorney and gave me some great feedback. However, I still have not found an accountant to answer some questions that will arise. I have reached out to a couple. It was recommended by the attorney to have an accountant who practices in both states as I live in Alexandria VA and will be investing in the Rochester NY area. Looking at properties very soon so trying to get my ducks in a row and team together.

My questions is this, do out of state investors recommend this as well and Should the accountant be located in the state I live in, Virginia or the state I am investing in, New York?

One accountant told me that Virginia will give me a credit for NY tax but didn’t explain any further.

I am not sure if my next question is for an accountant or an attorney (will be emailing the attorney after I post this). If I close on a property under an LLC and pay all cash but then want to finance a couple months later to pull money out. Does that money have to stay in the bank account for the LLC to use or do I personally have access to that money? My situation is I am able to take a loan out of my government retirement account at a very low interest rate which goes back into my account with no penalty. This will only cover about 15% of the property but it would be ideal to pay it back after I finance the property. Then when I want to buy another house I can borrow the money from retirement account again but only after the first one is paid back.

Thanks in advance for all your help.

My first post if you are interested or want me details or my background

https://www.biggerpockets.com/forums/55/topics/556...

@William Dalton

Thanks for the advice William.  I wish I could just dive right in like you. Unfortunately that is not how I function. I know I will not be able to learn everything there is to know prior to purchasing my first property. However, the way I function best is put as much in place as I can prior to reduce risk and stress. I don't want to be one and done. 

@Account Closed As far as my timeline goes. I did talk to an attorney on 4/20 who told me to hold off on setting up an LLC till I have an offer accepted and things look good to close. He said they only take 1-2 days to set up. I was under the impression they took weeks. So i am putting off the LLC along with a bank account (seeing how it would be under the LLCs name I assume-correct me if I am wrong).

He also suggested talking to a CPA who practices in both NY and VA. He reached out to his contacts but unfortunately none of the practice in VA. Does anyone else recommend this for out of state investors or is it just important to have a CPA who practices in the state the property is held? Does anyone have a CPA in the Rochester area they recommend even if they only practice in NY?

Going forward I would still like to talk to an CPA prior but I think I have a better grasp of the accounting side of real estate than the legal side. So I wont let it hold me back from making offers. However, because of my work and weekend commitments the next time I could make in to check out houses would be May 12th at the earliest.  If one comes available that interests me I do have a person set in place who will go with my agent to check it out if I am unable to see it.