All Forum Posts by: Marc Winter

Forget about the cash up front for a second.  Your first concern was regarding discrimination.

If by 'first come, first served' you mean (and say)  "first qualified tenant ready willing and able to enter into an agreement, with all required documentation and certified funds will be first", you are in the clear, and shouldn't get any arguments from a prospective tenant.

Doesn't matter who calls first, who sees the unit first, who applies first.  Who is fully vetted, qualified as above, is first, IMHO.

We also give them a 3-day time period for signing (we do most leases by e-sign, so there really should be no reason for delay).  If it is not completed, on to the next qualified tenant (if there is a waiting list.)

A few questions: 

1) is there a clause in your lease that states the tenant has seen and inspected the unit and agrees that it is in move in condition with no maintenance items that need attention?  We always get them to sign off on this type of clause.  Do you have pre-move in photos or a video?  You absolutely should.

2) Does the lease says the tenant is responsible for any damage to the unit? DO NOT LET THEM DO REPAIRS THEMSELVES.  From experience, they will either do a bad job, or not do it at all and still deduct the work from the rent.  We have maintenance (you are your own maintenance department when you are starting out) do the repairs.  Always take before and after photos.  

3) Does your lease call for regular (or irregular) inspections with 24 hour advance notice at a reasonable time?  It should, and with tenants like these, you'd want to inspect every 3 to 4 weeks for the first few months.  Change it up--have a friend or relative do it once in a while--tenants will often say things to a third party they won't say directly to an owner.

4)  Does your lease have an escape clause letting the tenant give you 30 or 60 day notice (we use 60 days) that they want to leave?  BTW, that clause works both ways--we can give the tenant 60 days notice we want them out.  Several reasons to do this:  it sometimes avoids a tenant moving in the middle of night and you being unaware for a period of time; if the give proper notice and leave the property in good condition, they can get their deposit back, etc.  Oh, one more--they must agree to allow you to show the unit during that time (assuming the unit is 'showable'.

5)  Are you 'afraid' of the tenant?  This is a tough one, because as a first time landlord, you may not be as familiar with the workings of the l/t laws (and customs) as an experienced tenant might be.  I've found the only way to overcome fear... is to face it, and do what you fear most.  If it will make you more comfortable, take Bubba along with you.  Tell him to nod in agreement when you speak, and shake his head in disagreement when the tenant speaks, but don't let him say a word.  (This suggestion is only half in jest.)

6) Do you know your state's landlord/tenant law?  If no, study it.  If yes, read it again.  Knowledge will give you power.

Good luck!

Thanks @Levi T. and @Robert B. for the advice. 

After speaking with our attorney and cpa, here's what we decided to do: since the LLC had no real assets except for the contractual agreements with the owners of the managed property, we agreed to have the existing management agreements assigned to our company and notify the owners of the 'merger/assignments'.

Seller has agreed to consult with us for two months after transfer to help smooth any issues, plus indemnification from the seller re no outstanding or pending lawsuits, as of date of transfer, etc. 

Cleaner, faster and simpler.

OK, listen up:  SERVE THEM NOTICE! 

It has nothing to do with being hard or soft hearted.  It has nothing to do with getting them thrown out onto the street.

What it WILL accomplish is once they have something in writing, ie Notice To Pay or Quit (or whatever your official notice is in your location) they can go to any of the many, MANY great agencies that help people in this type of situation.

Once properly served, everyone will know that the clock is ticking.  That doesn't mean you MUST move to evict, but you put an end to the stories and made it a cold reality, which is necessary for the tenants AND the help organizations to take fast action to resolve, IMHO.

Other than that, if you feel so inclined, you can give them some moving money or donate to some charity that helps people in that situation--whatever you want to do. 

BUT, remember what flight attendants tell you pre-flight:  put your own oxygen mask on before trying to help others.

Best of luck.

We are considering buying out an existing LLC (it's a management company, and would add some volume to our own successful property management company). Everything looks good financially, however I've not sure what I should look for or how to protect myself from, any possible outstanding taxes or other liabilities that might be hiding out there on the subject acquisition LLC.

Anyone know of a way to check? Would we, and members, be liable, and is there any way to indemnify ourselves against such an event?

Any advice you could give would be appreciated!

Response to @Caleb Heimsoth and others that want some protection and privacy. We have been using land trusts--intervivos revocable trusts, one for each property. OF COURSE one needs insurance, but remember to NOT have all your eggs in the same LLC basket.

The way to structure: IF a suit comes up for a slip/fall on property A, and they win big, the judgment will NOT attach or affect property B through Z. If all your properties are in your own name or in one LLC or Corp, ALL assets attached to that will be affected.

Even if you are sued personally for something outside of real estate (car or boating accident) and you lose BIG beyond insurance, the real estate held in trusts cannot be attached.

Over the last 25+ years, we have been involved in 3 lawsuits.  Each one was simply 'legal blackmail', and the insurance company settled a $50,000 claim for about $2,000--nothing out of our pocket.  (That one was for a tenant spilling hot oil on her foot while deep frying chicken.  People can and do sue for ANYTHING!)

Definitely get a licensed pest control specialist out there to check for more damage and for current infestation.  Are they termites or carpenter ants?  Ask for termite cert from owner--if they can't provide one, consider having a treatment done. 

Fixing rotted floor joists is fairly straight forward, however I agree with @Ned Jackson that you want the credit and get the work done by your own contractors--get a few bids before closing. 

If the floor joists, sill plate or rim joists have been damaged and you are afraid of cracking walls, etc, you can use expanding steel lolly columns.  After wood has been sistered or replaced, install the columns on a concrete pad, then every week twist up just a bit.  Over the course of a month or two, you should be back at level, and the slow raising will keep cracks to a minimum.

Good luck.

Speak with your other neighbors around the house there, and get their impressions of that resident.  That should give you other perspective of the residents of that property.  If it's all bad news, I'd do the following:

When it happens again, go to the neighbor with Bubba.  Or make friends with a police officer and have them accompany you.  Make sure you video the encounter--probably will be an entertaining exchange.  BTW, if they are dirt bags, criminals or cookin up a new batch of chemicals, they won't ever open the door. 

Take photos of the vehicle and tags.  Keep a time log.  Tow if you must.  Install internet and exterior video cams. Purchase a Simply Safe or other type of alarm system.  (You can use it on other properties in future.)  Doesn't matter if it is even an "A" neighborhood--stuff happens!

Until this situation is resolved, don't go there without your Bubba.  Safety is number one, which is one of the reasons we NEVER allow any of our staff to show property to unknown prospects after dark.  And hey, you're in Texas, right?  Doesn't EVERYBODY there carry?  LOL.

Wishing you the best of luck! 

Did you call or did you send a questionnaire that was accompanied by a signed authorization from the prospective tenant to disclose info?  If they are totally uncooperative, which because of possible litigation is understandable, search of l/t court for your location will show if there was action(s) against them.

If the prospect is still living there, ask to do a home visit to see exactly how they live.  If they balk at that, think red flag.  @John Underwood makes a good suggestion about the car which I found works well also. 

One thing we do often, is CALL the previous or 2nd past landlord/manager.  If they balk at answering any of your screening questions, tell them, "ok, I understand you cant answer those questions...  but let me ask you this:  would you rent to them again?"

Silence, laughing, grunting or a HELL NO!  will tell you what you want to know.

I'll try, but I have some questions: who advised you to set up LLC with you as sole 'member'? (There are no 'presidents' in LLC's.) Did you discuss the function of LLC and Land Trust with your attorney? Since a single-member LLC is basically 'transparent', what would it accomplish to have an LLC as trustee? (I could understand if you wanted to make the LLC a beneficiary, however that could POSSIBLY cloud your exemption re state transfer tax and/or bank exemption via Garn St-Germain.

The title company and bank/lender will use exactly the same entity as whichever holds title either refi or purchase.

Perhaps you should consider asking your lender if they will lend to your trust.  Or find one that will.  Additionally, you could take title in your own name, and later record a trustee's deed that establishes the trust--no due on sale, and no transfer tax if done correctly. 

BTW, if you purchase in LLC and transfer to your name or to trust, (or visa-versa) you probably will face transfer taxes--check with your local and state transfer taxing authorities or your title company.

Lastly, (not being an attorney, but dealing with them in regards to real estate for over 30 years) I can tell you from my own experience, if they cannot/will not explain the pro's and con's of the entity structure you are looking for, I'd look for another attorney.  And if that is the case, I'd have attorney #2 review attorney #1 land trust docs, just to be certain.

Good luck.