All Forum Posts by: Christopher Mendoza

While both methods limit your liability, the land trust will provide greater privacy than an LLC. For example, you have Investment Property, LLC. You can likely go to your secretary of states' website, punch in the entity name and obtain information such as the manager's names and address (which depending on your organization, it could list your name and address). The LLC, however, (regardless if it stands alone or in conjunction with the land trust) is needed for the limitation of liability.

Personally, I would keep the entity holding the assets (houses) separate from the entity doing the management. I would not have the LLC holding the assets also providing management services to third parties. If the LLC holds the assets and provides management services to third parties, you have commingled the LLCs assets (your houses and revenue from management services). A party that sues you because of poor management services will be able to access the LLC's assets (e.g., houses held by LLC).

I am a hedge fund attorney, and this is how we structure our funds: [Fund] (normally limited partnership) managed by [Management] (LLC, which is the general partner of the Fund). So, separation of assets from management is common.

Have you asked your CPA or lawyer why the alternative is not a better option? They both should be better able to provide you the benefits and drawbacks of each one, as the reason for either one depends greatly on the specific facts of your situation.

As a third possible alternative, you may want to ask about a Series LLC. That may allow greater flexibility than having to create an LLC for each individual property.

Nevertheless, it is important to talk to your CPA and attorney about the possible scenarios. They are in a much better position to provide guidance because they are familiar with your particular situation. 

It is hard to say because of the varying labor costs in each market. Have you done any previous work with any of the contractors? 

At first glance, the $495 seems cheap, and probably makes you wonder the reason for the low price; however, it could be explained for a variety of reasons: (1) it is that contractor's bread-and-butter; (2) the other two high priced contractors are swamped with work and simply won't do a job for less than x amount; (3) the low-cost contractor is in need of work and will work for a smaller profit margin. 

What does your operating agreement (or LLC agreement for Delaware LLCs) require? You will want to adhere to what the operating agreement requires. Also, technically, LLCs do not need resolutions (unlike corporations that need resolutions to memorialize certain decisions), unless required by the operating agreement; however, LLCs can draft resolutions. You can find a variety of samples online. Be sure to follow the requirements of your operating agreement. If you don't have one, be sure to have the manager or managing member sign the resolution.

Also, if someone is requesting an LLC resolution from you. Ask them what specific language you need to include in the resolution.

This may be useful: http://www.nolo.com/legal-encyclopedia/can-judgmen...

Although the insurance company appointed an attorney, the attorney has a fiduciary obligation to represent your interests. Talk to your attorney about the various scenarios, and the likelihood of those scenarios.

Have you asked your home insurance company whether it covers (some or all of the) liability for the accident? Your home insurance may cover some of the liability beyond what your auto insurance covers. 

So, under your scenario, the property is owned by you, but the property manager is a separate entity. If that is the case, the injured party will sue the property owner. In reality, the injured party will sue both the property manager and the owner. The property owner is responsible for maintaining the property. The property manager may have some responsibility for maintenance, but the onus will fall greater on the owner. Second, the property owner is the one with deeper pockets. So, in sum, a smart lawyer will sue both the property manager and property owner, but will focus on the property owner. Because of the specificity of your scenario, you should consult an attorney familiar with your jurisdiction.

(This is not legal advice)

Obviously, a very frustrating scenario. You are doing the right thing by giving the 5-day notice every time and applying the late fee. It is important because (1) it provides discipline in managing your property and (2) it helps against a defense of laches by the tenant--a difficult defense to prove, but something to be aware of. 

Nevertheless, your goal is to get paid and avoid court. So, continue with your process and continue collecting payments and late fees from the tenant. If you restructure the payment structure (e.g., weekly payment, instead of monthly) be sure to get it in writing. It may be difficult to create a new lease at this juncture, but an amendment of the current lease may be more appropriate. 

As for the lease renewal, I would want to get this tenant out at the end of the lease. If she has trouble paying you the current amount, she will likely struggle more to pay the increased rent and penalty fee. As another person commented, she probably has poor money management skills. If you want her out at the end of the lease, you can simply say that you are not renewing the lease. You may be unsure of what to do with the property--continue renting it, sell it, rehab the place, etc. If you have to evict her at that point, you probably would have had to evict her at some future point--especially after you increase the rent and late fee. 

(This is not legal advice)

You can form an LLC fairly easy. There are member-managed LLCs and manager-managed LLCs. So, you may want to figure out which one you prefer prior to filing the articles of organization with the secretary of state.

The more complex part is the operating agreement, the agreement that governs the LLC itself. Without an operating agreement, you would be subject to your state's default governing management rules. If you decide to do an operating agreement, you may want an attorney to review it for you.

Hey Everyone,

My name is Chris. As a California native (inland empire), I was hesitant about leaving the Golden State, but I am glad that my travels have brought me to Chicago. The weather may not be the best, but the people, eclectic neighborhoods, sports teams, and food are amazing.

I am a hedge fund attorney. I help with hedge fund formation, registration, and compliance issues. Having been a fan of investing, my first investment foray was into the stock market while I was in law school. After a few successful investing sprees, I decided to purchase a rental property. I quickly realized that I was working harder for each dollar investing in the stock market in comparison to real estate investing. I have the same investment philosophy: buy undervalued assets paying a dividend (cash-flow). I currently own two properties, but I am looking to purchase a few more in the inner suburbs of Chicago.

I am an avid learner. I enjoy reading finance books. My favorite business-related book of all time is "A Random Walk Down Wall Street." It just helped me realize that money is akin to a jealous mistress. If you don't treat it right and take care of it, it will leave you (inflation, foolish investments, etc.) without any warning. I am also a huge foreign film buff.

Any way, I am excited to become a participant on the forums. I am always looking to learn from others. Whether you are a novice or seasoned investor, I welcome any insight, advice, or guidance.

There are a few things to consider. What kind of partnership are you considering? There is a general partnership, where the partners are liable for the debts and actions of the partnership. A limited partnership, where the general partner (and not the limited partners) are liable for the debts and actions of the partnership. In a limited partnership, the limited partner is only liable up to his investment in the partnership.

An LLC may provide you with the flexibility and protection that you desire. In an LLC, the members (interest holders) are liable up to their investment in the LLC, unless the entity veil is pierced--which leads to personal liability. If you do an LLC, you can easily form the LLC, but the operating agreement (the document governing the actions of the LLC) may require some more work or assistance from an attorney.

You may want to consider the role you and your brother want to play once the house is owned by the entity. What actions will require the consent of both you and him, and what actions can be performed by either of you individually. These are just some things you could consider as you progress through your decision making.