All Forum Posts by: Michael Johnson

I am also from Morris County and, although tomorrow night does not work for me on such short notice, I am definitely interested in attending a REI meet-up.

@Amy Martin Truthfully, I don't see any reason to get involved in any kind of argument over something as small as this - especially at the beginning of the relationship.  What I do see, however, is a poor attempt by your tenant to protect their security deposit that you will very easily be able to navigate around should there actually be some damage to the walls at the end of the lease.  Again, absent the details of your tenant's personality, I don't see this as an attempt by your tenant to "pull the wool over your eyes" or take advantage of you but rather them keeping a mindful eye on their security deposit.  Don't sweat the minutia and pick your winning battles; I don't see the beginning of a lease as a strategic time to get into an argument over something so small, especially when it's an easy win for you down the road should it re-present itself.

I wouldn't be too concerned given the generality of their statements.  You have the video footage form day 1 indicating that there weren't any significant mark ups, dents, etc. in the walls.  This is also time stamped.  You have their security deposit; when they leave, use that security deposit to fix up the "lots of" marks, dents, holes, etc. that they are attempting to protect themselves from having to fix (assuming no other damages).  If they believe this to be unfair 12 months from now, let them sue you.  They won't win for a number of reasons, but here are the two main ones:

1) "Lots of" is a non descriptive phrase that virtually means nothing.  They should have taken digital pictures of their own documenting each of these blemishes to protect themselves.  The fact that they won't be able to provide them (and if they do provide pictures you have your time-stamped footage validating how it actually looked during the walk-through) will be enough to sway the judge to see the merit of your defense.  Remember, in the US the burden of proof is on the plaintiff!

2) The time/costs of suing you for the damages of fixing up these holes, dents, etc. is immaterial and would be inadvisable for them to pursue.  Simply, the cost/benefit isn't there for them.

I wouldn't address this as a concern right now because it will damage your immediate relationship with the tenant and remember that you still have to deal with them for the duration of the lease! You've protected yourself with the video footage; I don't see any reason to instigate a fight here when there is no merit to their claims to begin with and you have time-stamped evidence to prove that.  This is a fight you can win at the end of the lease AFTER you've collected your rent.  Right now, it's a losing fight that only creates problems and a strained relationship, but based on how your tenant is acting, I suspect this isn't the last problem you're going to have with them.

While I don't speak from personal experience here, my father has dealt with tenants like this in the past and this is how he has successfully handled it.

@Steve Vaughan do you hold each property within its own, individual LLC? Or do you hold them all within one? I'm worried that by holding them all within one, one might be leaving the backdoor open whereby a litigating tenant with a big enough claim in one particular unit can go after not just the asset they are/were living in but the other assets in the portfolio as well.

@Jeremy Hunter , thanks for your thoughts and insight! I haven't actually sat down with an attorney yet to discuss anything, but I am trying to see what others have had success with.  My partner is also relatively new to real estate, but between the two of us we have enough capital and reserve to acquire a property of modest size (it ain't cheap in New Jersey!). 

Hi Sydni,

Although also new to real estate, I think that I may be able to help you here.  I personally believe that this would be a great conversation starter and that it is in your best interests to use it to differentiate yourself.  You would know better than anyone: how many other NFL cheerleaders make a career change of this magnitude or are interested in having a professional life after cheerleading?  I don't know much about it, but I would venture to say that you are in the minority! Congrats and good for you!  I believe that networking in this field is no different than the networking I do within the New York City & Philadelphia finance community.  It is a part of your story and, when framed properly, it will differentiate you and make you stand out to people.  By being unique you make yourself more memorable and, truthfully, being memorable is half of the networking battle!  

Best of luck,

Mike 

Good Afternoon everyone,

I am a fledgling real estate investor and am interested in hearing the general community's experience/recommendation operating as an LLC, S Corp, or C Corp. Having some background in finance, accounting, tax, and business law, I am aware of the textbook advantages and disadvantages that each offers and their subsequent financial statement impact, but as far as actual operating ease and efficiency what is the recommended entity for holding these real estate assets?

My initial thought process in creating a business entity that exposes me to the least amount of risk would be to structure a  limited partnership with three parties: my partner and I are personally listed as limited partners (each with 49% ownership of the LP) and an LLC (where my partner and I together are the majority interest) listed as the GP with 2% ownership.  In this way, my partner and I will each receive 49% of the operating income through the pass-through entity (with income, capital gains, etc. individually being managed and optimized through individual tax planning) and the LLC will further offer us indirect control while still limiting our personal liability exposure as it's an LLC.  In the event of lawsuit, the plaintiff/tenant would only be able to sue the LLC, which holds a mere 2% of the partnership assets.  So long as the partnership capital accounts are properly monitored and the bylaws of the LLC are strictly adhered to, I don't see how this could be penetrated.  Any thoughts here? Am I overlooking something?

Thanks,

Mike     

I would be hesitant to share costs on any capital improvement to the home.  Let's not forget the obvious tax advantages for making capital improvements.  If treated as a capital improvement, you will receive the benefit of the depreciation expense over the improvement's useful life.  If treated as a one-time repair expense, then it is a business expense (albeit a relatively good one as it adds value) to which you can apply right to your bottom line for lower end-of-year tax treatment.  If you share the costs with your tenant, you are shorting yourself on the tax benefit!  If you want to ignore the obvious risks associated with sharing the costs that the other posters have noted (entitlement, shoddy worksmanship, etc), I think that the tax advantages are enough reason to make the improvement on your own.  No matter which route you take, I think it is only reasonable that the monthly rent be increased marginally as this is not a necessary repair/improvement.