All Forum Posts by: Ned Carey

@David H. it depends apon what the exact agreements are between you and your father. Generally anything that goes into the cost of renovationg the property pre-lease up goes to the basis and is not deductible. 

Are you going to own part of the property due to the money your LLC is putting in? Will your father be paying you back for the money you put up? In the first case the money woud go into your LLCs basis in the property in the second case it is principal of a loan and not deductible in any way. You need to be talking to a good accountant and probaby also a good attorney about this. The details matter. I have only used a couple of examples, ther may be many other ways to structure this with different tax consequences.

@Sean Gallagher I don't knokw exactly what you want to do but microsoft Excel other spreadsheet could easily handle this. 

But to what end? Your time is better spent doing a deal than it is figuring how much money you might make if you did deals. I know it can be fun to conceptualize how much you can make but it is the doing that actually make sthe money. 

@Renee Jones generally you can not record your deed until the taxes are paid. Perhaps the county/city would allow you to take over the tax payments but that is up them. No one here can tell you how they might decide. If they do let you take over they payent they still might want the taxes to be paid before your deed is recorded. 

If you are willing to take the risk my guess is they don't care who pays the taxes as long as they get paid. Perhaps you can just continue the payments until caught up and then record your deed. I would want to see the specific written agreement on the taxes before I cosidered such a thing. Also I would run it by an attorney 

The big question is are you in a place to refinance the mortgage or pay the taxes if something goes wrong? Is this even a deal, or are you just intersted because it looks like you can do it with no money down?

@Steve Cho the offering documents are what counts. If the offernig doc say they are not secured, then they are not secured. 

As far as the dates are concerned that is when the opportunity to invest stops. That does not mean they will stop paying for people already invested in December. 

Someone advertising on Bigger Pockets or being on their podcast is NOT in any way an endorsement by Bigger Pockets. 

In other words Ditto what @Jay Hinrichs said

@Amandeep Singh relative to other areas Baltimore is still less expensive and the rents are still higher relative to the cost to purchase. However prices have gone way up due to the strong market. There is a lot of competition driving prices up. 

You can still find good cashflowing deals in Baltimore but nowhere near what your father did. Most of my portfolio is section 8. It is more hassle and you have to screen your tenenats well. It will take twice as long to rent your property due to the section 8 bueracracy but our tenants have stayed longer. Baltimore has a lot of rough neighborhoods and it can sometimes change block by block. You need to actually go there to learn where to invests\ and where not to. 

Good luck

@Jonathan Bui I am not excited about them. I see no need for an LLC fo every property. Since they are new, case law has yet to determine how they will be handled. If they aren't run as seaparete companies with all formalities then I can see them being pierced. The only benefit I see is a smal cost savings from one state fee instead of a fee for each LLC. Series LLC created in one state that allows them may not be usefull in another state where the properties are owned.

If you run them separately you still have the complexity, a large number of bank accounts, accountiing costs and the rest. If each LLC has it's own bank account then you have many separate piles of cash. You may need to transfer money from one to another. While this can be done legally, the accounting and documenting of these transfers can take a lot of time and or expense.

Go back and read @Nathan Gesner post.

An LLC is your LAST resort to asset protection. FIrst is comply with the law, next treat people with respoect and act responsibllly when things go wrong, Third is insurance. The LLC is your last resort for protection.

@Jonathan Bui I went with an LLC from the begining. The reason is I assumed I would grow to a size where it would benefit me. I am in Baltimore and lead paint lawsuits are a big issue. One probem with transfering a property to an LLC is the liabilty of anythig that happens before the transfer, you are still personally responsible for.

I now have close to 20 LLCs It is a nightmare, expensive, complex, and an accounting disaster. there is a lot to be said for keeping it simple. 

Another factor is will you be a sole member of the LLC? I believe in some states a singe meber LLC amy not protect you at all. (FL is where I think I read about it here on BP).

An LLC is never perrfect protection. You are always responsible for your own actions. If while driving to a property an behalf of your LLC, you run over a little odl lady, both YOU and the LLC are responsible.

I chose an LLC for the extra protection but there is a cost.

@Dillon Ransome many if not most areas have property records online so you dont have to actually go there. 

Caution: some states like Maryland have addopted laws to protect homeowners in preforclosure from "Predatory" investors. Make sure your state doesnt have such laws. The maryland laws are unreasonable and could put you in jail for doing nothing moraly or ethically wrong. 

@Jonathan Bui virtually all mortage loans today have a "due on sale" clause" But that is only one issue. Another issue is that your title insurance is no longer any good becasue of the new owner. Having a loan in your name for a property owned by an LLC has potential to allow a creditor to pierce yoiur LLC. (by itself probably not enough but combined with other factors it could happen)

Arguably you have commited bank fraud. You have gotten one type of loan but used it in a way that was not intended and not allowed. 

People who cut corners like this are likely to cut corners in other ways that may cause the LLC to be "Pierced". In other words a court can say "you are not running this like a real business so the court detemines that yiou dont actually have an LLC and you own all of this in your own name"

The proper way to do it is buy the property in the LLC and the LLC gets a loan in it;s name.

Most new investors do not pay near enough attention to the law. NOLO Press and others have books on LLC and how to run then. NOLO books are intended to be self help. I dont recomend do it yorself law but I ido recomend people learn the basics of bussiness law.

I would like to add one more important point

Go back and reread @Nathan Gesner's post