All Forum Posts by: Mike Day

@Shawn Holsapple

Do you have a particular local lender to recommend? :)

Your situation is pretty complex, but after reading your post a few times I think I understand the question. So basically you have a property that you are currently living in that you have a HELOC on, and the bank is going to force you to close the HELOC once you convert it to an investment property, and you want to retain access to the ability to take out funds whenever you want without doing a conventional refi - is that right? My first question is, how is the bank going to know that it's now an investment property? I don't think the bank is going to raise a ruckus about a loan that's paid fully and on time. Also, some banks will do HELOCs on investment properties. If you make enough phone calls, you'll probably find one. Does that help?

Thanks to all for the replies. I personally like to keep myself pretty highly leveraged and am comfortable with that, so it looks like I'll be turning to a portfolio lender once I get a few more properties. Time to make some phone calls!

Hi all. So I currently am holding a single rental property and am planning on financing 2-3 more in the near future. This means I will hit the limit of 4, after which most banks will not issue more loans (even though Fannie Mae allows up to 10). I wanted to survey the community to find out what other investors have done for property number 5 and up. Right now the most likely path appears to be finding a local portfolio lender to do the loans, or refinancing several properties together into a commercial loan to reduce the number of loans down below 4 and getting another conventional loan. How have other people dealt with this? Does anybody know of a national lender that will do 5-10 properties? Thanks!

Or take out the gas stove and put in an electric one. Or redo the lease when it comes up so that tenants pay utilities. I'd assume it's going to be this way year after year unless you take some action.

Hmm, I'm in Indy and have a different perspective. Renting out a house valued around $60-$70k and renting it out for $700 sounds reasonable. The part that I'd exercise great caution about and would not recommend for a first-time investor is an out-of-town rehab. Too many things are out of your control and there's too much potential for you to get ripped off. If I were you, I'd get a good real estate agent, have them help you assemble a list of investment properties that you can immediately rent out without repairs (doable in this price range), fly out and take a look. Neighborhoods vary from block to block here. If you want to know if it's trash or treasure, you have to see it for yourself. A $700 rental house is not necessarily in a slum.

Hi John. I'm going to send you a PM in a minute. :)

People always say seek out a legal expert, etc., etc., and I also think it's a good idea, but I'll try to give you some hints based on my experience and research. Insurance and entities such as LLCs are two different layers of defenses. If your insurance doesn't come through for you, you have the protection of the entity you set up to fall back on. If you do things properly, the LLC's business is the LLC's business and you can't be held personally liable if, say, a tenant slips and falls on the property. As your net worth increases it becomes more critical to have that kind of protection, as you have more to lose and are frankly a more attractive target for people who might try to sue you, frivolously or not. Personally I think you should have at least $300k in liability coverage, and consider getting umbrella coverage on top of that.

Oops, double post! Mods feel free to delete.

This is a topic that gets debated a lot at BiggerPockets and I'm sure you'll get many replies on both sides of the issue. My first question is why you only want to set up an LLC for out of state purchases. The liability to you is basically the same regardless of the property's location. You can hold rental real estate in any state in an LLC from any state. The states that are used most often because they are perceived to have better asset protection are Wyoming and Nevada. You're in an unfortunate situation as a California resident because California's own LLCs offer poor protection, and California slaps heavy taxes on LLCs from other states. A few years ago I think the taxes were around $800 annually per LLC. Many people recommend holding each rental property in a separate LLC, but in your case it's probably not worth it to do that due to the tax burden in California. You can put a few properties in each LLC or just rely on insurance. Some people shun LLCs completely because they are expensive, complicated, and haven't been thoroughly tested in court. I'm sure you'll receive many opinions about this. I think, if you have significant assets to protect, you should spend a couple hundred bucks and get advice from a good real estate attorney. If you're just starting and don't have extensive assets to protect, I'd get enough insurance to cover what you do have and revisit this down the road.