All Forum Posts by: Pete Harper

Quote from @Hannah C Christie:

1. Why? Because every resource recommends doing so from a liability stand point and I do not want my name out there as the property owner. I am staying local to where the rental is, work in healthcare where I can be found reliably and with little security. 
2. Tax benefits? I don’t plan on selling anytime soon which is why I’m going through this trouble. My interest rate is 2.875% which I do not want to give up and the house hasn’t changed too much in value to make selling lucrative. Additionally, I still like the house so if things don’t work out with my living situation (cohabiting with partner) I have some place to go back to. 
3. I’m ok spending more if there’s some benefit to it- like privacy and being able to sleep at night. 

I have a business banking account and a PO Box for the LLC, a property management company picked out for once the transfer is approved (so I can sign the agreement as the LLC and the LLC actually has the right sign) and a CPA that has helped me file and form the LLC. I took the advice to put the house in an LLC (or at least try to) from a prominent real estate maven in my area (she has about 40 properties).

Hannah, I've been in a similar situation where I wanted to transfer title to my LLC. As you can see this is a hot topic with strong opinions on both sides.

Transferring title will give you a small degree of anonymity. It will likely dissuade a disgruntled tenant or stalker who will try and look you up.  They will see the LLC name and address instead of your own.  A PO Box for business is a good idea. As others have pointed out a good lawyer can easily get around this and find your personal information. If you are looking for total anonymity there are other legal instruments like Wyoming LLC or Trusts but I believe that is beyond the scope  of what your are asking.  If you are looking for legal protection then a good umbrella policy is your best first defense. An umbrella policy inside an LLC is even better. The umbrella policy provides access to very good legal defense lawyers who's job is defending you.  You should sleep better.

You said you have lived in the home two years.  That qualifies you for a $250k capital gains tax break, $500k if filing jointly.  Even if you sell after renting for a year you still qualify.  Check with your CPA but this is a huge benefit if you decide to sell the property.

Nuts and bolts of transferring.  I've done this before.  You are taking the right approach speaking with the bank first.  Done right this will not trigger due on sale clause.  For FannieMae loan I was not able to transfer the loan itself into the LLC.  My name remained on the loan.  I was however able to transfer the property title to the LLC.  If you look on the county records you only see the LLC name and address.  If you dig further you will see warranty deed transfer from me to LLC.  Your average Joe stalker would see this as property being sold.  A smart lawyer could dig further and find the loan lien.  On top of the regular home insurance policy I carry a sizable umbrella policy.  BTW warranty deed preserves the title policy chain, don't do Quit Claim Deed.  No issues with title when we later sold.

1% is a useful screen criterial for evaluating cash flow properties.  It is a quick and easy way to sort through a bunch of prospective properties.  If you see a $400k property that rents for $2000/month move on.  It isn't going to cash flow.  Don't bother running the in depth numbers because it just isn't going to cash flow positive.  If however it is close to 1% then it is worth taking a closer look.  June year we closed on a 10 unit complex that was 0.9% that is cash flowing nicely.

Don't believe the nay-sayers that 1% deals no longer exist. I closed on a 2%+ deal in April. Our overall portfolio average is 1.6%. In todays market you are going to look a little harder. Off-Markers deals not on the MLS. Or tertiary markets outside the major markets in the path of progress.

lol "another seriously battered and abused landlord"  Says the guy with footprints all up and down his back from his tenant walking all over him. lol

You obviously know more than everyone on the forum.  Best of luck.

I'm sorry if are not getting the sympathy you expected.....

Most of the issues I'm seeing are on you, not the tenant.  You need to start running this as a business.  

Late rent is totally your fault.  You have allowed them to get away with paying late and they are abusing it. Rent is due by the 5th, pay our written quit notice go out by the 7th, by the 15th we have started eviction process in court.  In Texas you can have a court judgement before the end of the month.

I can't believe you are allowing a non-approved home business.  You should have sent notice the minute you found out.  Not only is this illegal, it is a huge liability for you as the property owner.  Imagine if someone gets sick or injured.  Any smart lawyer is going to come after you as the home owner.  Your property insurance is not going to cover you either.  I'm sure there is a "home business" exclusion in your policy unless you purchased a special policy.  Not only that but I doubt the tenant has the appropriate business licensing and health inspections.  Home business is grounds for eviction. 

Sorry, but you are in over your head.  You need to seek the advice of a professional property manager to unravel this mess.

We had a similar issue where a tenant would call for a maintenance issue then not let people into the apartment.  The boyfriend would make the request but his girlfriend would not allow anyone to enter the unit.  Finally I called him and said I was leaving for the day since I couldn't get access.  I guess he called her and she came out and sat in the car while I unstopped the sink.  That might be an option in this case.  Ask her to leave while you are there.  

I would not say BRRRR is dead. Is it more difficult? Yes. Is it dead? No. Too many people get into real estate wanting to make a quick easy buck. The minute they run into difficulty they give up or just start whining. It takes work. You need to get out there and look harder for good deals and buy deeper. Don't expect a good deal to fall in your lap off MLS.

We recently purchased an off-market estate sale 2%+ deal, a duplex in smaller market.  Purchase was 20% down at 7.25%.  By buying at a deep discount we have over $16,000 in equity on day one.  We just completed the renovation of the first unit so we are half way into renovations.  The other side is currently rented and paying the mortgage.  We will need to wait a bit for seasoning but I expect to be able to refinance in the coming year pulling out all our original capital.  Meanwhile the property is running at a positive cash flow ($800 month) saving up for the next good deal.  I only need to find 1-2 of these deals a year.

Interesting question, one I've been pondering myself.  I started off our real estate journey four years ago.  My wife and I were recently retired and I set a goal of $100k a year within the first three years.  The idea was to diversify and supplement our retirement income.  We hit my $100k number the second year, four years in we are over triple that number. I have been astounded by how quickly real estate scales.  We started investing primarily in small multi-family properties; duplex and four-plex.  We would buy properties that needed mostly cosmetic updates and do most of the work ourselves.  Being retired I had the time and energy.  We like small multi-family so we can work on one unit at a time.  While we were doing renovations the other unit(s) would help pay expenses.  This quickly scaled to where we were not spending any out of pocket money on renovations.  Now four years in we have 38 total units and things have scaled to where our properties are buying new properties.  We've even been able to hire contractors for the major projects.  We just finished a full gut renovation on half a duplex bought with proceeds from our rental portfolio.  

Our retirement journey has been much different than expected.  Our living expenses are less than I had anticipated and the real estate side has been more successful.  My wife and I are currently debating "How Many is enough?"  I still really enjoy real estate and want to keep going.  

Quote from @Kris Wong:

You do not need separate bank accounts for each of your series cells in a series LLC. All you need to do is account for them separately in your bookkeeping software. You can also "transfer" money between Cell 1 -> Parent series -> Cell 2. I put transfer in quotes because it's all the same bank account. These are just accounting entries. This is essentially a distribution followed by an owner contribution.

You can choose to get a new EIN for a series if it's required for lending or some similar purpose. However, you still do not need a separate bank account. There's a lot of misinformation out there regarding series LLCs because they're relatively new, and there's not a lot of case law around the entity structure, specifically.

I was told differently by my attorney.  Each Series needs to maintain its own bank account otherwise you are co-mingling funds.  I have mine set up with Wells Fargo.  Each series has a savings account to receive funds.  The parent has a checking account.  To pay bills I transfer money from the child to the parent account.  Only the parent has a unique EIN number and files tax returns.

Duplex wins hands down! If you look at cost/sqrft a duplex will be cheaper.  If you intend to scale it is much easier to pay one insurance policy, one tax bill, one mortgage, etc.  The other advantage is you spread your risk.  If one side is empty you still have the other side paying the mortgage.  If you are buying a property that needs work you can renovate one side at a time while the other side remains rented.  Once the first side done you rent it at a higher price and use the income to renovate the second side.  We've used this strategy to self-fund all our renovations.

Quote from @Anjelica Allen:

Greetings everyone,

So I'm one week to closing on my first home. I'm purchasing a Duplex with a 203k FHA rehab loan (Property 275k).

1. The first unit needs repairs, nothing major (Estimate 27k). Second unit is occupied with tenants that are refusing to pay market value, they are paying 950, when the average rent is 1200+. I don’t like the idea of market value terms as rent prices and incomes haven’t matched in years. Seller claims they will give notice to vacate upon closing, which begs to questions does this fall on me now?

2. Another issue I'm having is that my lender requested me to pay the full year of home insurance before closing, even tho payments after closing will continue to go to escrow from mortgage payments for the year I just paid for. Lender stated that everything about my property is expensive, and 203k FHA loan doesn't allow/ or have grants available. Why not? Why do I have to pay this now, instead of paying it during closing with loan?

3. Lastly the biggest issue of it all is that the Loan Estimate had me closing at -8k, which was great, because I could keep my reserves to apply to the principle and or unexpected costs. But I received my Closing Disclosure document to sign and now its saying 18k to close, which wouldn’t leave me with a lot of cushion afterwards. 

With all the documents to sign, legalize language, and seller pressuring to close. Something just doesn’t sit right with me and I don’t know if it’s something I’m missing or I’m about to take on a problem. I’ve saved for so long to get to this point, that I’m worried after all this, I may have to walk away.

Make sure the seller has the tenant vacate prior to closing.  If need be the seller is going to have to evict.  Once you close the tenant becomes your problem.  Don't let the seller dump his problem tenant onto you.

That sound right on insurance.  You pay the first year up-front, escrow is for next years insurance.  The bank will always want you ahead on your escrow payments.  You will get a partial year credit from seller on taxes.  Don't be surprised if your bank wants taxes paid up front as well.  The Closing Disclosure Document is your closing costs.  

Sounds like you need a good real estate lawyer to walk you through the process.