All Forum Posts by: Raquel D.

There's a reason most people stay stuck in the same cycle regarding finances, careers, etc. - the advice, tools and information are all available for everyone, but how we use it is up to us.

I've loaned money to friends in the past, and every time, it wrecked the friendship when they couldn't pay me back and stopped talking to me  (even though I never asked for it).  I think the rental situation would  be no different.  A new place or environment doesn't always change a person's life if they don't change, too.

You could suggest a podcast or blog, or maybe give him a copy of Rich Dad Poor Dad or the Richest Man in Babylon or something easy and introductory like that, and see if he gets intrigued about ways to change his life - to take responsibility for the things that happen to him and to work toward a heartier future.  But sadly, most people don't.  And I don't mean that negatively or judgmentally - I mean it just as a matter of fact.  Generally, people spend more time fixating on their circumstances instead of questioning what they can do to change them.  And it's hard to break that cycle when everybody else is doing it!

Good luck with your friend - he's lucky to have your support.

Yep nothing to pay if the balance is 0!  I would note that some of them have penalties if you close them in a certain number of years - I took out one that had a $450 penalty if I closed it (or sold the property) within 3 years of the start date, even if I had a zero balance or never used the funds. 

It's hard to weigh in without knowing any numbers. What rents do you collect every month?  Who pays utilities? What are the expenses?  Do you have a cash reserve, or have you factored in saving part of monthly rents to build up a reserve?  What do you anticipate for future repairs/capital expenditures?  BP has some really great calculators BTW - even if you don't know all these numbers right now, if you take a look, it will at least mention the categories you should be thinking about.

Depending on your expenses and  income should answer how much of a mortgage you might be able to tolerate.  If after factoring in expenses and reserves you only collect $800 a month, paying a $737/month mortgage may not make any sense.  But if you net $1,500, then maybe it would.

At any rate, I think it's great that you've gotten started - it's okay to learn the details later.  There are lots of great resources here!  In fact, I'd also recommend trying to catch one of those weekly webinars that Brandon Turner does - he usually goes through analyzing a deal in each one, and it may give you a better idea of how to calculate how much of a mortgage you can take on.  The Afford Anything blog also has some good articles for analyzing rental revenues for SFHs (and I think there may be a triplex in there, too).

Also, there are a lot of people who will tell you "yes, leverage yourself to the max to get into more deals!" or "no don't ever take out  mortgage!" without listening to any of the details of your situation.  Just consider how much you want to rely on advice from people making sweeping generalizations.  Very little is black and white - there's a ton of gray in between!

I don't know the legal implications or anything about Florida transfers, but in many states, the difference between a quitclaim deed and a grant deed (or warranty deed) is just title assurances. It has nothing to do with transfer taxes. Transfer taxes generally relate to consideration paid. So if someone is using the property they own to fund an LLC they also own, there isn't consideration paid, so no transfer tax.

To distinguish the difference:

- Scenario 1: Someone starts an LLC, "capitalizes" (funds) it with $300,000, and then uses the $300,000 in the LLC account to purchase a property. The LLC is paying consideration for a newly acquired property, so consideration is paid. Therefore, when recording the deed transferring interest from old owner to new LLC, transfer taxes are due.

- Scenario 2: Someone owns a property as an individual. That same person establishes an LLC and transfers the property into the LLC -- hence "capitalizing" the LLC with the property. No consideration was paid. Therefore, in the deed from the individual to the LLC, no transfer tax is due.

The county recorder/register of deeds might actually answer this too - they can't give legal advice but asking a question just to confirm you're right is fine, i.e., "if I own a property and transfer is to my LLC, I don't owe transfer taxes, right?"

I can offer a customer perspective. I stay in an Airbnb once a month when I travel for work. Since all I need is a place to sleep/shower, I prioritize location over actual amenities. I’ve stayed in private suites within houses, in private rooms with shared bathrooms, and once in a shared room with bunk beds. Would you be able to have a lot of potential customers staying alone, traveling for work? If so, then I would say having private rooms with shared bathrooms would be acceptable. Depending on area of the country, public transit access could be very important in addition to location. If you think your primary guests would be there for pleasure, location would still be important, but vacationers would care more about privacy (private suites or non-shared bathrooms), kitchen and fridge access, maybe even parking. Most of the Airbnbs I’ve stayed in recently I would NOT stay in if I were traveling with someone. Also when people are staying in your home, cleanliness is a bit factor. My worst Airbnb experience was in a house with tons of sloppy homemade storage and clutter (the bed I slept in was a bunk bed but top bunk was loaded with misc. crap), unclean shared spaces (toothpaste flecks on mirror and all over sink, floss hanging out of the trash can), only one thin towel that I had to ask for, bad outlet access, and no top sheet on the bed. (Because of the general uncleanliness I wasn’t even sure if the linens were freshly cleaned — I slept with a shirt over my pillow.) My point is that in shared spaces, especially bathrooms, it is extra important to be clean when there are paying guests on the premises.

There are a few thing I would note just to think about while you make your decision ... 

- An important step after establishing the LLC is to transfer title to the property to the LLC. I see you're based in NY - I once needed to help a client transfer a NY condo to their revocable living trust and the fee for the deed prep service was something like $800-900 because of NY fees (we were using one of the well-known national deed prep companies that usually charges less than $200 a deed including recording fees). I don't know if that is typical, but it was a shock for the client, and it is definitely significant on top of all the other formation fees. The LLC does nothing if the property isn't transferred into it, so it's a very important step -- make sure you factor it into your costs!

- Corporations have more formalities but a lot of it is just making sure annual minutes of meetings are being prepared.  An attorney doesn't need to do this - there are plenty of forms/templates available and generally it's not that it needs to be /perfect/, just that it meets all the criteria.  (Accuracy and timeliness are very important for Secretary of State filings - but those will be necessary for just about any business entity.)

- Whether you need just 1 LLC or multiple LLCs really depends on how much protection you need. If you put 3 properties in 1 LLC, then a lawsuit regarding 1 property could put all 3 properties at risk. If you have 3 LLCs for 3 properties (i.e., 1 LLC for each), then a lawsuit regarding 1 property only puts that property at risk. That's the thing about the entity question - the right answer for one person isn't necessarily the best answer for you. But there's some really good reasoning and analysis available on BP as to how people decided what structure to use.

- LLC formation companies can definitely prepare the entity right, but they're not going to know how to give advice on how to structure what you're doing. They're selling a product -- if you go into a hardware store and know you need a new circular, then someone can lead you to it and help you find it. But if you go into a hardware store and just know you need something to cut a piece of wood, the sales person might sell you a table saw or a hack saw -- not because it's the best, but because it's the only two saws that particular sales person has ever used. And you can probably cut your wood with it, but it may not be the best way -- and using the wrong tools can lead to bad results, or at least not the results you're looking for.

@Steve S. The baking soda and water left no residue on my walls — it was very diluted and I did rub the walls once with the mix, once with just water. I should note my walls were textured with a medium/eggshell gloss paint.  I recommend some gloss to paint anyway — otherwise every scuff or water splash will show.  

So I actually had this issue with my first condo. I wiped down the walls with water with a hint of baking soda in the kitchen and rooms directly next to the kitchen, scrubbed all kitchen surfaces (including inside cupboards/drawers, along the sides/back of the range, etc), and left bowls of coffee grounds out for awhile. Just the cheapest coffee, change it every few days, etc. The scrubbing got rid of the majority of it, and the coffee gradually absorbed what lingered. (I also read leaving out bowls of vinegar would do something similar so I tried that but I felt the coffee worked best — maybe alternating between the two helped though). Of course, I had tile on the first story — if I had carpet I’m not sure if it would’ve worked. I left bowls of coffee grinds in the upstairs bedrooms, which had carpet, but I hope you got those cleaned professionally anyway. Letting baking soda and / or carpet fresh sit on them for 15-30m before vacuuming is good too but that’s good for any mild odors.

Grant Cardone has some good reasons for this, but his rationale isn’t right for every person’s particular circumstance. I’ve heard as a general rule it’s best to rent if you plan on moving within a couple of years, which makes sense because of costs associated with buying/selling a property. Obviously this doesn’t apply for people who do a value-add (live in flip) so they live there and re-sell a couple years down the road for more. If you already own the home and your rent would be the same for a similar property, then the primary reason I could think of to sell would be if you want that equity to invest elsewhere. With a house you own however, at least you know the mortgage is fixed. With a rental, prices can go up. (I rented an apartment when I moved to the Bay Area in 2008. If I still lived there, my rent would have easily increased $1000. Luckily I bought a place after a few years — now my mortgage is way less than a 1BR/1Bath super old apartment in a very sketchy neighborhood).

POAs are meant for signing in an individual capacity, and won’t work for any other titles (manager, officer, trustee, etc.) but there are some good suggestions in this thread for what to do regarding giving someone authority to sign documents for your LLC.