All Forum Posts by: Reese Thompson

Wow, lots of good info here. Thanks everyone. I forgot to mention that I do have a partner in the LLC

So I'm kind of under the impression that I'm not necessarily required to file the 1065, but I should anyway to get the ball rolling and do a little cya.  Better to do than not do type of thing?  

I'm preparing to file my taxes for my LLC. Since we didn't have our rental units yet for last year, the only cash event that occurred was the cost for forming the LLC. Total amount was less than $500, so I'm wondering if someone could point me in the right direction for how to handle this?

Thanks!

Wow, bad day for sure.  Glad you got out safe!  One wrong whip of the trailer and it's throwing the pickup off, too.  My neighbor was talking to me one time while I was trying to hook up, and I forgot to close the latch on the ball.  Luckily I was empty and was only on the edge of town when it came off.  It bounced everywhere like you described until I was able to get it stopped (can't forget those safety chains!).  The front of the trailer hit my hitch when I was slowing down, so I was really lucky that I was able to avoid any damage to my tailgate and bumper, too. 

I definitely use the highest rated equipment I can find.  I don't usually get anywhere close to the load rating, but I don't want to risk it being worn out from rust or fatigue.  Can't forget the better hitch pins, too!

Just wanted to update on what I found.

I drilled a couple holes in the walls, one on each outside wall.  I used an inspection camera I got on a Black Friday sale at Harbor Freight to look inside, and there is definitely insulation in the walls.  It was all blown-in, so one thing that I didn't do was look at the top of the wall to see if it had compressed any.

My bedroom is above our utility room in the basement, so I was able to go downstairs and see about putting a vent up into the closet.  There was a perfect spot from one of the bedroom vents to put in a T and run a duct on over to the closet, which is what I did.  I had to use a piece of flexible duct though to be able to make it over the heat pump lines coming in from outside. 

It is much warmer now in the closet, and my wife is happy.  Happy wife, happy life.

Thanks, guys!  That's some good info.

@James Wise So is it pretty common for brokers to be sponsoring an investor that they know isn't ultimately going to be working for them or does it matter?  Because I'm assuming that in order for everything to be proper with splitting the co-broke you would have to technically be an employee of their company?

@Theo Hicks  Congrats!  Aside from the experience portion (which is a huge benefit) while making money, did you see that you weren't going to be able to be an agent and complete the requirements while holding a full-time job elsewhere?  I'm asking because I make a pretty decent salary at my current job that I'm pretty sure I wouldn't be able to replace very quickly as an agent.

I've read and heard in podcasts several times about people getting their RE licenses for the intent of investing.  While I understand it is not necessary, I can see the potential benefit.  At least in Ohio, what I've read is that you need to be sponsored as an agent by a broker for 2 years before you can go on your own. 

I'm wondering how people have gone about doing this in the past?  Are these brokers people with their own established practice or other investors?  Why would they even be willing to help you out?  Are they receiving a commission split on your deals by being your sponsoring broker?

Also, what's different between the agent and broker that allows brokers to go it alone?  I'm guessing becoming a broker is what most investors are ultimately striving for?

Thanks!

I agree about the helpfulness of BP.  I haven't experienced it on the deal side like you have, but definitely on idea flow and helping to keep yourself focused. 

I recently was a little discouraged by a lack of good deals that I've been looking for, and I was even beginning to wonder why I'm doing this.  So I just started looking around on BP.  Wasn't long before I got my head on straight and started trying new methods.  I think I have a couple ideas lined up for some potential deals.

Congratulations!

I'm guessing you're doing buy and hold judging based on the picture?  What kind of criteria do you use to make your purchases especially being out of the area?

 Exactly.  So if your returns on what you're purchasing are higher than your alternative, you'll have a positive "Net Present Value" (NPV) which means that your gain in value is higher than your opportunity cost.  And that's what we as investors need to look at is whether this opportunity is gives us the highest NPV relative to other investments.  And that comes full circle to the two values that I don't think I explained as well above.  One value is the market value and what the transaction of the purchase will occur at, and the other value is the value to the investor as to whether this is their best opportunity.

That's some good stuff there. 

Here's a little update:

We ended up not doing the deal.  The minimum the seller would take was $150k, and the most we would have been willing to pay was $145k ($144,731) before another deal we looked at had better returns.  That didn't include the extra $5k we wanted off for the 40-year old boiler, so our absolute top price was $140k. 

There's only one other 4-plex in the area that has sold in the last year, and it went for somewhere around $150k.  So he very well may get what he wants for it, but it's not going to be from us.

One thing I realized during this experience was the different types of values that can be placed on a property.  I know this is probably elementary, but it's something I learned and am going to try to apply to future investments.  And maybe it's theory BS, but it made our decision easier.  Here it is:  the value that lenders place on 4-plexes on down is based on comparable sales as we all know, and that's how they're going to be priced and what agents are going to push the deal to go through as.  But as an investor, we need to look at comparable returns no matter if it's a duplex, 4-plex, or 10-plex.  By purchasing one property we're giving up the opportunity to purchase another property (at that instant), and there is a cost associated with that.  As long as they both meet your criteria and you have the means to buy either, your return on the property you're buying better be higher than what you can get on another, otherwise why not go buy the other? 

That's how I applied number sense to justify our decision.  We had looked at another property, so we had the expenses and rents to apply an analysis with the same financing structure in both deals.  I cheated and used solver to then calculate what the highest price we could pay for our deal was to match the return on the other property (based on its list price), and that was the $144,731.  Anything higher than that, and we're "losing money" relative to if we had purchased the other property.