All Forum Posts by: Steve Christensen

I am sure this question has been asked numerous times on here, and I have read many forum posts. However, it seems like many of the answers come down to "what are you personally trying to do / what are your goals?" So, instead of asking should I do x, I'd like to state what I've done and what I'd like to do, with ensuing questions.

I need to set up a business entity. My goal is to have a small portfolio of SFR to multi (no bigger than a quad/4-plex), totaling 10-15 units. At this current time, I do not have any properties. I also wholesale, but so far have only referred a few leads, and have completed one wholesale/flip deal myself. Due to the timing, I did it in my personal name, as I did not have an entity set up. I would like to avoid this asap, hence the entity. I also would like to rehab a few projects a year, but, from my understanding, this shouldn't really change much as it pertains to the short-term wholesaling. As one last curve ball, I am new to working as a licensed agent. My income is solely commission.

Some options I have looked at:

1) setting up multiple LLC's taxed as an S-corp, i.e. 1 LLC for flipping, 1 for rehabbing, 1 for rentals, not to exceed 3 properties per, then setting up a new (so if I had 15 rentals, I would have 5 separate LLC's, with 3 properties in each)

2) setting up a series LLC (I live in and operate in the state of Missouri)

* I do not have a partner, it is just me. I do not have any dependents nor married, if this matters, but I think that is more estate planning

Questions with these 2 options:

Is the s-corp taxation my best option? Is a series LLC better for my goals, or multiple LLC's?

When you are new, you don't know what to ask. From my understanding, having an LLC for every flip/wholesale, rehab, etc = tax return you have to file. I don't know if this is good or bad, but it sounds like a hassle. So, does anyone think it would be best to flip/wholesale in 1 specified LLC, taxed as an S-corp (or recommendations), as well as rehab (since it will be 1 year or less) - and then have another separate LLC, taxed as ___ (I really don't know the best setup for buy/hold long-term investment property) for my rentals? Or, would it be better/easier to have 1 series LLC, with 2 defined series, 1 for the flip/wholesale / rehabs, and 1 for my long-term rentals?

I have seen throughout these forum posts that you should NEVER hold real estate long term in anything taxed as a corporation. Can anyone shed light on what this means?

Also - I would like to buy my rental properties in a Land Trust, and the trustee be the entity. From my understanding, the trustee would have no liability. Does purchasing property in a Land Trust affect ANY of the aforementioned? My goal, or idea with doing this, is two-fold; 1) protection, and 2) if I have 1 LLC for my long-term rentals, I can have each property purchased in a Land Trust, avoiding have an LLC for each property (or 2 or 3 properties in each LLC, still having to file multiple tax returns for each LLC), thus avoiding multiple tax returns.

Any thoughts on my income from working my commissioned real estate transactions with all of this?

I really appreciate any and all feedback!

@Robert Bacher try zaba search, it is a free search. However, if the name is John Smith you still might run into those brick walls.

Your next and best bet is skip tracing. However, it costs money ($1 per search), and even then, you are not guaranteed of a good, working phone number.

At that point, you could door knock, or put them on your direct mail campaign.

@Kyle Grimm Congratulations! Do not short-change yourself at all. If it were easy, then everyone would do it. You took massive action, and completed your goals, with some time to spare!

I second your recommendation on writing goals down. Specific goals. So many people say they want to lose weight, but not how much. Or that they want to 'get into' real estate, but don't specify what form. You were specific, set a deadline, had a plan, wrote it down, and crushed it.

I look forward to seeing your future achievements! And thank you for posting this, showing your results for others to see.

@Al Wilson and @Roland Paicely , I found out the document they want the seller to sign is simply to state she knew that I was assigning the contract, NOT the amount the contract was assigned for. Why on Earth, I have no idea. The contract, as well as a separate Seller's Acknowledgement sheet clearly stated this. I guess it was CYA for the title company.

Thanks for the responses!

I am closing my first wholesale deal, and the title company has informed me that the seller has to sign an additional document regarding the assignment of the contract.

Is this standard? My original Purchase and Sale Contract states that the contract is assignable. I didn't know if the seller would see the difference on the HUD form or not, and the seller knows that I was marketing the property for a profit, but I was not expecting this.

How do you go about pre-screening potential buyers/rehabbers/investors for your wholesale deals?

Sometimes it is just not feasible to go to my properties. I have a lock box on them, but some people just don't give me the right feeling when they call.

Some questions I ask are 'how soon can you close?', 'how will you be funding?', 'do you have other rental properties, if so how many/where?', etc.

A company I used to work for had rental homes all over the area. It was not feasible to go to the property every time a potential tenant wanted to view it. So we would screen over the phone, and then ask them to text us a picture of their ID, and then we would send the lock box code. 

I've tried this with some buyers, but there has been resistance. 

Does anyone have some better suggestions / questions to screen buyers? Stealing of copper is very common and I am trying to avoid this.

I agree with @Donovan Castaneda, you need to take out a percentage for vacancy (I do 10%), and depending on the condition of the property, a percentage for maintenance (I like to start at 10%, but love to be able to build in more, as I sometimes mix maintenance and cap ex). Both of those are excluding cap ex, which is the depreciation of say, the water tank, roof, appliances, etc. 

I would not do this deal. Many tv shows and simplistic numbers, like rent minus piti make things look great, but they that is not being analyzed in a professional way. 

Are you a homeowner? Have you thought about doing an FHA loan on say a duplex or 4 family? That way you would be very low on a down payment, can rent out one unit, and live in the other.

There are many ways to do low/no or other people's money deals, but the numbers don't lie.

There is a really good post by Ali Boone on analyzing a property very quickly on a napkin. I'd check that out. You learn how to calculate cap rate and cash on cash return. I think once you do that, as well as what Donovan mentioned, you would see that this is not a good deal, at least in what we know about thus far. 

Good luck on finding that first good one!

@Guy Gimenez I understand and appreciate your response. Unfortunately, the offer of hard work, doing mundane tasks, etc. does not necessarily lead you down the right path. I've offered this to investors. I've woken up at 3am to put out signs, put out signs for open houses, mail letters, and door knock on pre-foreclosures...all to learn that properties were acquired by shortsales purchased by a 3rd party, to either wholesale or rehab by the agent doing the shortsale or the broker. Right, wrong, or indifferent, I wasn't comfortable with this and parted ways. While this was only one example, and I cannot throw the baby out with the bathwater, I've found that the pool of investors with a true knowledge and background in real estate is limited vs those that learned from purchasing something from a late-night infomercial or attending a guru seminar.

And I completely understand obtaining knowledge by money or time. I'm ok with both, as long as I am getting the correct knowledge. Last night I attended a meetup. Two people who sent me a deal (I could tell they were brand spanking new to the industry; I think they paid to go to seminar that charges 25k, they were not licensed, and did not get the deal under contract for the right price) heard my name announced at the meetup, and came up to me right after and asked if I would mentor them in marketing. While I was honored, they proceeded with telling me they had no idea what they were doing. I didn't feel like they'd even tried to obtain knowledge of information on their own, and just wanted me to tell them everything. I referenced them to here, and said I would meet with them if they emailed me...we'll see if that happens! I only bring this up, because I really do get people who want to take take take, and don't offer anything. For me, I feel like something like marketing is one of the 'easier' things to learn about. Contracts, comps, negotiating, those, to me, are the harder things that I rarely see/hear about on podcasts/ebooks/programs/etc.

@Brent Coombs Thanks!

@Darrin Carey Seems like a catch-22, net listing = forbidden (in most states) by a licensed agent, wholesaling = no issue with net listing, but brokering of a property without a license.

Yes, I was held to many standards, regulations, laws, etc. And I want to comply with them as a licensed agent with the ability to wholesale. 

Thank you all for the responses!

@Bill Gulley - could you, or anyone for that matter, care to elaborate on how you can do wholesaling, legally?

The only way I know of doing what was mentioned, is closing with Transactional Funds. Is this what you mean Bill?

I've enjoyed the responses, but as you mentioned Bill, there are numerous posts on here, debating the legality of wholesaling, to be licensed or not, to use Option Contracts vs Purchase and Sale Contracts, intent to close or not, etc....and through all of them, at least for me, I have yet to see a clear path of how to do it. Yes, I know this is going to be state by state, but there has to be some basic level to do this ethically and legally, without justifications.

@Darrin Carey Is it possible for a wholesale deal to not be a net listing? If so, how? I'm not trying to get around a net listing. I want to know how to do this correctly. I actually have a recent post gaining some pretty good responses (titled "Net Listing vs Wholesaling" - I don't know how to link other forum posts), but still no answer. 

Also, I would never write a contract I couldn't/wouldn't close, ESPECIALLY if there was a family in the home. 

I am very up front and honest about my intentions, how I can help, and this results in getting to an Option Contract. 

However, if we agreed to x sales, price, but I find a buyer at y, isn't that still technically a net listing?

@Rob Caldwell How do you list the property, and market through your other syndicates, without it being a net listing? To be more specific, as an example, you list a property "as-is" in the MLS at 25k, and for the sake of this example, let's just say the commission is 6%. But what if you found a cash buyer, not through an agent / the MLS, and they were willing to pay you 27k?

@Guy Gimenez - this advice is rampant in the community. I have been licensed since 2009, but solely for managing properties. I did not sales, traditional, or wholesaling. Now, I'd like to try wholesaling, and when I've asked local "experts" on advice, it's like I frustrate them, and I'm told to "just go do a deal". I get it, I believe in failing forward, but not at the expense of a home owner/seller, or to walk in a grey area, just to make a buck. No thank you.