All Forum Posts by: Tom V.

Here's an answer to the OP:

Every LLC has (should have) an operating agreement. The operating agreement should state who the members (owners) are. The parent LLC can be the member of the child lower level LLCs.

If your child LLCs already have operating agreements, you just draw up a resolution stating that the members have changed (needs to be signed by the previous and subsequent members).  

One can imagine a similar move for an investor who wanted to consolidate ownership of his LLC's into a Living Trust or other estate planning vehicle. To make clear that the trust owns the LLCs, one would draw up a resolution for each child LLC naming the Living Trust as the Member.

Click around here:

http://info.legalzoom.com/llc-resolution-4775.html

Hi - 

I am starting to educate myself on the probate purchase process in California.  I know there is an opportunity to "overbid on a house" whose sale needs to be authorized by a judge.  

Does anyone have a suggestion for a website that aggregates probate hearing information?  

How do I find out what houses fall into this category and when their sale is heard in court?

Also, if anyone has reading recommendations for learning California Probate rules/laws/ processes, I have not had good luck on Amazon.  

Thanks in advance.

You need to think about two parts:

1.  How much will you have to spend to get the property operating normally (one time or capital expenditures)  Usually helps to have a knowledgeable contractor see the place if you know there is work to be done.   Your cost basis will be what you pay to purchase and what you pay to rehab. 

2. What will be the annual Net Operating Income of the property once you have it back in shape? You could google NOI or start here:

 http://realestate.about.com/od/knowthemath/ht/net_...

#2 / #1 is you capitalization rate.   That will help you determine if it is a good deal, how much you can hope to finance etc..   If you knew you were going to go through all of the hassle of renovating and landlording for a 3% or 5% or 10% or 20% return, your willingness to do it should vary with the cap rate.

As for bidding, start low - find out what you can from the listing agent about other offers, best of luck.   

A case in point:

https://www.redfin.com/CA/San-Francisco/2111-Brode...

None of the following applies to cash flow properties.  This is a set of observations on creating an optimal strategy for 'forced appreciation.'

1.  People will take on a ton of debt.  

Whatever your feelings are about debt for yourself, a great concept to recognize is that other people will indebt themselves enormously (and banks and the government and family members will assist those people in indebting themselves) for the purpose of buying a place to live.  

If this rule applies to a young couple trying to scrape together a $10K down payment, it applies equally to a lawyer and a doctor making $500K per year.   Society generally agrees that borrowing a ton of money is okay if one is doing it to buy a house.   Why not be the person who receives the net proceeds of that enormous borrowing?   Much better to aim for the folks who can borrow a million bucks instead of the ones who fight to borrow $200K.

2.  People buy homes based on feelings.  

If you can create (develop, redevelop, flip, fix up) a place for people to live that "feels" like a million dollars (and you have chosen a market that supports million dollar valuations) you will get a million dollars for your work.  People who work in complex, highly-compensated jobs seldom have the time or the desire to take on home improvement or construction etc..  It would be quite a stretch for any person to raise the resources necessary to build a Lexus or a BMW or a Mercedes automobile franchise from scratch.  At the same time, once you have done a $25K cap-ex flip, you know most of the ropes for doing a $250K renovation flip or even a $1mm renovation.  You can build one-off luxury (the house version of a Mercedes), if you are in the right market.  

3.  High income people will be able to borrow and buy even if times are tough.   If you are taking on  the risk of rebuilding a house, you might have uncertainty about when you will finish, how much it will cost, etc.  Valuations are not low generally now, in many markets.  So how does a flipper 'hedge'?  Ironically, in my opinion, the best hedge is building a quality, expensive product that will sell in all circumstances.  You limit your downside by putting more chips on the table.  

It seems like you are taking on an enormous amount of fiduciary responsibility and baloney for $1-5K slices.   

They are constantly tuning their price algorithms so it does not seem unreasonable to see values jump around now and then.  

I am not a CPA, but yes, I don't think your depreciation schedule depends on your other income unless you are trying to count passive losses, which you are not, by the sound of it.  

You should still be able to offset your rental income with property depreciation, you just couldn't use any passive losses (depreciation etc.) to offset other non-rental property income.    

1.  She owes the money and needs to pay it back.  If she can't and he can, and he wants to keep the house, he should pay it back. 

2.  Once the mortgage is current, she should be able to deed it to him.  Will the bank accelerate with a due on sale clause?  Probably not, but that's the whole point of a due on sale clause - to prevent someone from selling/deeding a house without paying off a loan.  But as long as the mortgage is current, they probably won't care.  

3.  If the issue is that she doesn't want to put the property in his name, then BP is probably not the place to get help. 

Get the mortgage current, and she can sell it to him formally.  

He can get a new loan if he really needs to, right? 

Why doesn't he just pay the money that his mother owes to bring the mortgage current.  Then she can keep the house.  

From there, he can do whatever work needs to be done, buy it from her, etc.