All Forum Posts by: Mike Neubauer

At a minimum, I would check with a couple other insurance agents because having the LLC as the primary insured is very common. The only time an issue would come up with who is primary, umbrella, etc is if there is a problem. Unfortunately, by that time it is too late.

By just reading your post quickly, I instantly got the feeling that the agent is just inexperienced with LLC's and went with something he/she was comfortable with even though it may not be correct.

An issue could arise based on how you set up the LLC as well, whether it is a single member or multiple member, and whether it is member-managed or manager-managed.

A CPA will be good for advising you on taxes and how to setup the taxation of your LLC, but a asset protection attorney would be best suited for creating the LLC. If you choose to create 1 LLC, you can do it in any state, but you have to pay the state you own houses in a foreign entity fee, which is usually the same price as starting an LLC in that state.

The benefit of just 1 LLC registered as a foreign entity in any state that you do business in is that it is much easier to manage, 1 bank account, 1 tax return, etc.

If you set up an LLC in each state you own property, it will realistically cost about the same and give more asset protection because litigation on 1 LLC won't affect the other. However, it is a little more time consuming to manage because you need individual accounts for each LLC.

You should hold as many properties in an individual LLC as you are comfortable with losing in a lawsuit.

Also, with an LLC, I prefer to do a manager-managed, with me as the manager. A manager is not the owner and therefor will not have litigation against him/her. However, a member will be open to litigation because they are the owner. Some states will disclose the members of a manager-managed, others will not. If you use a state that doesn't disclose the members of a manager-managed, I'd suggest that.

An LLC can be taxed in many different ways, as a simple sole proprietor, partnership, C-corp, or S-corp. A trusted CPA who knows real estate would be able to advise you on this.

The usual rule of thumb is for flipping, an S-corp.
For buy and hold, sole proprietor or partnership (if it is more than 1 member)

I understand that theory behind it is very easy, but I do not even truly understand how the probate process works. I do not know how I would approach an attorney with confidence when I am unsure what his role even is in probate.

As far as just make an offer, I do not even know how to track down probate properties, yet besides going to an attorney that handles them, which again I wouldn't even know where to begin with them.

I am not concerned about clear title, the real estate side of things is like any other deal, but I am looking for help in getting these deals in the pipeline. That is why I am looking for a personal mentor, someone that can walk me through it step by step.

Hi everyone,

I am looking to expand a little more into probate. We had run across a couple, but they were referrals, not marketing. We currently do flips, some flips to lease option and buy mostly short sales or sheriff sales.

I am looking for someone that is an expert in Probate to getting that acquisition strategy up and running in my area.

Thanks,

Mike

Very good point.

A couple options to avoid that is using your retirement funds to invest in a C-corp (not the ideal structure for flipping, but it works if you are using it solely for flipping).

The other option is to invest with your retirement funds using non-recourse loans. These profits from debt-financed income are not taxed, even if it is unrelated.

Before you can even consider a lease option, you need to make sure that you are not underwater so much that the future value of the property will be less than the option price.

Let's say you have a house worth $100k and owe $125k. You lease option it out and say the sale price will be $125k.

Now, In 5 years, the house is still worth $100k. The tenants can't purchase because no one will lend them $125k on a 100k unit.

The only way a lease option works on an underwater home is if the equity is close and it is in an appreciating area.

If the city's housing authority purchased the adjacent unit, and there are terrible tenants, I am not getting the picture of a quickly appreciating market.

Plus, if you have a tenant/buyer sign that lease option deal on an underwater mortgage, you can be held responsible legally. The courts will (and already have) seen it as you taking advantage of an uneducated renter.

A short sale or long term rent are the 2 best options for you.

Many sellers talk a tough game, and let me forewarn you from experience, if a seller isn't Motivated, do not waste your time. Put him in the cold file, and wait a little while. He will probably come around, and if he doesn't you can buy it as an REO.

I would definitely never do a sub2 deal with someone threatening BK. A sub2 deal is risky because he could file BK after a year of you making payments, then the bank can foreclose and you are out of luck.

You mentioned many times, "he says."

Until he "proves" I honestly wouldn't believe a word "he says."

He sounds very sketchy, and I'd hate to see you get burned. Sometimes you can get as creative as you want and still just won't work.

I'm not saying there is no potential, but until he moves onto a new category of emotions and becomes motivated his name should be in a "cold" file.

Will Barnard is dead on with investing in buy & holds in an IRA.

It isn't a good idea to use 2 tax shelters together. A rental property already provides great tax advantages through the various deductions you can take. Once you put that property into a fund that in itself provides tax advantages, it wipes the rental property advantages away.

Basically the IRS doesn't allow you to double dip with taxes.

The best place for self directed funds is flipping if you want quick cash or HM lending, discount notes, or tax liens for long term investments.

That way you can really take advantage of the IRS rules.

Also, I prefer a SOLO 401k vs. any IRA fund. It is a little less strict, and the penalties (should a mistake be made) are less severe.

If I were paying cash for a property, I'd need to pick it up at 65-75% of the ARV(that percentage is purchase plus rehab) so a $100k house, I can only be in for 65k-75k. I really don't like to be at 75%, but will do it for a good deal in an appreciating area because we sell some on lease options to cut out certain costs.

Also, have you thought of doing a lease option with them, fixing it, and then re-selling it for a profit, that way you save the interest costs and closing costs (on one transaction). Negotiate a price, sign an option to purchase this property, then explain what you are going to do. Fix it up, sell it.

Say you have an option of $60k, and it costs $45k in rehab. $105k.

Now you sell it at $125k. You make a net profit of $20k. (obviously there are going to be some other costs, probably about $10k worth as a safety factor.

But it is a nice easy way to do a project with very little money down and not having to pay interest costs. I'd probably try to work the numbers a little more in my favor. $45k in rehab is a lot of work being done. Maybe you can save a little there, or purchase it a little cheaper.

Agreed. If it is a 4 unit or lower, you should be able to get an FHA mortgage on it.

However, if you are only approved for $60k based on your income that will make things difficult because they probably won't take into account the rent from the other 3 units.