All Forum Posts by: Brandon Cao

Wow great advice everyone, I appreciate the input. I will definitely consider getting a fictitious name for now and use my future umbrella insurance to act as my fiscal lawsuit barrier at least until I build up more equity. And after doing a brief search on Pennsylvania's business name search I believe I saw some people using a fictitious name and then having LLCs or Corps stemming from their name. For example: "Fictitious name" as the fictitious name and then "Fictitious name - 123 Property name" as an LLC.

I think that's a good strategy, but I would take it one step further in my future, having an LLC as the primary LLC and then having an LLC for each individual property assuming the primary LLC as the single member.

Also I guess my next question would be, is it better to form a DBA or an LLC that ONLY serves as a property manager for my own properties [i.e. to collect rent and manage my own properties].

Kyle J.
Thanks Kyle! I'm going to look into DBAs, so everything is the same? I can keep my bank accounts and deposit the checks as if they were my name? And does it have any affect on my taxes?

Thanks Jon! I like your advice on the MO or cash, although I don't know if my tenants will be crazy about paying for a money order

Hello All,

I know we all strive to look more professional as investors. Some of us are willing to go and get an LLC to do so. I was wondering if there was an easier way? Specifically, is there is a way for the tenant's check to be made payable to someone other than my name? You know, how some write out checks to 123 InsertStreetnamehere [similar to LLC held in property's name] instead of my name. Granted my name is adequate, but it just doesn't have the "Oomph" that says, this is a professional real estate business with a professional landlord.

Any thoughts?

Junior Salters@
These are all very interesting replies. I just walked around Philadelphia this past two weekends and I looked at 7 or 8 properties. I would say 4 of them were really enticing from the pictures and the statements provided. Before I got to giddy and since I'm small time (this would be my third property), I made sure to get my realtor and schedule a showing at each property.

I will admit I did really like 2 out of the 8 homes upon a walkthrough, both of each I eventually put down offers. Unfortunately, I would say ~60% of the properties upon walkthrough showed problems that were not apparent from the pics.

For example, one had a missing ceiling panel with mold and an unusually damp basement (although containing a sump pump). Although this could be captured from a home inspection. What a lot of people here are not telling you is that the home inspection could cost you upwards of $400. In my arena that's no small fee. Also, The real reason I felt like I needed to walkthrough was for the neighborhood. Turns out many of the homes were dilapidated in the area and did not look like an "up and coming" area.

Another example, I saw a quadroplex property that from the description just needed some drywall and finish up the utility lines. Although this was true, it turns out the house had a resident inside. A homeless man took shelter in the house, which could be alleviated by eviction or other means. I however, was looking for less of a headache and also saw that the house would require more than $20k in repairs more than my pre-walkthrough estimate.

I just wanted to let you know there is another side to the story.

Best of Luck!

Brandon

Mark H.
Thanks for the clarification Mark, that's exactly how I feel. I will admit that I did not know this for sure on my last purchase via FHA. They counted the Security Deposit as part of the 6% Sellers assist, so effectively, I had roughly 4.5% Sellers assist, with the deposit covering the other 1.5%.

Unfortunately, it was on the day of closing that I saw the HUD-1 and I did not have the 100% knowledge nor the confidence to tell the closing company at the table that they need to fix this or no deal. I won't make the same mistake twice. I'm going to ask to see the HUD-1 at least a few days before settlement date.

Thanks for your reply!

Hello Everyone,

For those experts in Fannie Mae guidelines, the 2% sellers assist exists for investment conventional loans. Say I have a fully rented out duplex investment property with the following information:

Agreement of Sale: Purchase price $73,400 assuming 2% Sellers assist
Therefore offer amount is actually ~$72,000 (I'm rounding)
For arguments sake let's assuming that the two tenants in the house have a grand total of $1000 in security deposits.

The seller must give the security deposits to the landlord during closing, but would that count as part of the sellers assist or does this count as a separate source of funds. I heard that Fannie Mae frowns on essentially putting down less than 20% on the property. In other words would the offer amount effectively become $73,000 because the security deposit counts as sellers assist or would I still receive the security deposit and the $1,400 sellers assist.

Hi Agnih,

In your PM, you asked about wallpaper removal and painting. So here goes.

I am also a relatively new investor so I would take my tips with a grain of salt. I honestly did not know much about the contractors here in Philly when I fixed up the first property. The good thing for me was that most of the repairs required were cosmetic. That being said, I signed up for Angie's List to get a list of reputable contractors. I find the problem with Angie's list is not reliability, but cost. It seems like the contractors are so well known now, they are so busy and can price their work at exorbitant prices. That being said you can see what people have spent on a particular piece of work. This allowed me to get an average estimate for how much each piece of rehab was going to cost.

Cutting to the chase, I used an AL coupon for $200 of wallpaper removal for 6 hours from [I'll tell you in a PM]. They required I believe 10 hours or so, the price came out to ~$370 to remove about ~1000 SF of wallpaper. They charge by the hour so depending on how easy/difficult it is it could be $200 for one room or three rooms... Glue can be a tricky . Anyways if you plan on doing it yourself I'm not an expert, but it seems like a lot of elbow grease.

Painting, I did by myself. After the wallpaper was stripped I just went to Behr and picked up the Ultra Premium with the self-priming formula. I actually only coated with one coat of paint thru the 1200 SF house. Although I will say most investors say two coats. I left the ceiling alone since it was actually in pretty good condition (Ceiling white color). This took roughly 3 separate days. Obviously there were way more repairs to be done, but many of them I hired out the work. I tried to refinish my hardwood floors myself but that turned out to be a disaster. I used a Oreck Multi-floor orbiter to refinish the floor, but that only left circle scratch marks on the floor. Rookie mistake. I would suggest hiring a professional hardwood floor refinisher or you could take a swing at it by renting a drum sander or U-sander from Home Depot.

As for roofing it really depends. I would just go online and have three separate contractors give you three separate quotes on the work. Again you could turn to AL and see the average pricing.

Good Luck!

Hmm I saw this one at T-Shirt Orgy in Berkeley, CA.

"Prose before Hos"

and it has a picture of William Shakespeare. Clever!

First off I want to thank you both for giving your views. I definitely see merit in both options. My only reluctance is as you stated finding a lender that would be able to do a cash-out refi after seasoning of 6 months. If I were able to find said lender, I would consider this option. That being said, I will have to find someone of this caliber in the Philly area. As for Bill's response, the parental separate title work seems like extra work, but the payoffs seem pretty worth it. It's never bad to have Mike's friend could add another game plan to their playbook.

As before, I said I would look into the Wells Fargo Purchase and Renovate loan. I spoke with a rep and he's running the numbers right now, but here are the perks:

-no prepayment penalty
-requires 25% down
-can do loans starting from $50k and up, anything below $50k will be a HELOC (a no-no for me at this point)
-ONLY ONE CLOSING COST!!
-Works on Investment Properties

Cons:
-Must hire contractors to perform the work
-I haven't heard of anyone doing this yet
-I heard its a little higher interest rate
-Hoping there's no requirement for points...

Right now this is definitely a contender because of the single closing costs and the lack of excessive interest rates from Hard Money Loans. Simpler and easier on the relationship for that matter, than the parental loan. Although I won't know until I try it. I'll keep you guys up to date -- still waiting on the offer response though.

Thanks,

Brandon