All Forum Posts by: Thos. A.

If you're an LLC or corp, beware of representing yourself. Judges in non-metro counties are now using an obscure 2015 court case/precedent involving a large out of state Trust renting to a Section 8 tenant (who won based on some federal violation). Judges consider this precedent their license to rule against the owner of an LLC, even a small flow-through SMLLC, representing him/herself. I've had this happen to me EVEN if the tenants doesn't show, or ask about it. Judges feel it's their role to advocate for tenants, even the ones who know they didn't pay and don't bother to show up. And it's getting worse. I've had this happen in three outstate counties now. I have a whole legal argument about why this precedent doesn't apply, with supporting case history, but of course no judge--even the ones who don't follow the statutes themselves when ruling (happens a lot)--want a lesson or lecture in law from a layman like me. They're the experts...and have the power.

I'm in the process of writing and asking my state legislators to extend Housing Court Rule 603 statewide; it seems very logical. If you agree, please contact your own rep, and simply ask that "Housing Court Rule 603, allowing small landlords using LLCs to represent themselves, be extended statewide. It's only fair that all small-business owning Minnesotans should have access to the same rules." Thanks.

Most of the advice above it interesting, but premature. The right structure can come later; MN LLCs (I have 8) are cheap and easy to set up, no attorney needed. Get a few deals under your belt first and get comfortable with the nuts and bolts of the business, then worry about such details. 

Just to vent a bit...Nobody's trying to prosecute Neiman Marcus, or Ebay sellers, or even Wal-mart for making a profit. It's understood. And I'd guess even Wal-mart has some items they mark up 50% or more. Mark my words, it's only a matter of time before retailers get nailed for daring to seek profit. Is there no limit to this nanny state? "Atlas Shrugged" has never been more topical.

People go to payday lenders because it's their best, or only choice. They get "screwed," yes, but aren't they complicit in the screwing? People don't get talked into doing something they don't want to do. They use the brains they have to make the best decisions they can. Jesse Ventura once said "you can't legislate stupidity," and he was right. If the gummint wants to eliminate the profit motive, they are sure doing it.

Yes, there may be little old ladies laying for inadvertent ADA violators in Missouri (or is that an urban legend?), but I wonder what happens in court. There are plenty of people doing seller-financed deals every day who don't even know about SAFE, or Dodd-Frank. Do I need to hire LMOs to run my deals through? I've started doing that, yes. Should we be fair (while being profitable) Are there really regulators scrutinizing HUD's out there, looking for possible unfair transactions? If so, perhaps they all just got laid off due to sequestration. But despite all the challenges and hindrances put up in the risk-taking entrepreneur's path, the rest of us, we'll keep doing what we do, Lonnie deals and all, in our pursuit of the American dream. And if the govt decides to kill off all the incentives to make a living, we'll join John Galt in fantasy land.

You'd be well-served by working with agents familiar with REOs and foreclosures, not just whoever answered the phone. Check sites like HUDhomestore.com and homepath to ID the agent-players in your area, some of them are good to work with, others just act like conduits and offer little service. Find a agent who'll set you up with auto-emails of new MLS listings. Many "investors" are about and agents, just like you and I, want to avoid wasting their time on the non-serious ones. So it's a bit of a game. Though we all prefer to have THEM working for OUR business (not the other way around) I never sign those agreements. I do have a few favored agents I make offers through. They are usually the ones who choose to sign me up for auto-send MLS emails.

Stop asking big banks. Go to local, community banks and credit unions, esp. the ones that have business loans and accounts. Look for the ones that hold their loans in house, not sell them to Fannie. Then you're not bound by the Fannie rules. I have nearly 20 financed properties (8 with one credit union) and no one's every mentioned a limit. I've had them refi for me as quickly as one month after purchase, too, at appraised value of twice what I paid. Just don't borrow so much that you hinder your cash flow.

I have around $5m in real estate, mostly small rentals and houses I've sold on terms. I have so many varied deals--Sub2, sandwich leases, houses sold on CD, timber sale income, flips, interest from private loans...then there are all the receipts for expenses, 1099s for workers, 1098 for buyers and from banks, organizing the data to be entered, tax planning, the list goes on and on. Of course I have a bookkeeper, and a CPA who does my taxes which helps.

I spend so much time on tax-related stuff that I got to wondering...what if I ignored the rules completely, kept all my receipts, but just focused on deals, and didn't file any returns at all? Yes, I'd surely get audited eventually. Let's say the IRS audit me and present me with a bill including penalties for, I don't know, say $200,000. Then I just pay it, and go back to work and make it back in a few months. Or what if I just made the recommended quarterly estimated payments, but never actually filed returns?

I know I'd be at their mercy, but something about this makes sense, just let them send me a bill, even if it's biased in their favor. Does anyone know someone who did this? I'd love to hear what happened.

Looks like this post has been going awhile, but I'll add my 2c. I'm shopping Solo Roth 401k right now (want to avoid UBTI) for my better, seller financed/sub2 RE deals. I checked FoxnFox, they've added an annual fee as of November 2012, and I don't blame them, and would worry if they weren't getting paid to keep me current. My wife already has a Roth SDIRA with LLC/checkbook control with Sunwest, and I've been happy with the customer service. At $500 to set up and $200/mo, they're not the very cheapest 401k (Vanguard gets $1995 + $40/mo!) but they've been at it for years, and I've been pleased with their customer service.

Is this completely turnkey, no repairs needed to lease up? Then your numbers are OK, and it's an OK deal to start out with. If not, add in the cost of repairs. Even if you factor in your time---which you should--this deal provides enough (and not much more) cushion to get you started, and you'll learn the ropes as you go. And get to know this website, http://pa.courts.state.mn.us, you'll need it to screen your tenants. WI, IA, and ND have free sites too, for tenants from further afield, search "(name of state) Courts" to find them.

You sound like the guy who is worried about how he's gonna pay the taxes on his next profitable flip. If your mgmt company is keeping your properties filled, they are obviously incentivized to do so, who cares? As long as they don't let late rents get out of control (or let too many people think it's OK to be late a lot, that's a slippery slope) and they have a firm eviction policy, I'd worry about more important things. I manage my own properties, about 60 tenants, some pay late regularly, some include the late fees, some don't. I note what's owed by those who don't pay late fees and deduct from their deposit later. I don't spend my time hounding people to pay $50 of late fees, my time is more valuable than that. And I factor in the type of tenant. If they don't complain much and take care of minor issues themselves, I'm happy to let a few late payments slide.

Can't find any recent info. Apparently HUD told all states to enact their own version of SAFE or be subject to federal rules, so they all did that. How aggressively is it being enforced, has anyone been made a "test case? I worry that small investors that a small investor might get busted for selling a house on seller finance terms, Contract for Deed/CD or Land Contract. Is it better to avoid this completely and just sell on Lease Options, which aren't equitable contracts?