All Forum Posts by: Todd Magin

Darsh Patel Short of visiting the area in person, you can go on apartments.com or other such sites to do virtual tours of your competition in the area. You can get an idea of the types of finishes that other rentals have.

Jonathan Johnson I'm a newbie here but have read a lot. I think one option is to form an LLC (or other business entity) and have the investors listed as distribution partners of the LLC based on their initial investment (or any distribution agreed upon). Management responsibilities can be allocated totally separately (you could retain 100% control). The LLC would then buy the property with the profits distributed to investors according to the LLCs articles of incorporation. If you go this route, get a RE attorney to set things up and also run it by your lender. Some lenders may not lend to LLCs. Hopefully others more experienced than I will chime in!

@Jonathan Santa

Welcome to Bigger Pockets!!  You certainly sound ready to go for it to me!  I am also a newbie with a similar goal of landing my first MF property this year.  The one thing I would encourage you to do is to use the BP rental calculator to help you analyze the deal.  It will remind you of all the costs involved and also help you determine the price at which you should buy the property.  You can also share the details here on BP and the community will help you analyze it.

Apparently the formation of Series LLC's are only "allowed" in a few states. I live (and will invest in) Maryland, which does not allow the formation of Series LLCs. Is using a Series LLC as simple as forming it in another state such as Delaware where they are allowed?

Are there legal ramifications of skirting the MD law in such a manner?  Since the business resides in MD, does the MD law trump the Delaware law?

What are the tax implications?  Do I have to file returns in both MD and Delaware?  Annual fees to both MD and DE?

Would a RE attorney know both sides of this equation or would I need an accountant as well?

@Todd Fithian, @Patsy Waldron, @Jessie Niu

Great goals!! I fully expect to see three posts in the "Success Stories" from all of you later this year! :)

Good luck in 2017!!

@Kevin Siedlecki

Have you ever put seeing the tax returns in a contract?  It could be written as a contingency you could use during your due diligence period.  The seller may be more forthcoming if they know they have a serious buyer, but like you said, they are under no obligation (unless they sign that contract!).

@Tony Stancato

You should be able to get actuals on taxes, insurance, utilities, with a few phone calls (or on the internet) and you can also get area vacancy rates from the local chamber of commerce.  As for capex, I use 10% of rent.  Also, I use 10% for property management as well (you can also call a PM). 

I agree with @Kevin Siedlecki, the capex and vacancy numbers are absurdly low and the PM is also missing. After adding these in, your numbers will come close to the 50% rule, so you're probably in the ballpark, but verify as much as you can.

Oh, one other thing you can ask for is the owner's tax return for the property.  They normally don't fudge expenses there!

Alan Smith I agree with Matthew Drouin and James Swiech . Your ROI for ONLY the tenants paying off your mortgage is about 8%, but if you could buy low enough to get a positive cash flow, make improvements to raise the rents to market, and cut expenses to increase cash flow AND invest in an up-and-coming area to maximize appreciation, you'll have reached investing nirvana! Don't settle for no cash flow and look for mismanaged properties where you can increase cash flow.

@Eismail Ismail

@Christine Mwai detailed (more eloquently than I) seller carry back financing where the seller agrees to finance a portion of the purchase price and takes a first position lien on the property.  This protects both parties because the buyer takes title on the property at settlement (his lump sum is secured by the property), and the current owner's interests are also secured because they have a lien on the property and can foreclose if the buyer does not pay off the loan per the agreed terms. As Christine advised, a lawyer should draw up the contract.

I'm interested in hearing this answer as I'm curious.  It sounds like the current owner is offering a seller carry back, but that would make the buyer the owner at settlement, not 5 years down the road.  This does not sound like a good deal for the buyer as he could lose his lump sum if something happens during that 5 years.

I would definitely recommend that the buyer see a lawyer, because they would probably not advise them to continue with these terms.