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All Forum Posts by: Tom O.

Tom O. has started 11 posts and replied 210 times.

Quote from @Chad Westfall:
Quote from @Tom O.:
Quote from @Chad Westfall:
Quote from @Tom O.:

Don't waste money setting up an LLC until you actually own something.

@Tom O.

Not sure I agree with this for all situations. I buy multifamily (5+ unit) properties. The LLC is required to start any type of financial conversations.
 

@Christopher Tokarski

Why is an LLC required to start "any type of financial conversations"? I'm at 25 units with two buildings at 5+ units and I still don't have an LLC. Is my commercial banker doing it wrong? You think I need an LLC to have a "conversation" with someone who wants to loan me money or sell me a building? 

I think too many people are told "get an LLC" and they blindly do it not knowing why. What is the purpose of the LLC? Is it liability protection? A $1 million unbrella costs $300. Is it something else? What? 

 @Tom O. In my experience, many commercial lenders won't do personal loans on commercial properties. They require an entities (LLC, S or C Corp, etc). Your a perfect example of an exception, which is why I said I don't know if I totally agree with that statement. There are exceptions in every case.

I did misspeak that all loans require an entity. I used LLC as an example but should have kept it more broad.

As far as the LLC conversation, there are tax strategies that make LLC's favorable. They are not just for protection, although that is the most common reason people use them.

1. My commercial lender has given me two loans without an LLC. 
2. What tax strategy is there that makes an LLC favorable? I would love to know since my accountant has said nothing of the sort and my own understanding is that an LLC is just a pass through for an individual. So it is hard for me to see what tax benefit there could be but I'm not an accountant. I do like and trust my accountant. 

Post: 6 Family Apartment Building

Tom O.Posted
  • Chicago
  • Posts 214
  • Votes 165
Quote from @Jaryn Pierson:

Hi All

I have a 6 family apartment building I've been starting to look a little deeper into.  I've done the underwriting of the property first from a distance, and then zoomed in a bit closer and underwrote the deal as both a before, and after some common space renovations.

The property is owned by two brothers who definitely want out.  They've been handed the property down from their parents, have mismanaged it pretty poorly, and now have had to property fall out of escrow twice over the last year due to hard money falling through.  Nobody is on a lease, and although some capex stuff has been done over the last couple of years (roof, sewer line), many other things have not.

For starters, the four upstairs units are on their own electric meters, but the two downstairs units as well as the common spaces are all on one meter.  At the very least, all the electrical meters will have to be moved outside once any work starts, and I'm looking at 7 new meters and 7 new panels.  My question is, what are some resources I could look at for commercial that will show exactly what type of things will be tripped once I start doing some work.  I'm ok with the electrical work, but if all of a sudden all the plumbing needs to be replaced because of something, and then the fire suppression system etc I'll be in trouble real quick.  

I've never bought anything over 4 units so this is me wading into uncomfortable territory, but I do feel like with the right value adds over time this thing has the potential to be a great buy for me longterm.

Thoughts?

ps as far as building codes go, I'm in the state of Massachusetts


 Instead of asking us you should ask a local general contractor. Based on the age and what kind of plumbing was put in you should have some ideas after a thorough inspection. 

Quote from @Steve Vaughan:

I usually just say I'm mostly retired if anybody asks, but they rarely do. 

I have quite a few retired silver backs I work out around  at the gym in the quiet mid-morning hours. They ask sometimes. 

It was tougher when I used to buy a lot of construction material in the middle of the day.  Are you a contractor I would be asked.  Nah, just a bad handyman patching together a rental I'd say.  A few would ask about that but for the most part people are just doing their own thing and really don't care. 


 My Butler buys all my construction material. 

Post: Managing First Mult-Family

Tom O.Posted
  • Chicago
  • Posts 214
  • Votes 165

The one thing I found really helpful in getting tenants out (and you really don't want to even think about eviction in Cook County these days) is cash for keys. In the long run it will save you money. I used it with a gang family and it worked so well it was astonishing. That and bringing cookies. 

To answer your question, talk to bankers now. I have really liked Horizon bank for loans. Talk to bankers and mortgage brokers now about what your income and data would pre-qualify you for as some sellers will want to see that before they even show you their property. You should also try your own bank. You already have a relationship with them.

Post: Question for all Appraisers

Tom O.Posted
  • Chicago
  • Posts 214
  • Votes 165

Not an appraiser but I know many many (most?) two and three flats in Chicago have these enclosed but unheated back porches. So I'm not sure heating is a requirement. 

I have my butler handle all such pesky questions. 

Post: LLC or S Corp or Umbrella insurance?

Tom O.Posted
  • Chicago
  • Posts 214
  • Votes 165

my umbrella is $300 for $1 million. So $1200 buys a lot of umbrellas. 

Post: Managing First Mult-Family

Tom O.Posted
  • Chicago
  • Posts 214
  • Votes 165

Welcome to Chicago. 

First, there's a new Chicago ordinance which provides for 30, 60 or 90 days notice for rent increases and terminations depending on how long the tenant has been in the unit. So you need to figure that out. It's 30 for a 6 month or less tenant; 60 for 6 months to 3 years and 90 for more than 3 years. 

https://www.chicago.gov/city/e...

And while I agree with your decision to not use property management you will need to get up to speed on regs here in Chicago. For leasing up, for instance, there's a new Cook County ordinance regarding criminal screening. For that use apartments.com or Trulia or Zillow as they seem to follow it. Also, require a 650 credit score. I'm in Chicago so feel free to reach out to me if you need any advice. I'm only four years into it but have made my share of mistakes. 

And this is a good read on evictions and other rules in Chicago and Illinois: 

https://www.chicagoeviction.co...

He's an attorney and I can highly recommend him if you need help especially with evictions, etc. 

Post: Strategy to get to 100 units?

Tom O.Posted
  • Chicago
  • Posts 214
  • Votes 165

@Jeff Copeland can you send me that link as well? Thanks