All Forum Posts by: Tom O.

Umbrella or LLC? No, umbrella AND LLC. Although if you have enough millions in insurance that is a pretty darn good way to shield your other assets. To answer your question, either way, the property has to end up in the LLC. The property secures the loan. But, nobody's going to lend you the money without you personally guaranteeing the loan as well. But you should try to prove me wrong. Because, yeah, the LLC has no track record of income and you do.

What I do know of asset protection is this: plaintiff's lawyers are somewhat lazy. They like big fat insurance policies. They don't want to go after land and property. They don't want to own or manage rental properties. They want cash. From an insurance policy. Get more insurance. Also, nobody says this but it's true: personal injury lawsuits are fairly rare. Get more insurance.  

Incredibly useful. Thanks. 

Quote from @Stephen Jones:

@Tom O.

I understand where you are coming from but in this particular college town theres been a few new shiny buildings built which scares me. This asset isn't extremely old or anything, but the big buildings built closer to campus is a concern.

 What I would do is look at Apartments.com, and Trulia and Zillow and talk to realtors about rental demand. How many apartments of a type like yours (1B/2BR) are available right now? How many typically in May/August/October. Your lease cycle may differ depending on the college's start dates. But how is demand for apartments generally? 

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? 

I LOVE multi-unit in small towns even without a college. I got a large building in a small town and the thing has been great. There's NO rentals available so demand is really strong. 

Quote from @Matt Lyons:

I have lived in Chicago area my entire life and have been investing in RE for last 5 years with about 80 doors...My advise is FOR GODS SAKE DONT GO TO CHICAGO it sucks in so many ways!  Appreciation is not near as high as other areas (I bought a Bonita Springs Florida 2 bedroom home in December of 2020 and sold in April of 2021 and made $95k, I did no work simply appreciation), ( I also bought a lakefront Lake of Ozarks home that I airbnb and make about $1000 a month true profit and it has appreciated over $100k in less than 2 years)

The city of Chicago also has laws and restrictions and building code issues that frankly suck for home owners and investors, you will be in for a lot or red tape if you buy IN the city or the wrong suburb. A good contractor to do the work is EXTREMELY hard to come by in this area.

Finally PROPERTY taxes here are the second worst in the country and NOT getting any better.  While you are fixing to flip a property you will pay a fortune in real estate taxes and not have quick appreciation...in somewhere like South Carolina you will pay about 1/3 the taxes while you fix the property and see double the appreciation as well during that same time frame

I invest mostly for cash flow and buy in the FAR west IL area in small towns...no crime, good tenants, far less city oversight in how I run my business and much easier to evict a tenant... in short NEVER BUY ANYTHING IN COOK COUNTY, it takes MONTHS to get a court date to evict a tenant. You can also go to www.heyjackass.com and see the DAILY shooting reports for Chicago, we are really shooting a ton, breaking records every week... although we tend to not kill many people because we are bad shots, we still shoot a ton of people... the city is almost considered a war zone

I am also moving to South Carolina this summer while my new home is being built... this state is bad enough that my family and I had to move!  We have watched a ton of people leave mostly due to crime and taxes and a horrible political and union labor structure that cannot be fixed.

If you want to be in the Midwest look toward central IN (places like Carmel IN and surrounding areas) and also Iowa (areas like the quad cities can be good)...but, as another member mentioned, people are heading to the sunshine states...if I was FLIPPING then I would buy in those markets.  The younger generations want turnkey on trend homes, most dont know that things can be fixed, so you can likely find beat up properties that the younger buyer wont even consider, fix them on trend with what they want in a home, and then sell them at a nice profit...in the HOT areas the properties that dont sell quick need work, if you can do that work you can make a great profit

 I have to agree. Chicago is a terrible place to invest. Don't do it. But if you want to sell any of your 80 doors would you mind letting me know? Thanks. 

I do agree with a lot of your points, all kidding aside. And I'm serious that I'd look at anything you want to sell because I still think Chicago is a very desireable place to live. There's a reason developers are still building thousands of luxury apartments. There's strong demand and good wages. They need to get crime under control and we have a "get out of jail free" state's attorney in Foxx. It's a problem. 

I do agree with you about rural areas. I think they are an untapped market. 

But as a out of state investor I think Chicago's probably a bad idea. 

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

I'm not sure what your question is. Do you have a decent credit score? Do you have the 20-25% down payment for investment property? Do you have a current home with equity? 

To buy an investment property you need 20-25% down. If you move into the property you could get a down payment as low as 3.5-5% down. In some areas in northwest indiana you may qualify for a no money down USDA loan. If you're a veteran you would qualify for a VA no money down loan. If you already have a house you may want to move into your rental just for that low down payment. You only need to live there one year.

I've seen this move into a rental for one year for the low downpayment approach called NOMAD and there's a NOMAD podcast. I would read Lindahl's book "multi-family millions." 

Quote from @Steve Vaughan:

........

The buyer also has an agent who is costing her $8333 for drafting an offer already spelled out in the Option agreement.  You'd think this agent could cut her a break.  No risk of offer not being accepted. No time driving around or competing with other buyers. Nah. Charge the full 2.5%. 

My rant about agents.  Greed over empathy for a young first time buyer.  What should have costed her $12k ballooned to $33k when agents got involved. 

 Your beef should be with the stupid buyer not the greedy realtor. Who is dumb enough to pay $8K for a cut and paste agreement? A lawyer would have charged less than $800. I used a realtor to close an off market deal and he charged $1,500 as a flat fee and split that 50/50 buyer/seller. Seller's lawyer wanted to rip him off drafting the sales contract. 

I think wholesalers are leeches who take advantage of ignorant sellers and these leeches should be put out of business by regulation. Go ahead and prove me wrong. 

I get so many calls from people trying to buy my buildings. And when I ask what they are offering they offer me 2/3 of what I recently paid for the building. Are they morons? Do they think I'm a moron? 

Look: bedbugs and ****** mattesses and bedding and you're asking if you should do something about that? Of course you should. You should do No. 1 and then when you get the money do No. 2. You don't really have a choice. 

First, get the place cleaned up. Get rid of the bedbugs which will kill a rental. Clean, fix, paint, etc. Do as much cosmetic and remediation short of gut rehabs you can. Get every unit up to some base level of adquacy.  Figure out what units are worst or which units will bring the most money. Fix/rehab them first. 

This is just advice from a schmuck who only owns long term rentals, however. I don't do STR and don't pretend to know anything about it. This just seems obvious to me.