All Forum Posts by: Ryan Gillette

Are the lenders on those notes going to allow you to transfer title out of your name? Typically a transfer accelerates the note. 

If you do transfer and cross your fingers they don't call the note, you may still have issues comingling corporate assets (rent) paying personal debt (mortgage) which kind of defeats the purpose.

A less talked about approach to asset protection is good insurance. If a tenant is injured, wouldn't it be better to have $2M policy and insurance fighting it, rather than a cheap policy you exceed and now fight on your own or forfeit your LLC and then pray you didn't violate anything the tenant's attorney could use to break that protection and go after your other personal assets.

Maybe HR Block will do it for free if it's their mistake. The 1040X is below if you're curious. You just put a few numbers from your old return on the left side, your updated numbers ( "X" - $4000) on Sch E and updated (lower) tax due off the tax table. Explain the change in the comments. Pop it in the mail.

https://www.irs.gov/pub/irs-pd...

Are you running better numbers in MF? My experience, the ROI in the SFR 1-4 space using 30 year conventional is typically pretty good. It's been eaten into in the last ~14 months, but if you can nab a 30 year in the 5's from a local bank with a good down payment, you'll usually see a 10%+ return.

You can ride that train to 10 properties with GSE backing, all 30 year fixed debt.

MF has its advantages - economies of scale, easier to make large investments, less competition (sometimes). But unless you're running numbers and thinking you can make significantly more in MF, I would stick to SFR 1-4 unit.

Whatever you do, start with a written notice. Below are TX rules. Sometimes that alone is enough of a reality check for people, but at least it begins your clock today.

In terms of owner-occ, like Chris said there's provisions that allow you to screen differently - eg. you can deny an applicant with children. Tenants still have a right to live somewhere and until you give notice, you can't make someone homeless at the drop of a hat.

https://guides.sll.texas.gov/l...

If it's a rental, file a 1040X. It takes less than an hour. Amend your State as well. Unless you make $1000+ per hour, great ROI.

Anecdotally, it's pretty common. We see it a lot on the lending side where people will miss writing off taxes, insurance, HOA, etc on their Sch E. Sometimes there are reasons (tax disbursement wasn't until Jan 15, etc) but there are more cases than people think where it's oversight. I made a similar oversight once, amended, and a $700 check came maybe 6 weeks later.

It depends on your state statutes for cases in which a lease may broken early, such as domestic violence. If they legally can't break the lease, I would request they pay the monthly rent when it's due, and return the security deposit as you would normally, less damages, a month from now. If they refuse, I would send an itemized bill for the month rent due, deduct the security deposit, and return any interest. It would tough for them to sue you for the security deposit if they failed to meet their obligation, and you followed state guidelines for itemizing the portion of security you retained.

More realistically, something to consider is that you do run a risk they'll sue - especially if there's a case the door was a safety hazard or there's a state statute that allows them to break the lease. In my state, you risk triple damages if the judge sides with the tenant. That is, by keeping their security deposit you risk tripling your loss.

What kind of rent could you get for it? Location is not inherently bad if you get the right value on the property and have the right expectation for the property and its tenants.

Being close to a highway is good for some tenants (transportation ease) and bad for others (noise, view). Being 20 minutes from amenities may be a turn off for some people, or nothing to others. Depends on the area. If you'd get $1000/mo in town, you might only get $900/mo out there. As long as you're aware of that and calculate that in..

It'll all depend on the costs, but generally it's worth the investment:

1. Attract higher rent > increase revenue

2. Quicker turnover > increase revenue

3. Increase value of the property > increase assets

Painting, light fixtures and a linoleum floor are going to wipe out years of profit? It shouldn't. But if that's the case, you could focus on the imperative things (floors and walls), and spread the rest of project out over years. If you can swing it, it's usually best to do it all at once and capture the benefit upfront.

1. It's often wiser to keep existing tenants and slowly turn up the dial. It allows you to slowly turn over the property into the higher market rent while keeping vacancy loss and rehab costs more spread out. The downside to a large rent hike is not just the jump in vacancies, but also potentially creating a glut, depending on the size of the market. Let's say in any given month there are 10 tenants out there who want your apartments. Is it better to put 9 units on the market and hope at least 9 of those 10 meet your criteria? Or is it better to put them on the market slowly one at a time and get to choose only the best of the 10? The other thing is your rehab costs. To get market rent, it might require more than paint. Usually there's more repairs (fixing appliances, this and that). All in all, if you try it all at once you could eat a big vacancy loss, have an iffy pool of tenants and a large repair bill. Keep in mind though, some investors go in Day 1 and do this. The rent increases just have to pay for the losses you'll take early on and you have to be able to take that loss year 1.

2. Ask your realtor for a referral. My personal system is pulling criminal and credit through my company, then I do the screening myself. Call the landlord. Call the employer. Check their capacity ratios. Actually look through their credit, not just their score. The big thing, if you do it yourself, is to have a uniform written system and follow it. Even if race or ethnicity didn't influence you, you can't make exceptions for one person and not another. If at some point you get sued, you want to have meticulous records or why you accepted or denied applicants.

3. I'm wary of full service automation. Maybe when you're at a point where the low cost of automation outweighs the extra cost of evictions, it makes sense. The systems I've looked at simply pull multi-state criminal and pull tri-merged credit, and leave the rest up to you. That's the best IMO. The ones that promise to screen the tenant for you.. I'm wary of. I was just looking at one that promised that and their approach was looking at 6 months cash-flow. Promised to get  It's a good tool but a poor way to screen someone because it doesn't give you enough information of income continuity (let's say the tenant's child support/alimony ends in 6 months).

If you're not an attorney, don't write an RE purchase contract yourself. Contact a local RE agent or the property's listing agent and ask for a standard boilerplate contract. It's usually written by the local Realtor board and is fair to both sides of the transaction in accordance with local statutes. It costs you nothing and will be much more effective to both sides than what you write.

Keep in mind, it will likely cost you more for an attorney to read and correct your own written contract than it would to hire an attorney to write a contract for you. But if you get an attorney involved at this stage, you're probably looking at least 2-3 billable hours for them to meet with you, put the contract together, and then explain the contract to you. That could be $250-$1000. But for a standard purchase, it's a bit like hiring a surgeon to apply a band-aid.