All Forum Posts by: Will S.

Silver River Realty is based out of Bowie - (301) 352-0098.

Bill, your post surprises me. Not sure what facts I could derive from it other than needing '5mm$'? (annually? cash on hand? based on what value of a loan? just a little confused here with what you're even saying).

I would expect that an LLC clearing, say 100K in profits a year, with a D&B positive credit rating, could secure a loan for a simple $100k, or 200k equitable property.

My goal here was to see if anyone has some knowledge on the subject and I'm still open to any advice or tips from members of the community who might have something to contribute.

I'm definitely no good at the KISS method, and that's by design. John Starkey, I separate LLC's for liability purposes. If one LLC faces a lawsuit, the suitor can take only upto that property, where otherwise they could get their dirty hands on a few properties. The cost in Maryland is $300/yr per LLC.

At Bill G., could you expand on eliminating the personal guarantee? I understand obtaining commercial lending requires significant profit margins, cash reserves and a DandB credit profile, but if those are obtained, what kind of commercial criteria are we exactly looking at so there doesn't need to be a personal guarantee?

Thanks Steve. I don't mind providing the paperwork to show where the income came from, in fact it's expected. But wouldn't you agree it would be simpler to secure lending in the name of one LLC as opposed to six under a joint application?

Tax season is approaching!
I am a buy and hold investor in the DC area. Currently my properties each have their own LLC, and the taxes reflect the same. However, I know that down the road I would like to break into commercial lending, borrowing against an LLC. For that reason, does it make sense for all profits from the various LLC's to "pass through" to a central LLC? Perhaps two years from now it might be able to qualify for a loan? Any thoughts?

Thanks Craig. I agree with your opinion that the long term agreement could have potential for problems. However I've considered it from the angle of the contractor and it might not be that bad after all. Consider this - currently I am averaging about one and a half repairs a year at which cost me between $100 and $200 each. That's not bad for a contractor to earn a stable $250/mo cash flow, plus appreciation, even considering the inevitable surprise here and there. The quick math on that average is $225/year in repairs, cushioned to $1,000 for unexpected, vs his earning of $3,000 in projected annual cash flow - not accounting for vacancies and the like.

When looking at it that way it almost feels like I am being too generous, but then I conclude that 25% seems like a fair ratio for both parties.

Thoughts?

Good Evening BP. Experienced buy and hold landlord here wondering what others experience has been partnering with contractors?

I am considering offering my contractor a 25% equity stake on my next deal. I'd cover 75% of the materials cost, him covering the remaining 25%. He's licensed and operates a local repair business and we've done a lot of work before. Initial rehab would be between 'moderate' to 'heavy', but not 'severe' and the contractor would also be responsible for all tenant repairs and modest annual property improvements (within a two week turnaround).

My current properties are averaging about $1,000/mo in profit, after an $80-90k price tag. So the contractor would essentially be receiving $250/mo cash flow, plus cash out or eventual sale. Initial rehab estimates would be in the ball park of $10-20k without the partnership.

Am I offering too much, too little, or just right? My goals here are to eliminate unnecessary repairs by having a contractor who has an interest in doing the job right the first time. Also I'm a believe in having a quality team, and sharing in the profits. Finally, we all know cash is king and keeping upfront costs down seems only fair to return the favor on the back-end.

Hopefully I've provided enough information to get some feedback. Of course, we all have a different opinion on what a "moderate" rehab is. The agreement would be in writing, the operations would be recorded in a LLC with dual owners, and I'd form the LLC to be able to execute decisions with only 75% approval (if there's a disagreement to sell or hold, it becomes a non-issue). Also, keep in mind I am a buy and hold investor, so there is no quick flip and he would be in it for the long haul (10 years)!

What are your thoughts? Anyone have any positive experiences, or suggested profit share models? Anyone have negative experiences? (and if negative, please share how thorough the previous agreement was before going in together!)