All Forum Posts by: Heshel Mangel

@Ethan Henning Thank you for that info. Are you familiar with the Ellenwood area? I keep hearing mixed reviews about the neighborhoods north of the 138. I'd love to get some info from an agent that has real data.

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Thank you. That is a good idea. I never went to a REIA here in NYC because I figured I never would be able to invest here either way and the big players are way beyond my league. Maybe just visiting and attaching myself to successful people would be the way to go

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Originally posted by @Jason G.:

Originally posted by @Heshel Mangel:

Originally posted by @Scott Smith:

Originally posted by @Stanley Bronstein:

I have seen Due on Sale clauses get exercised by lenders.

Also, as @Steve Vaughan suggests, you can be creating title insurance issues, especially if you use a Quitclaim Deed, as opposed to a Warranty Deed.

The bottom line is simple. If you want your deal in an LLC, it should go in the LLC from the very beginning and the loan should be in the name of the LLC.

I agree with you that risking the Due on Sale clause is not recommended. However, I feel that you would benefit a lot from looking into Land Trusts. They do not violate the Due on Sale Clause, but you can still nest a Land Trust into an LLC by creating the LLC as the beneficiary.

https://www.biggerpockets.com/renewsblog/llc-lendi...

So, if I am understanding this correctly. I would create an LLC that holds no assets does no business. I would create a land trust in which I would then place the property, and designate the LLC as the beneficiary.

Is this correct? How would the state feel about having a single-member LLC that does zero business and holds zero assets?

Way easier to just get an umbrella policy than make yourself crazy with an LLC when you are just starting out.

Maybe @Scott Smith would be able to chime in on this as well, but do you have an LLC as your operating business? Aside from the discussion of whether to hold the properties in an LLC, land trust, own name, or what not, what about opening and operating your real estate business (bank account, EIN, income, expenses) through a separate LLC?

If yes, does it make a difference what state you open that LLC?

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Originally posted by @Scott Smith:

Originally posted by @Stanley Bronstein:

I have seen Due on Sale clauses get exercised by lenders.

Also, as @Steve Vaughan suggests, you can be creating title insurance issues, especially if you use a Quitclaim Deed, as opposed to a Warranty Deed.

The bottom line is simple. If you want your deal in an LLC, it should go in the LLC from the very beginning and the loan should be in the name of the LLC.

Is this correct? How would the state feel about having a single-member LLC that does zero business and holds zero assets?

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Originally posted by @Scott Smith:

Originally posted by @Heshel Mangel:

@Scott Smith

I can never seem to get a simple clear answer on this.

What is the way to go about someone just starting his real estate business (no previous business history or credit)?

It seems banks will not loan conventional loans to an LLC, yet buying a property under your own name and transferring to the LLC has all the issues mentioned above (DOS clause, Insurance issues).

So..how to get started?

Forget the LLC? Commercial loan? Try to sign title in LLC but take the mortgage personally?

Any clear advice would be greatly appreciated!

Hey Heshel,

This is the method I work with myself and have clients approach this topic. It does very on the specific needs of the investor, so this is not legal advice. This is just my opinion based on my own experiences and the clients that my firm works with.

An idea way to work this, especially for people with a growing portfolio, is to start with a Series LLC. This allows you to create "child" series that will house your properties legally separated, unless you do not maintain the corporate veil - we work with clients on this matter. This is where the Land Trust comes into the picture.

You will purchase the property in your personal name. This offers you all the normal financing options. From there you will transfer the property into the Land Trust, which will be nested into a "child" series of the Series LLC. There is a small chance that this can trigger the "threat letter" that was mentioned in my previous comment. At this point I have historically advised clients to disregard the letter, and even talked to some lenders who have become upset over this.
Two reasons for disregarding the letter.
(1) because the Land Trust is considered an estate planning tool, it is handled differently than properties transferred directly into LLC's. The letter is incorrect and my firm has provided several legal opinion letters to lenders detailing how the Due on Sale clause is not violated by this action. This tends to assuage lenders
(2) though banks may threaten this, they have never taken action against a performing note placed within a Land Trust from either myself or my clients. I have 2,000 clients and have created over 10,000 Land Trusts - yet to have a lender take action on a threat letter that is still performing.

There are more benefits to the Land Trust than just the Due on Sale clause, but that is how I generally work through these issues.
purchase property in personal name -> place into land trust -> house land trust in "child" series of LLC.

Thanks for this advice! Actually, the first time I heard of this strategy was listening to the podcast episode that you were on. I have to do more learning on that it seems. Does this seem to be a smart plan for someone just starting off or is this something more advanced (and more expensive) that only makes sense once someone has a sizeable portfolio under their belt?

Another thing I am thinking of, is just to create an LLC as my operating company (right away, and use this for all income and expenses) and down the line create LLC's to hold the properties. Does that make sense?

It seems from what I am hearing that purchasing a property with an LLC and the mortgage under one's own name doesn't really offer asset protection as it can be easily pierced.

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@Scott Smith

I can never seem to get a simple clear answer on this.

What is the way to go about someone just starting his real estate business (no previous business history or credit)?

It seems banks will not loan conventional loans to an LLC, yet buying a property under your own name and transferring to the LLC has all the issues mentioned above (DOS clause, Insurance issues).

So..how to get started?

Forget the LLC? Commercial loan? Try to sign title in LLC but take the mortgage personally?

Any clear advice would be greatly appreciated!

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I hope this is the appropriate place to post this, not looking to infringe on any terms here.

I am just wondering if anybody has heard of a real estate investors assistant. I am looking to gain some real-world expertise and knowledge as a real estate investor and figured there's no better way than to learn from someone already successful.

If anyone knows any investor in NYC that is looking for an assistant, I am happy to jump on board and hustle. All I'd need is a basic salary to cover expenses and I'd be happy to do the rest.

Any leads or advice would be awesome!

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I hope this is the appropriate place to post this, not looking to infringe on any terms here.

If anyone knows any investor in NYC that is looking for an assistant, I am happy to jump on board and hustle. All I'd need is a basic salary to cover expenses and I'd be happy to do the rest.

Any leads or advice would be awesome!

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Hey @Byron Scott ! Pretty late to the party here, but I am looking at a property in Villa Rica. How has your search and experience been trying to invest in the area?

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Originally posted by @Jason G.:

Originally posted by @Heshel Mangel:

Originally posted by @Jason G.:

We closed on our first duplex last week. The duplex was through Roofstock and located in Conyers, GA. So this makes our fifth Atlanta Market rental and fourth through Roofstock. The process went extremely smooth, but because we've done it several times already there are no surprises. The lender we've been using for this and the last GA property has been a pleasure to work with and they are very investor friendly with no odd overlays. We purchased for 127k w/ 25% down and the total rents are $1,400.

We had our first tenant leave, a couple of months early, but a new tenant is moving in so we only lost two months total in rent. The turnover required new carpeting and painting as well as a few other items. In total it came out to approximately 6k which really killed the numbers for the year. On a second property the tenant gave notice to non-renew, so hopefully we can fill that vacancy soon, though having a vacancy in winter isn't ideal.

Currently we have six conventional mortgage slots taken, so we are hoping to add a new property each year for the next four years and then our primary should be paid off giving us another slot. Looking at options after that it seems that the safest course of action would be just to pay one property off and buy another and keep repeating. Our goal is to have net annual cash flow of between 200-300k by the time we are 50, which gives us fourteen years to make this happen.

Congratulations!

I am amazed that you found a property on Roofstock that's rents for more than 1% purchase price.

Did the numbers you spent during vacancy fall in line with what Roofstock estimated you'd need to spend based on their inspections and underwriting process?

Do you have any desire to scale faster than what conventional mortgages will allow? Do your rates get worse with each loan?

In general, how accurate have you found Roofstock numbers to be now that you can compare with actual costs.

I've found Roofstock's numbers aren't always accurate, but they are using assumptions that they've come up with to analyze the properties. An investor always needs to do their own calculations. The rates have gone up with each loan. I don't want to get caught with my pants down, so I do not want to scale faster. There is another post right now on BP titled "25 units at 24 years old - What I've learned" where an investor has 25 units leveraged with 10 year commercial loans with 2,500 in reserves for each unit and some units cash flow at $50. I do not want to be in that situation. That sounds all wonderful, hey look at me, I have 25 units and then the market takes a down turn and guess, what, hey look at me, I have zero units. I'd rather deal with 30 year loans with no balloon payments and lower interest rates and then if I pay one property off, sure dead equity, but expenses drop significantly and cash flow shoots up significantly and as more and more units get paid off I will likely be able to ride out a horrible storm if one hits. My girlfriend and I have pretty good paying 9-5 jobs, so even though this whole concept of paying one off and buying one seems daunting, it actually isn't that bad. Once our primary is paid off in a few years we should be able to set aside between 85-100k a year solely from our 9-5 jobs just for either future purchases or pay downs, all the while rolling over the cash flow from the properties into more purchases. So things should move pretty quickly after a certain point from snowballing.

Thanks for the response. Of course due diligence must be done I was just curious as to their numbers as I've seen alot of it but never actually purchased anything myself. Some of their numbers they have from the inspection report though, you really are relying on them, no?

A big hit I keep seeing is they plug mortgage at like 5.2% when in truth the mortgage will be 6+%. Pretty quick for cash flow to go non existent with that type of spread.

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All Forum Posts by: Heshel Mangel

Heshel Mangel has started 25 posts and replied 198 times.

Post: Investing in Atlanta

Post: Real Estate Investor

Post: Due on sale clause-did it happen to anybody?

Post: Due on sale clause-did it happen to anybody?

Post: Due on sale clause-did it happen to anybody?

Post: Due on sale clause-did it happen to anybody?

Post: Real Estate Investor

Post: Real Estate Investor

Post: Villa Rica/ Carrollton Buy and Hold

Post: Roofstock Case Study