Brandon and David: Ask Us Anything Podcast!

188 Replies

Originally posted by @Jasmine Nelson :
Originally posted by @Lynnette E.:

I am also interested in why LLCs are popular and discussed so much on Bigger Pockets.  

My attorney is recommending putting property in a Trust.  The title insurance is still valid as the trust takes ownership in my name as trustor.  It avoids probate and is easy to pass onto heirs.  Separate trusts can reduce liability and are cheap to clone and all of them together would require one tax filing, under my name with my regular taxes.  It allows one to offset profit and lose for all assets in one tax filing.  

He sees LLCs as vastly more complex than needed and more expensive, management and tax wise.

So, can you explain the difference and what are the benefits/disadvantages of each?  I'd like to understand different opinions.

Awe, good question as I am in the same predicament. I prefer Trust but then it's probably because I don't know much about LLC's either. Please let me know what which you decide to choose.

I am almost certain I will be using Trusts.  I have my personal homes and an adult disabled daughter's home in a Trust now.  I likely will put the rental properties in another Trust.  I may set up a third for a 4 unit apartment, (and future assets) that is in escrow now, but might just put it with the other rental properties.  For liability I do not want to put the rentals in the same Trust as the homes my family live in.

Its really a personal decision, and I am still seeking input. I don't understand the big push on LLCs on BP, but am trying to read and understand it. Really seems excessive when they also put one house in each LLC and they have pulled out all the equity. Might not ever agree, but do want to understand. Or maybe its great and I am missing something important. That I why I still want to learn.

Part of my decision is also based on having 15 year old kids and being in my late 50s. Most of my dependable relatives are deceased and I have one druggie brother still alive. He would love to seize all my assets if he could. Trusts will protect my assets better for my disabled adult daughter and two teens. LLCs would be something he could spend a lot of time trying to get, and my young kids and disabled daughter would not have the ability to fight him. I am also not seeing the benefit of a LLC. I carry heavy insurance and am NOT a slum lord. I keep things safe and working well, so do not have a high risk. It seems that the benefit of an LLC is risk management, nothing else?

I'd love to hear from more construction side of the investing. People who do ground up or have a background as a general contractor, or people that know the ins and outs of the building trades.

@Brandon Turner Should a first time buyer spend every penny They’ve saved on the down payment of an FHA loan on a multi family to house hack (given all numbers look good, expenses paid, and a little extra cash flow cushion for maintenance and capX)....or should they wait an extra year to start shopping when they can maybe have a $15k backup reserve cushion?

@Brandon Turner what is Brandon Turner’s story, from beginning to present?? Everything from the emo days to now? Is there a Brandon Turner specific interview podcast anyone? All the nitty gritty in one podcast?

Originally posted by @Lynnette E. :
Originally posted by @Jasmine Nelson:
Originally posted by @Lynnette E.:

I am also interested in why LLCs are popular and discussed so much on Bigger Pockets.  

My attorney is recommending putting property in a Trust.  The title insurance is still valid as the trust takes ownership in my name as trustor.  It avoids probate and is easy to pass onto heirs.  Separate trusts can reduce liability and are cheap to clone and all of them together would require one tax filing, under my name with my regular taxes.  It allows one to offset profit and lose for all assets in one tax filing.  

He sees LLCs as vastly more complex than needed and more expensive, management and tax wise.

So, can you explain the difference and what are the benefits/disadvantages of each?  I'd like to understand different opinions.

Awe, good question as I am in the same predicament. I prefer Trust but then it's probably because I don't know much about LLC's either. Please let me know what which you decide to choose.

I am almost certain I will be using Trusts.  I have my personal homes and an adult disabled daughter's home in a Trust now.  I likely will put the rental properties in another Trust.  I may set up a third for a 4 unit apartment, (and future assets) that is in escrow now, but might just put it with the other rental properties.  For liability I do not want to put the rentals in the same Trust as the homes my family live in.

Its really a personal decision, and I am still seeking input. I don't understand the big push on LLCs on BP, but am trying to read and understand it. Really seems excessive when they also put one house in each LLC and they have pulled out all the equity. Might not ever agree, but do want to understand. Or maybe its great and I am missing something important. That I why I still want to learn.

Part of my decision is also based on having 15 year old kids and being in my late 50s. Most of my dependable relatives are deceased and I have one druggie brother still alive. He would love to seize all my assets if he could. Trusts will protect my assets better for my disabled adult daughter and two teens. LLCs would be something he could spend a lot of time trying to get, and my young kids and disabled daughter would not have the ability to fight him. I am also not seeing the benefit of a LLC. I carry heavy insurance and am NOT a slum lord. I keep things safe and working well, so do not have a high risk. It seems that the benefit of an LLC is risk management, nothing else?

 I think you're making the right decision by putting you assests in a Trust especially when you have a disabled child.

@Brandon Turner More epsiodes on scaling. Alot of us got over that 1-5 deal hump. the next 6-20 deals is where we need help. Too small to scale massively, but to big to not think growth/efficency.

not a newbie but far from an expert too!

Originally posted by @Devin Gordon :

The refinance portion of Brrrr is unclear on how to do it in specific steps, for those of us who have never done it. Like the appraisal, and if you've never actually been through the steps it feels quite scary because most of the time were just taking one persons advice on what to do, usually from the lender I would expect. So could you break down what you do when your ready to refinance, do you just call your lender and say "hey I'm ready to refinance!" and the steps after. What happens if it does not appraise for what you thought? When Brrrr goes wrong... etc...

Devin - a lot of this stuff doesn't need to be scary. When I did my first BRRRR, I left a lot in the hands of my mortgage broker.

Make friends with your mortgage broker! A good one will always look out for you. Repeat business for them feeds their kids. 

My mortgage broker told me exactly what I needed to do for the refinance, appraisal, etc. 

Also, there are plenty of refinance products out there where a good mortgage broker can tell you the best one to go after. 

If you need any help please reach out some more! I'm happy to help. 

@Brandon Turner I'm so new that I'm in the middle of reading How to invest in Real Estate. I love the book so much, it has really helped me to make sure my financials are sorted. I made a conscience decision to prepare all my food once I saw how much unnecessary money I was spending buying out. Also purchasing my own router and switching my isp which saves me another $50. So I'm already saving $300 a week +$50 a month, which is a lot more to put towards any debt and increasing my savings. I'm so impressed with this book even though I'm not done and really excited about get my investment c

areer started.

So on to my questions. I don't own any property and currently rent in NYC. I've been thinking about if I should purchase a co-op or condo to start so that I can better understand property investment or might it be better to start buying rental properties first and then find a space for myself once I have more capital? Maybe the book will help 😊

Regarding the BRRRR strategy, if my partner and I buy a property under one LLC for renovation, can we then "sell" the property to our other LLC for property management in 3-6 mos? Is this a way to get around the time constraints to typically associated with a refinance.?

@Frances Song I agree. Would love to see more podcasts from women. I'm guessing BP demographic is 90% 25-50 year old male here but love to hear from women who became successful, especially by themselves. I think it is much more rare for women and much harder for us to find a network, mentors, partners. Hard to break into the boys club.

@Ryan P. Kotschedoff Would also love to see more podcasts and articles or how-to guides for young people starting out. Teens/early 20s. Maybe sub forums for both women and young people under 25?  

Also like to see more meat/detail in general in the podcasts. Really like seeing the detailed analysis of deals from Brandon with photos and numbers. How did they find their first loan and where? What challenge did they overcome with financing the first few deals and how did they overcome? What mistakes did they make along the way? How to find a partner, mentor or financing source on BP? More info on LLCs, trusts, insurance (liability, landlord), more info from a property managers perspective (how to deal with....), info from attorneys, etc. Is there a reason podcasts can only be investors and not PMs, landlord/tenant or RE attorneys, insurance agents?

Originally posted by @Mary K. :

@Frances Song I agree. Would love to see more podcasts from women. I'm guessing BP demographic is 90% 25-50 year old male here but love to hear from women who became successful, especially by themselves. I think it is much more rare for women and much harder for us to find a network, mentors, partners. Hard to break into the boys club.

@Ryan P. Kotschedoff Would also love to see more podcasts and articles or how-to guides for young people starting out. Teens/early 20s. Maybe sub forums for both women and young people under 25?  

Also like to see more meat/detail in general in the podcasts. Really like seeing the detailed analysis of deals from Brandon with photos and numbers. How did they find their first loan and where? What challenge did they overcome with financing the first few deals and how did they overcome? What mistakes did they make along the way? How to find a partner, mentor or financing source on BP? More info on LLCs, trusts, insurance (liability, landlord), more info from a property managers perspective (how to deal with....), info from attorneys, etc. Is there a reason podcasts can only be investors and not PMs, landlord/tenant or RE attorneys, insurance agents?

Hi Mary - of all of those questions above (they're all great ones!) which one do you think is holding YOU back the most?

Analysis paralysis is the killer these days in real estate. I paralyzed myself with the details for years. I finally just had enough courage to bite the bullet, and get after it, and I'm so happy I did. If I didn't I'd still be asking questions each day.

The moral of the story is, you need to take the initial leap of faith. All of those questions you ask get answered along the way. But you need to conquer the FIRST obstacle.

So again, which of these is holding you back MOST? Which is the next step on your list, and why do you feel like you can't do it? 

I have a question about finances and using a line of credit to get your initial capital. I'm feeling overwhelmed and not understanding how you manage making payments on that loan while still in the process of rehabbing your first property. I have no money! So I had to get creative and a lender connected me with a company that provides startup loans...essentially it's a line of credit that you can take a cash advance out of with no fees, and use as your capital for whatever you need (down payment, closing costs, rehab, etc.) But what I'm not able to understand is how I manage to make monthly payments on the balance while my rehab is still going on and my property isn't sold yet or refinanced...thank you!

@Brandon Turner

Would love to know your most productive marketing and prospecting techniques

Also you and David should have a debate podcast. Pick a real estate topic that you two disagree on and really debate it. Could be something like single family vs multifamily, local vs long distance, whether to buy in this hot market or wait for the correction. I find that debates are a good way for a listener to really see the pros and cons and it is an exciting form of discussion.

Good morning BP.  I have a question, I am putting in a request to a lender. He needs the scope of work. I'm doing some of the work myself w/family. Do I need concrete figures or just the work to be done to submit? 

@Brandon Turner

You are awesome! Because of you, I gained the knowledge and the “kick in the pants” I needed to get off the “proverbial” couch and jump into the investor world with confidence in my ability to run the numbers, speak with authority, and make creative deals work!!

Specifically, on your podcast with Jefferson Lilly, you mentioned that when you put a contract on a MHP, you asked for seller financing. At some point during the process, you further thought to yourself, “what heck, why not ask?”, and you asked (and received) the first year “interest only” with your financing.

I used the seller financing strategy on my second deal with an 8 unit apartment I purchased several months ago.

More recently, after listening to that same show several times, I just put a 71 unit MHP under contract with (you guessed it) seller financing with the 1st year “interest only”.

A question I would love to see answered (obviously, for selfish reasons) is:

“How to analyze and value a MHP”

Understanding that POHs should never be used in the calculation of CAP Rates, does individually metered city water/ city sewer taps increase the value versus individually metered city water/septic tanks versus master metered versus well water, etc?

If the park is completely full with TOHs; however the seller’s financials show that they are only collecting 2/3 of the potential rent, how would that factor into the valuation equation?

How would (this applies to all rental properties) the demand for affordable housing in the area affect the value?

How would the aesthetics of the park (or apartments) affect the value?

Digging a little deeper as it pertains to real estate in general, assuming we can place a value on under-performing assets, mismanaged assets, below market rents, value-add opportunities, etc., what “non-tangible” items would you assign a value and what methodology would you use?

Examples: I assume you wouldn't purchase the biggest home in the neighborhood to BRRRR (I certainly wouldn't at this point in my real estate career). However, how would the numbers bear out to come to that conclusion? Maybe your answer is that you know from experience not to buy that house. However, what if the house's ARV looks promising? Even if it looks promising, it's the biggest house in the neighborhood, so the ARV is probably off. How would we know? Arrrgghh. I'm confusing myself. :)

In summary:

Being a “recovering engineer that loves the numbers”, if any of the above does affect the value, is there a specific calculation or methodology that can monetize any of the above? (Understanding that there is no way to calculate the “exact” value, but can you hit close to the mark)

P.S. I understand the simple answer to “how much an asset is worth?” - it’s worth what someone is willing to pay for it. However, as an investor, we look to put a value on properties to see if we can make the property profitable.

Ok. I’ll stop. Sorry for the long post. I’m just a “real estate junkie”. I can’t get enough of it.

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