Canal Winchester, OH · Member since 2015 · 8 posts · 2 votes
I am extremely new to all this and the site, i would however like to start learning more and eventually invest in a duplex, or at most 4 plex, not sure on wording yet, and i would probably end up living in one of the parts and rent the others.
What are some good books or guides to read on, and information should i familiarize myself with as of now, like legal documents and standings.
The location i am looking to start out in is Ohio, the columbus area or around there, since this is where i will be living after i get out of the military.
Welcome to BP! There is a ton of information on the site which, in my opinion anyway, is better than you will find in most books. I would suggest starting out in the Learn section of the site with the How To Guides. The BP Podcasts are also an excellent source of information. The investing style you are thinking of doing is referred to as "House Hacking", at least here on BP. Type that into the search box and you will see lots of results, including a couple of podcasts.
Don't know your area, but a duplex is a nice transition into being a landlord. I know some have lived in 4-plex, but it does create more issues than you want right now. I know many are turning their garage into a small space, if they have a proper window, and then doing short term rentals.
Welcome to BP! There is a ton of information on the site which, in my opinion anyway, is better than you will find in most books. I would suggest starting out in the Learn section of the site with the How To Guides. The BP Podcasts are also an excellent source of information. The investing style you are thinking of doing is referred to as "House Hacking", at least here on BP. Type that into the search box and you will see lots of results, including a couple of podcasts.
Awesome that you are looking into RE investing. BP is a great resource for you to learn what you need to know.
One piece of advice is to never tell the other tenants you are the landlord because that will open up a whole can of worms. Now, with that being said that may be a challenge if you are going to live in one of the units. One problems it may cause is when rent is late which could make things uncomfortable at times. One way around this is to have an attorney collect the rent, send the 7 day notices, etc. on behalf of you. You can tell the attorney not be mention your name or use your LLC's name. Now, you are going to have to put that cost of the lawyer into your figures. An LLC in Ohio will cost you around $100/year.
As am owner occupant setting up an LLC @Pat G. you have essentially taken away one of the biggest benefits. The favorable financing available to an owner occupant. Why an LLC? Its hardly necessary on the first deal. And as a landlord do you want to start off with a wall between you and your tenants? I say introduce yourself, create a friendly atmosphere. You're not a robot you're a human being. Having an attorney collect rents for a couple apartments? Im sorry but Im not paying Anybody $250/hour to open a mailbox. Between the LLC and the attorney getting the mail you have all but spent @Treven Jennice's entire cashflow. Keep it simple. Sole proprietor, look into liability insurance. Talk to your tenants. You are their neighbor.
Call me paranoid, but I've heard too much legal advice against holding rentals in anything but an LLC. I setup an LLC on my own and then moved property over using a quit claim deed (there are pros and cons heretoo). After getting an attorney for another business venture, I was able to parlay information on the rental and he fully supported my actions. My advice - get introduced to an attorney but complete the setup on your own. If you get farther down the road and can affors it, work soley throughthe aattorney as more cash usually brings more risk. Personally, Im not aware of any legal/risk mitigation benefits of a sole prop. Best of luck!
Having an attorney collect rents for a couple apartments? Im sorry but Im not paying Anybody $250/hour to open a mailbox.
Hey, I'm an attorney and I collect my own rents, that must mean I'm paying myself $250/hr to open mailboxes... ;) To my tenants, I'm just the property manager...
LLCs are great for certain applications. Not necessarily for holding your primary residence, though some people do it.
Let me clarify one thing on the LLC for @Rob Beland and @Christian Carson I was suggesting to set up an LLC for his business not to place the duplex into, yes placing the duplex into the LLC would negate any tax benefits that you gain by owning your own home.
I guess the last sentence in @Rob Beland's post says it all. "You are their neighbor" and therein lies the problem. It is going to be a challenge being their neighbor and their landlord at the same time. Especially for your first RE deal.
Because the first time the rent is late, the excuses start, and then they will say, "Hey our kids play together", "Our wifes' are friends', "We have beers together," etc. Then you agree and let it slide, but down inside you are thinking I still have to pay the mortgage.
Then you start thinking that this RE stuff doesn't work, it is too hard, people suck, whatever. But RE does work and it is challenging at times but let me tell you from 20+ years of experience with dealing with tenants - Your not their friends, sure you need to be friendly, but you are not friends. You may think of it that way, but they don't, trust me. Don't put yourself in a position that you are going to regret later. Ask me how I know?
Anyway, I guess to solve this issue my suggestion would be to buy the duplex and place two paying tenants into both units and get an apartment which will be paid for by your 2 paying duplex tenants. Then go get another duplex, and another and another. Rinse and repeat!
Work on your business not in your business. I have bought a lot of properties from "Tired landlords".
I appreciate all the input and information, thank you all. For my first place i am planning to either live there, or if i can i will let two tenants rent it out and then just keep an apartment for a while or something. As for being their friend, i dont think it will be that hard to seperate that given my personality and how i come off to people, haha. Thanks for everything, hope to expect to see me more lol
I think you'll find reading through the many house hacking stories on BP that most people keep it simple for their first investment in a duplex, tri, or quad, doing everything in their own name and being open with the tenants that they are the owner. Liability is not really an issue if you properly vet your tenants and then treat them well, and any way a $1m umbrella policy is very inexpensive when added to your homeowners policy.
Our first property was an up/down duplex, which we lived in for 6 years as the tenant paid the mortgage and the property appreciated. Of course the tenant knew we were the owner. When something was broken in their unit, who else would they call to get it fixed? You don't want to live side by side with someone for years, pretending to be someone or something you're not.
When we sold that first duplex we calculated that not only had we lived for free, but we'd been paid about $1000 for each month we'd lived there. That set us up for further RE investments, which now include both SF and multi-family. In the case of multi-family, we have a separate PO box for correspondence, a separate phone #, business e-mail address, and business bank account, and the business card I pass out to the tenants say that I'm the manager, not the owner. However, that is possible because I don't live in the complex next door to the tenants.
@Treven Jennice that is a great way to go! You may even be able to do it twice with your VA loan depending on the purchase price and the maximum loan for your area.
I would definitely live in that duplex, just be very careful when screening your tenants....you certainly do not want some scumbags being your neighbor for years particularly if they know you are the landlord. But, if I could do it all over again I would have definitely gone that route!