Denver, CO · Member since 2017 · 15 posts · 4 votes
I am Zach Kiser. I am new to the club and I am researching several topics in real estate investing.
A few topics I am digging into are...
1. I am trying to learn how I get a property into an LLC without violating the "due on sale" clause of the mortgage, and I am looking into which lenders can design a mortgage where I can transfer the property to an LLC. so far no success.
2. I am looking into writing a solid lease put together and navigating setting up a business.
3. I am researching creative ways to find great deals in this crazy market
As I find Answers I might post them here at a later date but feel free to give me your comments.
First off why the fixation on the LLC titling the property? If it was truly an issue then there would be demand and the market would meet the demand. I often see this from people who have attended a guru seminar that proposes a complex LLC strategy for asset protection. If you have not assets, this is a rabbit trail. Until you have significant equity (IMO $1M plus) it is also a rabbit trail. Buy a property and then once you have something to lose hire attorneys to set up the structure to protect yourself. Sure it would be "better" if you started that way but you are spinning your wheels vs owning real estate.
Second, there are several attorneys around town that offer a lease for sale. Buy one from them. No need to reinvent the wheel, plus it covers you for several Colorado specific issues that are required in the lease.
Third, keep in mind that research (aka looking) is not action. Mailing letters, driving for dollars, calling owners, knocking on doors is action that generates leads that become offers that are signed as deals that make you money. Make sure your efforts are money generating efforts.
Zach Kiser First of all, welcome to Bigger Pockets. Conventional lenders with the nice interest rates and terms will have due on sale clauses. If you want to purchase the property with an LLC you're going to need a commercial lender that will likely put you in an ARM with higher interest rates and shorter amortization. If you want the better lending terms offered through conventional financing, you might look into how important the LLC is to you.
First off why the fixation on the LLC titling the property? If it was truly an issue then there would be demand and the market would meet the demand. I often see this from people who have attended a guru seminar that proposes a complex LLC strategy for asset protection. If you have not assets, this is a rabbit trail. Until you have significant equity (IMO $1M plus) it is also a rabbit trail. Buy a property and then once you have something to lose hire attorneys to set up the structure to protect yourself. Sure it would be "better" if you started that way but you are spinning your wheels vs owning real estate.
Second, there are several attorneys around town that offer a lease for sale. Buy one from them. No need to reinvent the wheel, plus it covers you for several Colorado specific issues that are required in the lease.
Third, keep in mind that research (aka looking) is not action. Mailing letters, driving for dollars, calling owners, knocking on doors is action that generates leads that become offers that are signed as deals that make you money. Make sure your efforts are money generating efforts.
@Zach Kiser I'm on the same page about the LLC as the others. Unless you have significant equity in a property, what are you protecting? Lawsuits come about when people have money and assets to take. If an attorney looked at your equity and assets they need to know that they have something to go after. If you're not planning on owning places with small loans or no loan at all it's likely not worth it.
Multis just like everything else here are a hot commodity. The idea of supplementing your mortgage has become more wide spread and has heavily increased the interest in those properties. They can still be found, but the ones where the numbers work is very small. As Bill said, buy a solid lease. It's usually a few hundred, but it will likely cover the bases you want and then you know it's written by a lawyer and not someone hashing things together.
I get the equity issue and realize I wouldn't be a target today but over time the equity would grow and I would become a target. Wouldn't it be wise to have an asset protection strategy in place from day one? And if I have multiple properties and the assets are not segregated I am risking losing all of them if I have a lawsuit related to just one of the properties.
Someone told me that if I purchase a property in my own name but manage the property under an LLC Property Management Company it might provide protection . my guess is that this offers zero asset protection but I'd be curious if anyone uses the strategy
Welcome to BP, @Zach Kiser! Unfortunately, the strategy you suggest does not work in Colorado. Here, an LLC property management company cannot manage the property unless it owns the property or it's a licensed real estate brokerage. You can lease the property to your LLC which can sublease to your tenant, but that certainly doesn't afford you the full protection of the LLC.
Don't get a lease off the internet (including LawDepot's lease, it has problems), buy one from a Colorado attorney specializing in real estate. It's the most important component and worth the couple hundred bucks.
yesterday I wrote a letter for my driving for dollars campaign. I called a mailing list sales man who wanted minimum 750 for the list I want. Yesterday on the webinar I learned how to find what I was looking for on the county assessor website for free.
@Zach Kiser what you stated is right and it's getting in the way of having ANY assets to protect. You are way over thinking it. Again, get some assets and then worry about protecting them. As you stated, "over time" your wealth grows. Use that time to figure out the protection issue. For example, say at some point in the future you find your unicorn loan you can transfer title to your LLC and take out the loan using the LLC. There are so many creative ways to handle this without getting bogged down. Find the asset to protect, then you can figure out how to protect it.
It shows negative cash flow. I am looking for ideas on how to make the numbers work. For example if I buy for 350,000 instead of 399,000 I might get a tiny amount of positive cash flow.
any other ideas of how to make this work on paper? Am I missing something?
It shows negative cash flow. I am looking for ideas on how to make the numbers work. For example if I buy for 350,000 instead of 399,000 I might get a tiny amount of positive cash flow.
any other ideas of how to make this work on paper? Am I missing something?
Thanks,
-Zach
1. Have the tenants pay water. If it's a single bill (pretty likely) then it just takes a little extra work to bill them each month.
2. See if you can justify higher rents for the units.
3. Figure out your price just to make it work.
4. Move on to the next analysis.
You'll start finding very quickly that there is some basic criteria that will greatly decrease the amount of properties you have to analyze. My numbers now look first at price and overall square footage for duplexes. If the two don't line up I don't even dig in since it isn't worth the time.