All Forum Posts by: Andy Collins

if its 10 years old in a rental be glad it made it so long.

You can often get a good dishwasher from Home Depot or Lowes for $250,,install is very simple,,but if your using a PM I guess your not close to the property

I've deal with a lot of banks and mortgage companies, and I will tell you that unless your an individual you aren't going to get a 'conforming' 30 year mortgage unless your purchase as an individual (and later putting into an LLC won't help either)

The "protection" you think your getting from an LLC is not what you think it is unless you are purely an investor (and even then its not that good).

Are you going to manage the properties yourself,,,are you going to hire any workers that will work on the property,,,are you going to select who you accept as a tenant! If you answered yes to any of these the LLC protection from liability is probable long gone. Even giving a personal guarantee on the note will put you at risk.

I agree with what Duncan has said before about getting an LLC being an ego boosters,,,,thats about all it will accomplish, you can tell someone your corporation owns this, etc etc, but while your doing that you will be paying more in interest, probable more in insurance, and you will not be protected.

I think guru's want to make people feel big by talking about having an LLC, or series LLC's,, etc etc,,,,

There are times it is a good idea, if your worth several million dollars, then it would make sense,,,if your going to inherit a large sum at some point in the future you might consider this,,but for the average person, until you get your 10 conforming mortgages, your just wasting time and money.

After I posted this I see that Duncan had also chimmed in,,,basically the same thing he said.

Maybe I've missed something, before anyone can answer your questions, you need to give more information.

What is your net worth, it is extremely high?

Are you planning on buy and hold or flips.

How are you planning on financing your purchases if your buy and hold?

Here is the thing, everyone is quick to say to form an LLC, etc,,if your a high net worth investor, that is probable right,, other than that it may or may not be.

Have you looked into the tax consequences of using an LLC?

If your a buy and hold investor, are you planning on putting the properties into one persons name and getting traditional (30 year) financing (traditional mortgages are for individuals, not LLC's)

An umbrella policy for a few million is a cheap way to take care of liability, and even if you have it in a series of LLC's and your 5 entities from it, if your involved in the rehab, and someone gets hurt because of neglect or something you should have know, you liable...and if your managing a rental and something goes wrong, your just as liable.

LLC's have a place for some people/situations,,they are NOT the great liability shield for everything people tend to think they are.

andy

if you have great credit, solid assets and great income, sure,,, it would be based purely on your financial situation and wouldn't be secured by any properties.

Banks prefer to have something to secure a loan with, so an open line of credit will be limited by your credit and ability to pay.

I normally figure 5% or $4,500,,,part of the cost are the same for most houses (appraisal, many of the fees etc), some will vary a little bit (title insurance).

I buy houses in just under $100k, and it seems like it normally ends up at just under 5%,,obviously this does not include any tax cost or credits that may be involved.

I deal with the Federal Communications Commission on a daily basis, we have a FCC attorney in Washington to "test the waters' on how things are being interpreted at the FCC if we are looking to do something in a gray area (interpretation is a major part of what really happens).

Attorneys are great at finding out how laws are being interpreted, but getting anything actually changed is a different story.

Even having to get our FCC attorney involved in a simple call letter change, that ask for an 'exception' to one small rule, cost tens of thousands of dollars (he bills us at $565 an hour).

Trying to get anything changed in Washington is EXTREMELY expensive, its better to find out what they are actually going to enforce and interpret the law. Changing it, that needs to be left to a major group (banks, etc) that has really deep pockets.

if you do take a $20k equity loan out on your home, I would do it and let is sit over 2 months,,the lender will want to know where any big deposits are from in the last 2 months,, you don't want to have to tell them its borrowed,,they "don't like that", LOL

I would encourage you to consider a combination of flips and buy and hold.

While you are buying and rehabbing some rentals for yourself, you will get some experience that will help you in flipping (and you will find some houses are great flip candidates while others are great rental deals.

As you build your rental portfolio with $1M in cash, I would go buy about $5M in houses, in the $100k range, and have 50 rental properties,,if each cash flowed $300 a month, you would have $15k a month in cash flow (now you will need to put some of that away for repairs).

You can use part of the cash flow to live, and part to add additional rental properties and flip along the way to make additional cash

Your assuming the $50k fix up will take care of all repairs for 10 years on a $450k house,,,it just doesn't work that way.

andy

a hard money lender lends based on the value of the property (or "after repaired value"), they will look at your credit, but are not as strict when it comes to your personal credit as, say a bank would be.

Hard money loans aren't designed to be long term, they are for the time to rehab a house and sell it (for a flip) or rehab, put a tenant in it and refinance into conventional (In this case they will be more worried about your credit because they want to make sure you can refinance into a traditional mortgage).

Most of the time you will be paying about 4 points and 12-14% interest (at least that's what I normally pay.

They are not for Owner Occupied houses (I've never seen a hard money lender that would lend for that anyway), but for investment properties (which makes it a lot easier to foreclose on)

andy