All Forum Posts by: Becca F.

@Mika'ele' Keni'

I got on a call with Prime Corporate Services and will be talking to them again. They didn't get into the specifics yet of foreign LLC and disregarded single member yet. In my situation, he recommended getting a holding company with LLCs for each property (2 are in the Midwest, 2 in California) I do my own taxes (so far) and I think California wants the $800 Franchise Tax for each LLC since I'm doing business in California. To me that is a lot besides paying the annual renewal fee, filing fees, etc in the state where the LLC is located. I have 6 family members/friends who own rental property (1 to 4 properties) in the Bay Area and none of them hold their properties in LLCs, which surprised me. The LLC fees, paperwork and the $800 franchise tax was the reason and they purchased umbrella insurance. A few of them have owned rentals for over 20 to 30 years. I think they would have told me if they were sued by a tenant or outside party and lost and had to payout. One person they know was sued (I don't know this person), self managing an in-law unit and insurance paid out 90%, not sure of the reason but I asked her details and am waiting for a response.

 I haven't consulted a CPA on this but this is what the guy at Prime Corporate seemed to say. Have you talked to a CPA yet? 

The 3 PM companies in Indianapolis I interviewed are on the NARPM site Nathan puts out. I will also look up PMs in San Francisco Bay Area later. I see so many people self-manage in the Bay Area to save money and to maximize their return, which is understandable but is very pro-tenant rights here. Thanks everyone for the advice! 

@Nathan Gesner @Dylan Vargas

The first Indiana house was my first rental property in 2019 so I was trying to save money. I interviewed 3 PMs, one a large company, a real estate agent who also worked at a PM company and my friend. I would have gone with the RE agent since he knew the market, rental comps etc but he wasn't taking on anymore rentals (I think it was a very small PM company). I negotiated with my friend for 6 to 8% monthly management fee but he wouldn't go lower. At that time I didn't know a PM had to be licensed RE broker/agent. 

From a time perspective I have a W2 job and don't have time to call repair people in Indianapolis especially if it's an emergency and I'm paying him 10% each month lol...I definitely don't want to screen tenants or write up a lease for a property 2000 miles away. I have enough on my plate with managing a local rental which I will turnover to a PM company later this year. 

I appreciate everyone's responses. I interviewed 3 PM companies and I've narrowed it down to 2 PM companies. I reviewed their lease agreements and agreements with me as the owner.  Nathan, I'll ask the additional questions you listed. I didn't know you could negotiate but I don't have a lot of rentals, just the 2 SFHs for now. 

@Blake Kirby

You mentioned that you need to have increase rents to make the payments. Do you mean increase rents for the 7 units to at least $1800 the market rate? Are the other 2 units at market rate rent?  Is this to cover the mortgage payments with property taxes and insurance, property management fees (what I could call barely breaking even) or be in a positive cash flow each month (cover the above, plus vacancies, repairs and capital expenses)? You mentioned $30,000 to remodel - is this for all 7 units or the 5 units with the $990 rent? 

I don't know how much this property costs but I think you're skating on thin ice. If you're potentially in a negative cash flow for 5 out of 7 units, that doesn't sound good. If you can find a just cause eviction with lease violation, that might work. Then if you evict them that's another set of issues like Dale mentioned above. 

My 2 cents is invest out of state. I'm in the Bay Area and am buying in the Midwest. You won't be paying these high California prices and dealing with landlord/tenant issues if you can't increase the rent or get those 5 tenants out quickly with minimum cost. If this is your first rental property that's a lot to deal with. 

I'm based in California and have 2 properties in the Indianapolis metro area. The first SFH I've been renting out since 2019. My personal name is on the lease (I don't have an LLC yet) and I'm technically "self-managing". I have someone helping me - this person isn't a licensed real estate broker but wrote up my lease and screened the tenants. I pay him 10% monthly management fee and 1 month rent to screen new tenants - are these amounts reasonable? SFH #1 is in Class A suburban area, have had 2 great tenants (on tenant #2 now). I do save some money since he doesn't charge me a renewal fee like a PM company and he did the paint touch up between tenants vs. me hiring a painter to paint entire rooms.

But he leaves it up to me to look up rental comps so I talk to realtors, other investors, etc when deciding on rent, any rent increases (none so far in 2 years for same tenant). I think my rent is slightly low since rents have increased a lot. I also have to call for any repairs, plumber, HVAC, communicate with my "helper" and he calls/talks to the tenants (I don't call/text tenants). So far this has occurred a few times and they were minor, no emergencies (overflowing toilet, etc) but it isn't time efficient for me since I'm on a different time zone.

I recently closed on an Indy SFH that's Class C and is ready to rent out. I've interviewed 3 PM companies and narrowed it down to two. The PM company offers more protection since their name would be on the lease with the tenant not my personal name and they would go to court for me if there's an eviction or other issue, if I pay the eviction fee for them to do that (hopefully that won't happen). I'm also a little apprehensive since I own all Class A properties and this is my first Class C property. They do charge more fees (renewal fee is the major one) than my current set up.

For those of you who have self-managed from out-of-state, what are your pros and cons? Do you have someone helping you? Do you write up the leases and screen tenants yourself or hire out the screening part? I'm trying to save money but I don't want it to come and bite me later with trying to self-manage (I'm self managing a local SFH as long as I can). If there are things I've overlooked, feel free to comment :)

Using a realtor and my own search on Zillow, which I send to my realtor if I find something worth considering. I'm buying out-of-state, closed recently on a SFH, move-in ready, negotiated quite a bit off the list price. I haven't done a renovation yet from far away. I may consider doing a flip or BRRRR from a distance now that I have trusted team in the Indianapolis area.

@Eric McCusker

I agree with the other comments. You should raise the rent, not to market rate all of a sudden, maybe somewhere midpoint. And you're breaking even...omg. 

I have a few investor friends in the San Francisco Bay Area that haven't raised the rent or it's been very small increases on their tenants in 15 to 20 years to be nice. They could be getting market rate rent. I'm talking $1600 to $2000 rent when they could be charging $3500 to $4500, maybe $5000 if the house has been updated and looks modern. It's one thing with rent control with multi-units but most SFHs here aren't under rent control here (yet). 

We didn't go into real estate to be a charity. The more I hear about severely under market rate rents I just cringe. Good luck.

@Mario Fernandez

I'm in the Bay Area and recently closed on a SFH, move in ready in the Indianapolis area, for $130,000. I did 20% down conventional loan. The projected cash flow on mine is $200 a month. My Rent to Price ratio is about 0.76%, which doesn't hit the 1% rule but the RTP ratio is worse in the Bay Area, more like 0.54% ratio. I also look at other metrics: is this a growing area, job opportunities, appreciation of properties over time. Cash flow is a major part but not the only factor for me.

If you can put $80,000 down that's do-able in the Midwest but don't stretch yourself financially too much. I found homes in the $59,000 to $100,000 range that needed lots of work. I was looking for $120,000 to $180,000 for move in ready.  I didn't want to do an out-of-state rehab and I know the Indianapolis metro area well, used to live there. I did a local renovation and it's a lot of stress, went over budget and I was on site at least once a week. 

I wouldn't recommend doing an OOS rehab for a first time investor unless you have a trusted team in place: realtor, contractor, inspector, property manager, painter, roofing company (if a new roof or repairs are needed). If you're not able to fly or drive to the property you're placing all your trust in people that they will make good decisions for you. I might consider a BRRRR in Indianapolis now, since now I have a team in place. Another option is buying from a turnkey company but you would need to vet those carefully - some are great and some are terrible. I considered buying a house in Ohio when I talked to one turnkey company but I wound up buying with an Indiana realtor who works with lots of investors. Good luck!

 Wow you have 17 rentals and use TurboTax? Does it make a difference if you hold the rentals in LLCs or own personal name as far as how complicated the taxes are. I don't have any LLCs yet (I know that topic has been discussed to death on BP). 

I have 3 rentals on my 2022 return, with a 4th rental that I just closed one to report on my 2023 taxes. I just got off a TurboTax call and she recommended that I take my documents and sit down with a CPA and that I should be getting Schedule Ks. She said if I want to do it on TurboTax myself I can. 

I got confused with the improvements I made on a rental - I paid the contractor XYZ amount (materials and labor) and he purchased the rough materials (drywall, insulation, recessed lights, bath tub, shower enclosures, paint, etc). I bought the kitchen cabinets, countertops, other lights, faucet fixtures, bathroom vanities, tile). On the improvements am I just adding up the costs of materials? It wouldn't make sense to add the labor cost in to the value of the home but that was a large part of the total cost of renovation. The TurboTax rep seemed impatient with me and kind of rude so I didn't want to annoy her anymore. 

I just closed on a SFH 2 weeks ago. I'm still looking to buy but taking time.

Premium deposit account but unlike a CD I can access the money quickly if needed. I'm also buying a few stocks and REITs. I'm considering Fundrise - there have been a few posts on BP and the people commenting said they are getting good ROI.