All Forum Posts by: Benjamin Aaker

Depends on the municipality. The township likely can place a lien on the property as punishment for breaking the rules. They probably won't know about it unless a neighbor complains. Neighbors often don't like having renters in their neighborhoods and might complain about it to the township. A lien will affect his ability to sell the property in the future and will need to be paid off before sale.

This also will have an effect on insurance. If the renter were to cause damage, for instance, start a fire, it probably would not be covered by the current homeowner's hazard insurance. Insurance may refuse to add coverage if the room is not legally rentable. Your boyfriend absolutely should contact the insurer to try to add coverage if he wants to rent. 

I'm going to assume you aren't talking about bank financing, but rather, investor/partner funds.

I prefer to keep other peoples' money out whenever possible. Every new investor is another opinion about the project. People change and so do their opinions, so you have a moving target.

That being said, you can do a lot bigger deals when employing others' money. When starting out, if you have the funds yourself, you will take greater risk but have greater upside. You will be the sole-decider in the project and you'll get great experience and hopefully make some money. 

Hi Dustin,

Auto Owners https://www.auto-owners.com is my insurer. I know the name doesn't sound like multifamily, but give them a call. My broker is North Risk Partners https://northriskpartners.com/

Here's what I do: Most of my properties are in separate LLCs. This is due to different owner structures, not that each property needs an LLC. For each LLC, I have commercial hazard insurance plus an umbrella policy of 1M. I use Auto Owner's and have had a great relationship with them.

If you have a residential FHA loan, you may trigger a due-on-sale clause unless you have lived there for a year or have had a life changing event. The bank might turn a blind eye but if they get audited, your loan may become due. Some will tell you to make the change anyway but that seems a large risk in this high interest rate environment. If you have commercial loans you can have an attorney write up and file a quitclaim deed (probably cost you $1k) to move it over to an LLC. Another $500 if you want the attorney to set up the LLC, depending on the area.

Sellers generally want cash before bank financing before seller financing. If they are offering seller financing, it'll often be in the listing. Sellers often don't know what it is, so you'll have to find the property first, then ask if they are interested.

Hi Mike and welcome to BP!