All Forum Posts by: Bryan Hartlen

It depends what you want from the bank. If you’re investing out of state and plan to be looking for funds (eg hard money) then an account with a bank local to your investments will generally help. But it can also be set up at the time of funding a loan. 

If you’re just looking for a checking account to manage and pay expenses, then pick something local to you where you have relationships already. 

It’s hard to go wrong as you can always open a new account to meet specific needs in the future.

Hi Sonya. To answer two of your questions:  

- You can register your LLC(s) in one state and invest in another, but how you do this will change depending upon where and what your investments are. As an example, I live in Phoenix, my LLC's are registered in AZ and I invest out of state (including in AL). In AL, I have to register my AZ LLC with the AL state (and have to pay AL state taxes).

- as a practice its best to have separate bank accounts for your LLC(s). Assuming your LLCs are a sole proprietorship, the accounts should also be in the name of the LLC not your personal name.

As others have said, a series LLC is most likely overkill at this stage of the game. Think of each LLC like a compound that separates your liability risk. If you have $4M in assets all under the same LLC then a liability risk from one property could expose you to up to $4M worth. If instead you put 40 $100k assets in their own LLC then the risk for each asset is limited to $100k. But the effort and cost to maintain 40 LLC's would outweigh the benefit of a low probability risk. (Note there are instances where the above generalization doesn't hold and an attorney is best to explain this to you)

There are costs to create each LLC (even if it's a series) and you will need to prepare and file taxes for each LLC. If you are at the stage, or get to the stage, where it makes sense to split your assets across multiple LLCs there are options other than series LLCs which may meet your needs that are simpler and more cost effective (eg create a second LLC).

@Evan Rattray this means that the current servicer is collecting note payments as well as taxes and insurance and is holding the tax and insurance portion of the payor’s funds and is responsible for paying taxes and insurance on the payor’s behalf.

If you buy a note with an escrow account, the escrowed funds and the obligation to pay taxes and insurance transfer to you and your servicer. 

@Jackson Harris as long as your definition of MF is duplex, triplex or quads AND your willing to live in some of the tougher (or at least, less desirable) neighborhoods AND you have patience your plan can work.

As others have noted the number of MF properties in the greater Phx area is low compared to many markets and the number for sale is even lower. I live in Phx but we do most of our investing out of state, so I’m not also the most current on local trends: so find yourself a good local agent to confirm that:
- it’s going to be hard to find anything at < $150k / door. Rehab will be required.
- you may need to look outside of Phx to markets like Gilbert/Mesa or even Tucson.  Most of the Phx pockets of small MF properties have been turning over for the past 5 years.  Not too many left. 
- When you find them, they won’t be in neighborhoods with luxury car dealerships.  More likely cash checking and pawn shops.
- Given the demand, buying on through MLS will be tough. You'll have to be very lucky or willing to buy a problem child property and/or neighborhood. You might want to start investigating methods for locating off-market opportunities that appeal to you. These are high effort low success processes that pay off big if/when they hit.

Good luck!

@Dean Halpin, my advice is to know your numbers for ARV & Rehab. We buy almost exclusively from wholesalers and the list of wholesalers that we look at is very short because many (if not most) wholesalers put a property under contract and try to assign it at unrealistic prices by putting forward unrealistically low rehab and high ARV. It's not worth our time to have to sift through the clutter.

If your numbers work, you’ll be able to assign your deals in the matter of days.  If it’s with a previous buyer, it could be in hours.  `

Best of luck!

@Sagar Mukala you’re correct you won’t find anything in Phoenix / Scottsdale or almost any national metropolitan market. Especially in a class B neighborhood. 1% rule does exist in some smaller tertiary markets and even there generally class C.  We have properties in Class C neighborhoods in Birmingham, AL that met the 2% rule but those are getting hard to find.

One other thought for you to consider - if you’re expecting to fly to your properties to handle situations, I’d suggest you reconsider. Unless you have your own plane, even a short flight puts you 4 -5 hours away in the best case, and realistically 6 - 24 hours out. If it’s an emergency you need to be there asap, if it’s not an emergency then you don’t want to have to fly somewhere to handle it. If you invest remotely, build a team and let them handle issues. You visit only if and when you want to. This will let you invest anywhere.

@Chris Seveney, do you run O&E reports or full title searches? Or does it depend on the situation?

There are also several useful blogs on BP.  Just search on screening and/or tenants:  Here's a few I have bookmarked:

The Complete Pre-Screening Tenants Process (biggerpockets.com
Screen Tenants For Rental Properties in 7 Easy Steps | BiggerPockets Blog
7 Advanced Tenant Screening Tips (Don't Get Fooled as a Landlord!) | Blog (biggerpockets.com)

Hi @Kat McLead.  We are remote investors (live in AZ) with 5 class C rentals in Birmingham, AL. In 5 years, we’ve had 3 different PM companies, and currently our properties split between 2 companies. We’ve diligently interviewed close to 10 companies during this time. I’m still waiting to find a very good PM company. They tend to operate in the fair to good range most of the time. 

Here are some thoughts on self management:

- showing units: Most PM companies don’t accompany prospects when they show a rental.  They control access after verifying the tenants meet their app requirements. Put a Wi-Fi or cellular lockbox on the unit (like realtors have) that can be managed remotely.  Or even a manual box and require tenants to call/text before and after viewing.  If you’re worried about damage you could also add camera security systems to units being shown. You’re handyman can put on a lockbox and periodically check the property after walkthroughs. 

- Evictions can be handled by a local attorney. You’ll need to check with them on costs and how/when they are to be engaged.  Unless you have a very large portfolio, you’ll most likely pay more than you would through a PM.  Hopefully, evictions are the least frequent task you’ll need to handle. 

What about handling the routine day to day operations:

- rent collection is easier these days with all the cloud platforms but you will need to research and select a platform and there most likely will be a fee.  Certainly less than what you pay a PM company but not free. 

- do you know all the local laws on notifications prior to eviction?  There are many steps that need to be followed prior to eviction that need to be tracked and followed.  Handling late payments, fees and catch up payments is much more likely than an actual eviction. 

- repair requests (do you want to be taking calls at 2am)?  Do you have a handyman and a list of specialist services plumbers, hvac, electricians, etc to handle the bigger problems?  Do your properties have common areas that need regular service or maintenance (trash, landscape, pest, snow, etc)?  If so, you’ll need a way to monitor their performance. 

- annual and turn-over inspections: your handyman can do these with proper direction and a checklist. It will be another cost for you to include in your planning. 

- Not sure if this applies to you, but a few of our properties are rented through Sec8 which requires another level of process and compliance that we didn’t want to have to learn and keep up with.

For what its worth, we also flip houses in the area and so we have a local team in place (contractors, realtors, lawyers, etc). Even with this set-up, and the less than stellar PM services we’ve had so far, we choose to pay and manage a PM company rather than try to remotely manage operation ourselves. Managing it yourself means locating, interviewing and managing multiple “team members”.

So we spend our time, working to improve our relationship and mutual expectations with our PM.  When we onboard a property, or when it’s being turned (we do the work on turns) or when it’s being marketed we have weekly calls to monitor progress and problems.  Once the property is rented these meetings will taper off and eventually cease. It’s not perfect and we have had to fire / terminate PM companies but for us, it’s still a better option than finding, vetting and managing multiple team members. 

@Bradley Jernigan your mileage will vary as in many cases the experience will depend on how well the housing authority that administers the tenant’s coupon is.  We have a few Sec8 rentals in the Birmingham, AL area and we deal with 3 different HA’s (Birmingham, Jefferson County & one more I can’t remember)… But it general:

- rents (at least the HA portion) are pretty much guaranteed.  We never missed a payment through Covid… But we have another property that we haven’t received rents for 3 months because the HA couldn’t complete their required re-certification.  We’ll get all of the missed payments this month or next once their process catches up… But the “regular” cash flow” isn’t guaranteed. 

- there’s more bureaucracy in dealing with the HA.  Assuming you use a PM company they’ll shield you from most of this except the time factor. It will almost always take longer to place a Sec8 tenant than a private payer.

- In our experience the tenants are long term.  We’ve only been doing this for 5 years but we haven’t had a tenant leave on their own.

- Rents are in general in line with market rents but again there’s bureaucracy in getting those rents and processing rent increases

- I believe M&R costs are a little higher for Sec8.  This is not due to increase wear & tear (many people say to expect this as many Sec8 tenants aren’t working and are home all day), but due to the annual inspection. We’ve found these to be an opportunity for the inspector to justify there position with nit-picky issues being flagged

- You can offer a property to Sec8 and private payer at the same time to test the market.  You don’t have to commit one way or the other until you find an acceptable tenant. 

Good luck…