All Forum Posts by: Bob Floss II

@Scott Nguyen I just had a client ask me this yesterday so I'll share what I told him...

If you had to personally guarantee the mortgage on the property, which most investors do for their first few deals, you have personal risk of loss with the property and the LLC won't insulate you. Hopefully as you grow as an investor, you can reach the point where the LLC is solely liable for the mortgage and you will have that layer of insulation. So putting both properties in separate LLC's won't make a big difference at this point to protect from loss on the mortgage.

The other main liability is risk of loss from a lawsuit brought by a tenant or some event at the property. If you feel you took out adequate insurance and didn't try to save a few bucks by getting cheap insurance, I don't have a problem keeping a couple properties in the same LLC. Keep in mind if you shopped around to get a cheaper policy, you may have bought a policy that creates loop holes and might expose you to liability. Also think about the amount of coverage you purchased. Do you feel the amount you purchased is sufficient to cover you in the event a tenant is disabled or dies at your property and they try to hold you responsible? The insurance policy does not limit your liability, it only offers the ability for the Plaintiff to recover funds. If the policy doesn't cover the judgment amount, they will come after the assets.

If you think your LLC can pass this stress test, you can have multiple buildings in one LLC. If this concerns you or your awake at night thinking about it, we can set up a new LLC.

Another note - if you are holding a couple 2 flats, that's fine. If you are dealing with 12 unit apartment buildings, you probably want to spread those out.

As of right now I don't advise Illinois investors to utilize a series LLC. In theory, they work great, but it's currently a product that appears to be reserved for larger investors and companies.

I say this because of the obstacles put up for new investors trying to set up a series LLC. Most large banks like Chase, Wells Fargo, and US Bank will not take a series LLC bank account. I've been unsuccessful in finding any literature from these banks on why they will not take the account. The only information I can share is a conversation I had with a Chase Manager who simply said when they started taking series LLC accounts, they almost immediately encountered individuals using them for illegal purposes and shut all the accounts down.

@Eric B. You definitely need to speak to an attorney. There are a number of different ways to structure your partnership and LLC. You need to protect yourself and your investor by eliminating misunderstandings down the road. Most investors I meet with think the LLC operating agreement is no big deal and once we get into the details they realize they've left a lot of details open ended.

@Jay Garrison Sorry to hear, attorneys are renowned for poor communication. If you still need an attorney I'd be happy to help.

@Zack Park What type of partner are you looking for? 

In moments like this, I give my clients a rating scale to puts things in perspective.

On my 1-10 scale of problems, 1 being "meh" and 10 being complete disaster, I would rate this a 4. I would give it a 2 but you may be looking at loss of earnest money. 

Hire an attorney, they will make a few phone calls, possibly an email, problem solved. We're not all bad sometimes.

@Ray Harrell I would recommend finding an attorney that only does evictions. The RLTO and corresponding case law is so complex and specific, its not enough to have an attorney, you need someone that only does evictions. 

In my opinion, this is a complete misuse of rent control. Areas with rent control are typically high rent districts with older residents that have lived in their unit since before the neighborhood turned improved. You can look to areas on Manhattan for an example. I could understand imposing rent control in Wicker Park or Bucktown, but no one is asking for it. We only see requests for rent control in areas that are starved for improvements and cash infusions. 

It's really disappointing to see the City of Chicago continually supports the idea of the landlord and investor being the enemy for many pockets of the City. I'm also getting very concerned by the attitude the City and the residents have taken towards entitlement of improvements. They blew the Olympics bid, the pushed away the Star Wars museum, they acted like they had the Amazon bid locked up, and I'm concerned the Obama library is headed for disaster, or Hawaii for that matter.

Closing in four days sends up a huge red flag, but its possible it was related to the seller and had nothing to do with the property. Any closing I've conducted where my client was forced to purchase under the gun, there was a serious underlying issue.

@Andreas Thuresson If it’s an investment only then you have to weigh buying in a stable area with lower returns or a more risky or developing area with higher returns. A good agent can show you a variety of properties and help you make a decision.