All Forum Posts by: Brandon Harris

I think a lawyer is key. I was quoted $750 for drafting the partnership agreement and operating agreement.

Courts across the country have been "piercing the veil" of LLCs and pushing the limits on the level of liability protection they provide. Just setting up an entity and transferring the assets to it typically isn't good enough for liability protection anymore. There are things you have to do annually and continuously to make sure that the LLC will protect you. A lawyer can give you a list of all those.

There are also a lot of factors you won't know about/think about if you write up an agreement or get a template. Lawyers will ask a lot of helpful questions to figure out how to write up the agreement so it best fits your needs.

Also, lawyers have relationships with others who may be interested in selling real estate. They could be a good source of referrals.

A lot of great advice has been given here. Here is my 2 cents. Also, congrats on the new baby! You will sleep through the night again someday. I promise!

Summary:
-I'd say wait until you have 2 rentals to move them to an LLC due to the extra costs. Just get good liability insurance on it for the time being and make sure you are following rental laws.

-Consult a CPA about tax deductions. 

-Everything done on your new home will be in your personal name since it is your primary residence. Keep track of EVERY major improvement you make to it because once you move to your next home and start renting it you can will need that information. A CPA can give you guidance on what costs are most important to track.

Not Summary:

I would see if your mortgage allows you to transfer the property to an LLC. I know one of ours actually has a clause that says the title can be transferred as long as the LLC is owned by the original owners. If it doesn't, then you need to figure out whether they will call your loan if you transfer it. I would consult an attorney.

When considering costs of transferring and maintaining an LLC, there are a few things to consider. Registering an LLC in Oregon is around $150 I believe. There is also an annual cost of $100 to keep it registered. If you get a lawyer to draw up the partnership agreement it could be $500-$750. I know a lot of people draft partnership agreements themselves or buy them from a website. You want to make sure you get the liability protection an LLC provides and to make sure all of the other obscure, but important, details are setup correctly. I would have a lawyer draft it to make sure this happens.

Typically, if the LLC is only owned by you, then you will pretend like it doesn't exist and include all of your rental activity on your 1040. If it is owned by you and your wife, then the LLC will fill out it's own tax form (Form 1065) and then you and your wife will each receive a K-1 to include in your tax return. If you go through turbotax this could be an extra could hundred dollars to file your return every year.

I am not an attorney and am not giving legal advice. Since I don't know the details of your tax profile, the tax guidance above is general advice and may not be suited to fit your personal situation. You should consult a CPA who is familiar with your situation for advice specific to you.

Good luck!

Took some digging. I believe I am ok to enter.

For the purposes of this chapter, delivery of possession occurs:

(1)

From the landlord to the tenant, when the landlord gives actual notice to the tenant that the tenant has the right under a rental agreement to occupy the dwelling unit to the exclusion of others. The right to occupy may be implied by actions such as the landlord’s delivery of the keys to the dwelling unit; and

(2)

From the tenant to the landlord at the termination of the tenancy, when:

(a)

The tenant gives actual notice to the landlord that the tenant has relinquished any right to occupy the dwelling unit to the exclusion of others. Relinquishment of the right to occupy may be implied by actions such as the tenant’s return of the keys to the dwelling unit;

(b)

After the expiration date of an outstanding termination of tenancy notice or the end of a term tenancy, the landlord reasonably believes under all the circumstances that the tenant has relinquished or no longer claims the right to occupy the dwelling unit to the exclusion of others; or

(c)

The landlord reasonably knows of the tenant’s abandonment of the dwelling unit. [1995 c.559 §9; 1999 c.603 §8]

@Sergey A. Petrov That's partially what I was thinking too. She has been really responsible so I don't think she would leave any problems intentionally, but there could always be an accident like a faucet left on or a door left unlocked.

@Isaac S. I'm thinking along the same lines as you. My fear is the devil is in the details. Oregon has become much stricter with rental laws that I don't want to violate anything because they may still be considered occupying it. 

You can look into getting a HELOC on your rentals. Not many places do them and the LTV requirement is usually 25%-30%. Since you are at 20%+ equity in both properties you may be able to get something out.

Of course, I would include the costs of the HELOC in your cash flow scenarios. Interest rates are typically high and variable, so be wary about that. They are best used for short term costs. If you are trying to fix and flip or BRRRR they are powerful tools. Better than having to get a hard money loan with high fees and interest rates.

Hello,

Do I have to give notice to enter a rental if the tenant has moved out, but the lease hasn't ended?

I have a tenant with a lease ending 8/31. She emailed saying that she cleaned, she left the keys, garage door opener, etc. at the house, and she isn't planning on going back. 

I'd like to go an make sure everything is actually locked, do the final inspection, and start on turning the property. Do I have to give 24 hours notice still since she no longer lives there and has said she isn't planning on occupying it? I couldn't find anything specific in the ORS.

Thank you for any help you can provide.

Yes, it is such a great way to put little money into a great performing asset. My wife and I wish we had done it before the kids were born. Or at least bought a new house every year with a low DP so we could have multiple rentals. Now with kids, we don't want to move them around from house to house so we don't cause some sort of psychological damage haha. 

This is what I am doing. I moved from Portland last year and I am renting out my house there. We'll see where the rental/housing market is in about 1.5 years. If the ROE on the property isn't very high then I may sell and reinvest in other properties. Especially if we are in a down market. It may be hard to justify though, even with a low ROE, due to the changing market conditions. The pros of the property are that I have a HELOC on the property that allows me to pull some equity out and the interest rate on the mortgage is 2.5%. I may have to trade that mortgage for other mortgages at much higher interest rates, which will cut into profit.

Right now I am leaning towards holding forever, but I want to keep my options open. In the end, it will be all about the math and opportunities.

Hey William,

I think the most important thing to do is know yourself, and your partner's self, first. Your commitment, your financials, and ability to handle stress. If you know this will cause you and your partner a lot of extra stress, especially during a pregnancy and when the babies come, then I would think twice about it. Also, can your budget handle $200/mo. on top of extra baby costs? If not, can you or your partner work more hours, get another job, apply for a promotion, etc.? Again, how will that affect your life. Time with the kids at night and on the weekends is precious at that age so you might not want to add too much more to your plate. Also sharing the load with your partner to take care of the twins.

As for the actual deal, when you say monthly payment of $2,600, does that include repair reserve, vacancy reserve, and other operating expenses? If it does, then I don't think going through with the purchase is a bad plan as long as you can afford to pay the $150-$200 per month. Portland rental market is so tight that I can't foresee rents going down. There is such a huge demand and low supply.

As far as equity, it really doesn't matter if that drops as long as you are able to hold the property. Equity is just a paper number except when you are selling or getting financing. In fact, and I'm not an expert on Oregon's property tax system, you may pay less in property taxes if the value goes down. I believe for new builds the tax assessable value is based on the purchase price when a house is first purchased. Then when FMV drops the taxable value drops. Again, I would check on that for new builds.

If you give up $4,500 of earnest money, that is 22 to 30 months of paying $150-200. In 2 -3 years, I am guessing you could raise the rent by at least $200. You should consider rising costs like property taxes though that will offset rent increases.

Also think about tax savings. Can you take the rental losses and offset some of your W2 income? If so, you could withhold less for taxes each month and use that money to pay for the difference. 

Hello,

Does anyone have a referral for a HELOC that will fit my situation?

I am looking to get a HELOC on my primary home in Oregon. I was in process with a lender, but they won't include my Schedule E rental income in the DTI calculation until it is shown on 2 tax returns. This is because the HELOC would be in second position. I have 2 SFRs and our primary. By excluding the rental income it looks as if I have 3 mortgages that aren't covered, as opposed to just a mortgage on the primary.

Based on current market rates I am at 80% LTV on the primary. I'm looking for a 90-95% LTV HELOC so I can get a good sized credit line established. I have a strong credit score. I have a good DTI when you include the rental income.

The rental income only shows on 1 tax return. I have signed leases, consistent rent payments, security deposits, etc. that can show the income is legitimate.

I've called a few more lenders, local banks and credit unions, and haven't had any luck. Does anyone know of a lender that will fund a HELOC on these terms? I have only worked will large commercial banks, credit unions, and local banks so maybe there is someone I don't know about.

Thanks in advance for any help you can provide!