All Forum Posts by: Brandon Morgan

@Brandon Morgan

I self manage my 29 SFR and run into this all the time. I've been slowly moving all my renters over to apartments.com to keep track of all these payments easier.

Been there done that with tenants like yours. I would give them a 3 day pay or quit notice. Tell them you’ll cancel your court date if they pay you the rest by the court date. Otherwise these people will own you.

@Brandon Morgan, nice to see someone from the same market here!

I do not accept cash app or zelle as those seem better suited for personal transactions than for something like rent payments.

I use apartments.com. It provides basically a tenant portal where you can upload copies of the lease, manage electronic payments, even do other things as well like maintenance requests.

Most tenants pay using secure ACH transfers from their account to mine. It takes a few days for the money to hit my account, but that is a small thing compared to the convenience. ACH transfers are free, but if a tenant wants to pay with a credit card they will get charged a fee. In addition tenants can choose to have their payments reported to a credit bureau to build their credit.

You can also set it up to automatically apply late fees which is nice.

Since its a portal for the tenant, both you and the tenant see a complete accounting of all payments made.

In addition you can use it to collect initial security deposits or to bill the tenant for addition items such as billed back utilities, damages, etc. So, if a tenant broke a window and it cost $300 to replace, you can simply add that bill in apartments.com and that way its all tracked where everyone can see it and track it. 

Were you able to find a property that would cash flow?  I am originally from PA and still have family there.  Perhaps I should look there.  Thanks.

Congratulations Brandon! I am still looking to buy my first investment property so I don't have enough experience to answer the LLC question. However, I was talking to a DSCR loan officer about a property I was looking at and they told me that they would only lend to an entity like a LLC or corporation; they would not lend to me individually. May I ask where you bought your first property? I am in San Diego and it is too expensive here to get started, so I am looking in the Midwest. But there are so many possible places to look, it gets overwhelming. Thanks.

An LLC is useful for two things: anonymity and legal protection. In most cases, neither is warranted.

Warning: I am not an attorney, and this can be a complicated topic. Please note the information provided below is a layman's definition designed to provide a basic understanding for the general audience. You should consult an attorney or CPA for your specific situation.

ANONYMITY: When you create the LLC, your name is recorded on the documents and published on the Secretary of State's website for all to see. So you're not completely anonymous. If you want to be completely anonymous, you can use a Registered Agent. The Registered Agent will record the documents on your behalf so only their name and information appear on the documents. I've done this with my properties because I'm well known in my small town and don't want people to know what I own.

LEGAL PROTECTION: By placing your assets in an LLC, you are legally separating them from your personal assets. If someone injures themselves and sues, they will be suing the LLC and not you personally. If your insurance coverage isn't enough, they could seize the LLC assets, but not your personal assets.

Additional thoughts:

1. An LLC is not free. You can spend as little as $100 to form an LLC, or you could use an attorney and spend $1,000 or more. There are also additional costs of operating and maintaining an LLC, like separate bank accounts, annual report filings, tax filings, etc.

2. There are rules to follow! If you fail to follow the rules, you may open your personal assets to a lawsuit. An example of this would be mixing your personal money and LLC money in the same bank account.

3. You do not need a separate LLC for each property or a series LLC! Don't make your life more complicated than it has to be. Most professionals will recommend a separate LLC for every $1 million in assets but I don't think that's necessary. In my case, I have residential rentals in one LLC, commercial properties in another, self storage in a third, and my real estate company operates in a fourth. Some have more than $1 million in equity while others have less.

4. The need for an LLC is grossly exaggerated on BiggerPockets and other websites. Have you ever heard of a Landlord being sued by a Tenant and losing property? I've been on this board since 2010 and haven't found an example yet. You've probably heard of big Landlords losing property, but only because they were flagrantly violating Fair Housing, running a slum, or otherwise violating the law in an egregious manner. You are more likely to be struck by lightning twice. The vast majority of lawsuits against Landlords are for wrongful eviction, security deposit disputes, and Fair Housing Violations. Your primary insurance policy with $300,000 in liability coverage should be sufficient in 99.999% of all lawsuits.

5. The best protection for you and your investments? Know and obey the law. I manage around 400 rentals with 14 years of experience and have never been sued once. Even if I were sued, I document everything and obey the law, so I won't be found guilty. Even if I were found guilty, the cost would be in the thousands, not in the millions. Insurance would cover it, I would pay the deductible, and no assets would be lost.

If you are in an area like San Diego where people are more likely to sue, a judge is more likely to find you guilty, and the payout is expected to be higher, you may consider an umbrella insurance policy. This policy will provide additional coverage above what your existing policy covers. It's easy to obtain, costs very little, and doesn't require extra, on-going effort to maintain.

@Brandon Morgan

If the loan is in your name I would not put it in LLC I would just a good insurance policy.

That’s what I would do and have done

Mobile homes can either be on their own lot (freehold) like most single family homes or they can be in a mobile home park (you rent the land).  If they are in a mobile home park, there will be restrictions as to what you can do (same as if you had a condo).