All Forum Posts by: Bruce Clark

I understand that the bank will need three reports. I just dont want to pay an appraiser for three appraisals, when he is clearly just going to change the address and the parcel number for the second and third reports. He will not have to pull separate comps or do any additional research. I'd like to at least get a reduced appraisals fee.

Any suggestions on how to go about requesting or negotiating that?

I just signed a contract to buy three houses. These houses are literally exactly the same and they are all right next to each other on the same street. Literally, the only difference in these houses is the outside trim. They are all white. One has blue trim; one has red trim; one has black trim. Otherwise, they are the exact same house. 

I am wondering if my bank is going to require 3 separate appraisals and if so, will I be charged the full price as if three different houses were appraised. I really do not want to pay the full price for 3 appraisals, when these houses will clearly appraise for the same exact amount. The only difference in the reports will be changing the address by one number.

Any suggestions, advice, comments, etc.?

I mean, it seems like if the existing LLC is paid to manage a property in accordance with a contract, that income will be taxed as "earned income," which would be a higher rate that the capital gains rate. I would rather not pay the higher tax rate on essentially the same income.

Am I totally off on this line of thinking?

My partner and I currently own and operate an LLC that owns and manages several residential rental units.

We were recently approached by an individual who wanted to invest in real estate. We formed an agreement that my partner and I would find a property that met our agreed upon criteria and get the property under contract for our agreed upon price. The investor would provide cash for the down payment. We would hold the property under a newly formed LLC with the our existing LLC being a 50% owner and the investor being a 50% owner. Also the new LLC would pay our existing LLC to manage the property.

My question what/how should I set the management agreement up between the LLC's to minimize the taxes owed. If I simply create a contract between the new LLC and the existing LLC for management, will the tax rate be higher than my standard capital gains rate? Is there another option to achieve my goal but reduce the tax rate? What am I missing?

My partner and I currently own and operate an LLC that owns and manages several residential rental units.

We were recently approached by an individual who wanted to invest in real estate. We formed an agreement that my partner and I would find a property that met our agreed upon criteria and get the property under contract for our agreed upon price. The investor would provide cash for the down payment. We would hold the property under a newly formed LLC with the our existing LLC being a 50% owner and the investor being a 50% owner. Also the new LLC would pay our existing LLC to manage the property.

My question what/how should I set the management agreement up between the LLC's to minimize the taxes owed. If I simply create a contract between the new LLC and the existing LLC for management, will the tax rate be higher than my standard capital gains rate? Is there another option to achieve my goal but reduce the tax rate? What am I missing?

Good tips and advice. Thanks to all.

I am not an inspector (obviously). I am just wondering if the gas is not one, how does/can the inspector find the leak?

Found a great property that was in great condition. The only issue was that the furnace was old but functional. I had an inspector look at the house and he did not find any major issues.

I closed on the property and listed it immediately. I had a ton of interest and found a great tenant (I hope) within a week. The day the tenant moved in, he attempted to get the gas turned on. Gas company found a gas leak and also said there was excessive carbon in the furnace. The red tagged it, and will not turn the gas on until i get it repaired.

Now I am stuck with these repairs on my first day of renting the property. My question is, did I make a mistake or miss something? Is there something I can do in the future to avoid this type of issue?

@John Thedford I calculated repairs, capital expenditures, and vacancy each at 5% of rent (15% or $300 per month). The property is in pretty good condition overall, so this should be more than sufficient.  I own other properties in the area of this property so I have a pretty firm understanding of the expenses and I am very conservative with estimates before purchasing anything. I definitely agree though. There are always unforeseen things that come up and you can never plan for everything. 

Thanks for the advice.

@Cody L. I will set up an LLC and the loan will be in the LLC's name. As 50% owners of the LLC we will also have to sign as personal guarantors. However, I already own and manage several properties that I have financed through 2 different banks. So I will actually do the leg work and arrange the financing. Given that I have relationships with these banks and they know that my properties have always been profitable, I should have no issue. I think it may be a little more of a challenge for the potential partner to approach a bank with no current rental properties and no real estate experience.