All Forum Posts by: Colin B.

Jim - if you're ever in a pinch, another solution is to form an entity using a simple form LLC agreement for closing and at a later date amend it as the owners require. Certainly not the optimal solution (and I agree with David's suggestion going forward) but it can be helpful to at least get the deal done, especially if you're still negotiating terms with your business partner when the closing should occur. Have you talked to a lawyer about your planned operations, etc.? If not, it may be helpful for you to talk to a corporate lawyer in the state where you plan to form the entity to make sure you get the right documentation and understand the limitations of entities under applicable state law (particularly as the limitations relate to limited liability). Good luck!

Annie - As someone who invests out of state frequently, I understand your challenge well and I'm sorry that you're going through it. I went through a similar challenge on my first out of state property - about six years ago, I bought a decent but old three unit in a transitional neighborhood. The cash flow was (and still is) great but I had to go through two property managers before finding the right one. I'm hopeful that your current arrangement will be more fruitful but I have had mixed luck with family and friends in similar contexts. 

As far as whether or not you or your PM is responsible for the pipes, do you have a formal PM agreement with them? If so, it's worth understanding whether the PM has breached any of its provisions. One provision to be weary of is a provision limiting the liability of the PM which, in my experience, is common in PM agreements. Then, absent a breach of any other applicable provision in the agreement (i.e., a provision limiting what the PM can spend without your approval) or the applicability of any state law to the contrary (for instance, in New York like many states, a liability waiver is ineffective for fraud), the question will be whether or not the PM's conduct falls outside of the liability limitation provision (many of them provide that the PM is nonetheless liable for, i.e., its gross negligence, bad faith, fraud, etc.). 

My gut reaction is that it probably isn't worth the time and the headache for a possible $500 recovery if the PM won't work with you amicably and out of court, even if they did breach any PM agreement (believe me, I spent more than that learning my lessons about ineffective PMs so consider yourself lucky) but do review them on Yelp, report them to Better Business Bureau, etc. to help the rest of us. Good luck! (No legal advice here.) 

I agree with pretty much everyone, John, and would suggest that you not make a claim. Another consideration on top of what others have said is that you are also potentially going to have to argue with your insurance company, depending on how reputable your insurance company is and what your policy says, to even get that $500.

For me, it depends on whether you can get increased rent for putting in a washer/dryer and whether you pay the water/electricity. In one of my buildings, I can get increased rent (~$75 a month) and so it was worth it for me to put in the washer and dryer myself. In another of my buildings, I can't so I didn't. As far as quality, it depends on the market for rentals - I would suggest you look at a few comps in the area and see what they do. Regardless, if you do get appliances and you're paying for water or electricity, then (1) make sure you focus on efficiency because washers and dryers can suck up a lot of water and energy and (2) consider whether to buy coin operated washers and dryers - in my experience they tend to cost more but tenants are less likely to abuse them. I've heard a story from a fellow investor of a tenant who had "laundry parties" where their friends came over to do laundry and watch Monday Night Football - not good for water/electric bills!

Fred - I was in a similar position as you a year ago and chose an option similar to your option (c). I think as long as you expect to make some cash flow (after covering all of your expenses, your mortgage, your insurance and any management fees) off of each building that you acquire and keep a cash reserve of, say, $30-$40,000 as a rainy day fund, you'll likely have enough of a cushion to cover any unexpected expenses. What I'm doing is using whatever I save to buy more properties and using the cash flow from my buildings to pay off the mortgages on the buildings that I acquire (paying off one at a time to free up more cash flow).