All Forum Posts by: Bill Walston

Hi Derek - I use google voice (forwarded to my cell) for my bandit signs. A big plus is that I can get a local number for pretty much any market that I choose to work. The only minor disadvantage is that when the number is forwarded my cell voice mail picks up the call (not my GV voice mail) if I choose not to answer.

As far as I know, the numbers cannot be traced back to an individual.

I know of a few investors who will purchase a prepaid cell phone to use for their bandit signs.

Daniel is pretty much spot on with his analysis. The key to pulling money from your LLC is to look at its tax election.

If an election has been made to be taxed as a corporation money will be taken as a salary or as a dividend distribution. If no corporate election has been made the funds will be treated as withdrawals from a sole proprietorship or partnership.

I'd suggest that you discuss this with your tax pro since withdrawals from your LLC should be part of your overall tax planning.

Originally posted by Rob Gillespie:

Travis,

The only worry is that you lied to the bank to get the loan with less down at a better rate. If you look at your closing docs, it says do you INTEND on occuping the property? You did, and things did not work out.

Are you sure about that Rob? The last set of closing documents I signed required an "Occupancy Affidavit" which required disclosing whether the property was to be a primary residence, second home, or investment property. The "primary residence" selection read, in relevant part:I don't read a word about intent, only "currently occupies, or will occupy."

The point is, Travis has an agreement with his lender for an owner occupied property. The property is not owner occupied. If I read his post correctly, it was never owner occupied as he says that he "stayed living in the apartment and rented the house out.." IF the lender should discover this fact there is a valid claim for misrepresentation. Was it intentional? I think not. But were I in Travis' position I would much rather have it on the record that I had informed the lender that my circumstances had changed. But that's just me.

The dreaded "due on sale" clause really isn't an issue here, as title to the property hasn't been transferred. What is at issue is an owner vs. a non-owner occupied property. I'd suggest you let the lender know the change in your circumstances and why you are not occupying the property as planned. You should also talk with your insurance company as you need a landlord policy on the property.

Originally posted by Alex K.:

I have an unusual situation:

I own a property which is under contract to sell to my tenants on Nov 1.. . The tenants are fixing the place up. The rental agreement states that I am to receive copies of receipts for all work done to the property. My plan was to use these receipts to increase my basis value of the property. Since the repairs are being done while I still own the property, I should be able to do this, right? Does it matter that I am not the payee on the receipt? For example the plumbing bill is $3400 (install RV water/sewer/electrical hookups) and it shows the date and the property address, but my tenant's name on it. Will the IRS frown upon this?

If you are allowing them to make the renovations in lieu of rent you probably have a case for increasing your basis in the property. You would, of course, have to include the value of the renovations in your gross rental income. If the tenants are making the improvements in anticipation of their purchase and you are NOT recognizing the value are rental income, then no, you may not increase your basis.

Originally posted by Alex K.:

I don't see how the tenants could use the receipt to increase their basis value since they did not own the property when the work was done.

But they DO have a binding contract to purchase the property. Accordingly, they would have a valid argument for including the value of the renovations in their basis calculation.

Originally posted by Aaron Mazzrillo:

I have spoken with many attorneys and they all say the same thing; An LLC does not really offer the liability protection people think it does. As an officer of the company, you can still be sued personally and the corporate veil can easily be pierced.

I disagree. By statute, LLC owners/members (most DO NOT have officers) are protected from personal liability for business debts and claims. That being said, I agree that there are a few exceptions to the limits on liability for the LLC, just as there are for corporations. An LLC owner/member can be held personally liable if he or she:

1) personally and directly injures someone;
2) personally guarantees a bank loan or a business debt on which the LLC defaults;
3) fails to deposit taxes withheld from employees' wages;
4) intentionally does something fraudulent, illegal, or reckless that causes harm to the company or to someone else; or
5) treats the LLC as an extension of his or her personal affairs, rather than as a separate legal entity.

This last exception is the most important. If owners don't treat the LLC as a separate business, a court might decide that the LLC doesn't really exist and find that its owners are really doing business as individuals who are personally liable for their acts. In other words, "pierce the veil." On the other hand, if the LLC is properly structured and treated as a business separate and apart from its owners/members this rarely happens.

Originally posted by Bryan A.:

I don't think it's necessary... I get emails to my phone

I can see why you wouldn't think it necessary Bryan, but, believe it or not, everyone doesn't get email on their phone. And even some who have email available choose not to use it, so text notifications would be valuable to them. :-)

I think that's an excellent idea!

Hi Mack! To say I'm a big fan of MLOs would be an understatement. In the last 9 months I've closed 7 deals using the MLO strategy. Some pros: no large cash down payment; no bank/lender qualifying in order to control the property; ability to walk away from the deal at the end of the lease if things are not working out, and minimal risk. The biggest challenge, I would say, is locating the targeted properties. But then, my philosophy is MLO deals are not found, they are made :-)

Mike, I strongly suggest that you run this by an attorney who is familiar with Medicade rules and regs before you attempt any transfer of the property - unless of course you want to be accused of participating in medicade fraud. The holder of the POA has obviously done his homework if he is aware that the sale proceeds may have to be used to pay the owners nursing home expenses. This deal is like a jar of jalapeno peppers - what you do today may burn your a$$ tomorrow.