All Forum Posts by: Chris K.

@Sammie Sams

You are basically describing what they call "house hacking." It's a good strategy if you are comfortable living in a multifamily instead of an SFR.

I have no idea what your personal life is like. And different folks have different opinions. But from a pure return perspective, you are almost always better off leveraging than not leveraging. So if you can do it, looking for a FHA/Fannie/Freddie Loan to buy a smaller multi-family might not be a bad idea.

No idea where you live but consider looking around the Scranton suburbs as well. Most people commute in the area by car. 

Disclaimer: While I’m an attorney licensed to practice in PA, I’m not your attorney. What I wrote above does not create an attorney/client relationship between us. I wrote the above for informational purposes. Do not rely on it for legal advice. Always consult with your attorney before you rely on the above information.

@Mayer M.

What size? It's hard to answer a question without knowing what the scope is. 

Disclaimer: While I’m an attorney licensed to practice in PA, I’m not your attorney. What I wrote above does not create an attorney/client relationship between us. I wrote the above for informational purposes. Do not rely on it for legal advice. Always consult with your attorney before you rely on the above information.

@Scott Marshall

What size of property? By that I mean, what's the approximate lease amount? 

Disclaimer: While I’m an attorney licensed to practice in PA, I’m not your attorney. What I wrote above does not create an attorney/client relationship between us. I wrote the above for informational purposes. Do not rely on it for legal advice. Always consult with your attorney before you rely on the above information.

@JASON CHOI

What kind of properties are you looking to buy? And how much? 

I ask since if I'm going to invest out of state, I will always try to look for larger investments that can manage itself. As the scale grows, you get access to better managers, contractors, lawyers, vendors, accountants, etc. 

I live in what some people would consider a flyover area. This doesn't mean you cannot make money here. But I tend to focus on smaller investments where I can leverage my strength (e.g. being a lawyer, being part of a decent size construction company, etc.). I can get more directly involved if needed since I live here and I know everyone here. 

For out-of-state and out-of-country investments, I will only do it if I can work with "proper" team members. For example, I manage some real estate back in Seoul, Korea. It is big enough that I can hire large scale management companies that basically handle everything. I don't have to deal with day-to-day decisions and I just get monthly/quarterly reports. Most of my family still lives there so I can rely on them if there is a major emergency without having to fly back. If needed, I can hire law firms and accounting firms that can handle legal/tax issues in both US and Korea. 

I wouldn't have this luxury if I just had a duplex in Seoul.

Those are just my thoughts. If you are in Malvern, I would probably focus on the PA markets. You can do Philly, Allentown, or even some of the small markets. Even though the strategy may change, you can theoretically make money in any of those areas.

Disclaimer: While I’m an attorney licensed to practice in PA, I’m not your attorney. What I wrote above does not create an attorney/client relationship between us. I wrote the above for informational purposes. Do not rely on it for legal advice. Always consult with your attorney before you rely on the above information.

@Akeem Moreno

It's an impossible question to answer without more details. If you don't have experience doing this, I would do a lot of homework before you think about it.  

Disclaimer: While I’m an attorney licensed to practice in PA, I’m not your attorney. What I wrote above does not create an attorney/client relationship between us. I wrote the above for informational purposes. Do not rely on it for legal advice. Always consult with your attorney before you rely on the above information.

@Syed H.

Depends on the municipality. Pennsylvania does not have a uniform rule on this. I can't say I know what Allentown's ordinances say on the matter. 

Do note, however, that Pennsylvania does have a law that restricts who can engage in property management activities for another person. You could, for example, hire someone to show the apartment and provide general information to the potential tenants. But such employees could not enter into a lease, negotiate terms, or hold money belonging to the tenants. 

And setting aside all the above, sometimes landlords can get into trouble for hiring unqualified people. Not saying your handman is unqualified. But I've seen smaller landlords get into major trouble because the person they hired wasn't properly managing the property and sometimes engaging in illegal activities. If you don't have a clear contact and the person doesn't have adequate insurance, that could end up becoming the landlord's problem. 

Disclaimer: While I’m an attorney licensed to practice in PA, I’m not your attorney. What I wrote above does not create an attorney/client relationship between us. I wrote the above for informational purposes. Do not rely on it for legal advice. Always consult with your attorney before you rely on the above information.

@Kris Marmol

I understand what you are looking for but it's not the easiest question to answer. Unlike a single-member LLC, you need to consider a lot of different factors when dealing with a multi-member LLC. And often times there is no "right" answer --- what makes sense for one LLC doesn't make sense for another. Because there is no "right" answer, forming a proper multi-member LLC can become a time-consuming, expensive process.

@Daniel Dietz gave some good ones. Aside from that you may also want to consider the following: 

• Will the LLC be required to make tax distributions to its members?

• What decisions require simple majority versus super majority votes?

• If you have a member that brings sweat equity, how will that member deal with potential tax implications?

• What level of fiduciary duty will each member owe to each other?

• Is it going to be member managed? Or manager managed?

• If you go with a 50-50 LLC, how will you deal with deadlocks?

When you look at how operating agreements are done at the "big boy" level, it's not uncommon for each member to hire their own respective lawyers and have them work on it together to make sure everyone is on the same page. It's costly but often needed when each member is contributing a good amount of money and resources. Unfortunately, it's not always an option for newer investors due to the costs involved.

Disclaimer: While I’m an attorney licensed to practice in PA, I’m not your attorney. What I wrote above does not create an attorney/client relationship between us. I wrote the above for informational purposes. Do not rely on it for legal advice. Always consult with your attorney before you rely on the above information.

@John Martin

Some thoughts: 

• I think NY recognizes tenancy by the entireties. But I'm not sure how extensive the protection is in NY. In PA, it's pretty strong. For asset protection purposes, you probably want to consult with a NY attorney than a PA attorney. For PA folks, I typically say it makes sense for only one of the husband and wives to own the LLC.

• For LLCs, I would say it generally makes sense to open an LLC in the state where the real estate is located.

• One special factor to consider in PA for LLCs. PA is infamous for its realty transfer taxes. Last time I checked, the PA Department of Revenue's position is that if you assign an agreement of sale from you personally to an LLC, that is a taxable event. So there is the risk that you may have to pay real estate taxes twice. To avoid this outcome, it probably makes sense to open an LLC before you sign the agreement of sale. There are ways to work around it if the seller is nice. But the safest option is to have an LLC before you sign anything.

Disclaimer: While I’m an attorney licensed to practice in PA, I’m not your attorney. What I wrote above does not create an attorney/client relationship between us. I wrote the above for informational purposes. Do not rely on it for legal advice. Always consult with your attorney before you rely on the above information.

@Ehab Habib

A lot of the Pennsylvania municipalities now require landlords living outside of a certain mile radius to hire a property manager. So keep that in mind. 

I would check out the following markets: 

• Harrisburg-Carlisle, PA MSA
• Scranton–Wilkes-Barre–Hazleton, PA MSA
• Lancaster, PA MSA
• York-Hanover, PA MSA
• Reading, PA MSA

Histroically, those areas have been around a 10 cap market and the population has remained around 400k to 600k. From there, you basically have larger markets in Philadelphia, Pittsburgh, and Allentown. There are also smaller areas but they tend to be more of niche areas (e.g. college rentals in State College). 

If you are in Jersey City, I would probably check out the Allentown , Wilkes-Barre/Scranton, and Reading. They are within reasonable driving distance and a relatively easy drive. Harrisburg, Lancaster, and York can be a hike depending on traffic. Stroudsburg is fine but it's a much smaller city compared to the other areas listed above. 

Good luck!

Disclaimer: While I’m an attorney licensed to practice in PA, I’m not your attorney. What I wrote above does not create an attorney/client relationship between us. I wrote the above for informational purposes. Do not rely on it for legal advice. Always consult with your attorney before you rely on the above information.

@Kris Marmol

I would say yes. There are large concepts behind operating agreements that's common in all 50 states. But there are variations in state law that could matter a lot depending on what you intend to do. So if you intend to open an LLC in a specific state, it probably makes sense to hire an attorney that is licensed to practice in that state.

Disclaimer: While I’m an attorney licensed to practice in PA, I’m not your attorney. What I wrote above does not create an attorney/client relationship between us. I wrote the above for informational purposes. Do not rely on it for legal advice. Always consult with your attorney before you rely on the above information.