All Forum Posts by: Carl Millsap

@Ashish Acharya thanks for the response. My wife and I are the only members of the LLC.

We bought a property in 2019 using a 1031, now we want to refinance that property but as part of the re-fi we want to move it into an LLC.

Will the change in title (ownership) trigger a tax bill because we used 1031 funds to buy the property? 

We are trying to determine if we refi into the LLC or keep it in our name.

Thanks 

@Shawn Wainsely in addition to what has been stated we are doing 60-90 day leases that go month to month after the initial term.

The eviction moratorium (s) generally state you can't evict for non-payment. In our area you can evict for not having a valid lease, or any other cause other than non-payment. By using a short term lease you have the option of not renewing the lease. 

The tenant of course has the option to leave early but for us the risk / reward is worth it.

Of course I recommend you consult a lawyer to ensure this is a sufficient strategy in your area. 

@James Feely we had the same concern / problem so we have a two step process. It takes more time but has reduced the # of applicants.

First we send an email with the qualifications clearly spelled out, and our application. At the end of that email it says:

"If you meet the above qualifications do the following two (2) things."

1. Reply to this email stating you would like to move forward. Once they reply to the email we provide the Cozy link.

2. Return the attached application and supporting documents to the office.

If they reply and they don't qualify which some have done it's on them....we can only do so much to help. 

@Lee Ostrowski if your tenant did the right thing and caught up with their rent and is otherwise a good tenant then I'd renew. A bird in the hand is better than 2 in the bush. 

With the current environment I'd rather keep a paying tenant than to spend $ cleaning / repairing a unit once they move out only to take the chance of getting someone who qualifies initially but eventually becomes a risk.

We are renewing leases and setting any new lease on a month to month basis. 

Eviction moratoriums are generally about non-payment.  With a M2M lease we can give 30 days notice stating we are NOT renewing the lease and evict for cause if they don't vacate. The tenant has the same option but it's worth the it to have that option then to sign a 12 month lease and not be able to evict for non-payment. Works in our area, consult a lawyer in your area. 

As for bringing a unit up to "standard" during lease renewal. We don't renovate units while someone is living there. We make all repairs in a timely fashion but any upgrades to flooring, changes in paint etc. will be done when the unit is vacant. If it's 1 year from now or 5 years from now it doesn't matter. 

Hope this helps.

@Tiffany M. in our area if you file for anything outside of non-payment the court has proceeded w/ the forcible detainer (eviction). 

We evicted a tenant for not having a valid lease, and one for not maintaining renter's insurance per the lease. 

I recommend you consult w/ a lawyer or other investors in your area. Ask some of the property managers they may know as well.

Good luck.

@Norman Alsumairi your approach will depend on what risk you want to take, your long term goal and what the current market is. 

IF you BRRR / Flip is that to get $ for your next deals? If you get a multifamily is that a Buy & hold?

 I bought single families as a buy and hold, but then started selling off to buy multifamily as the equity increased. I could have kept them and refinanced but our goals have changed and thus the approach changed. 

I recommend you look at where you want to be 3-5 years from now then backwards plan from there. You'll have to adjust along the way but the important thing is to get started. Get that first deal under your belt.

In some markets single family makes since, even more so than multifamily. A good friend invest in upstate NY where they can buy 3 bedroom homes for $35-50K and rent for $1100-$1300 per month. In my market that same home will rent for $750-$875. Look at your market and determine what will get you the best bang for your $.  

@Brian Geiger we use MB's SDA and couldn't be happier with it. So far as we've grown it's been easy to adapt to different scenarios. 

Bonus is that as he updates it you receive the updated version vs. buying the new version. 

@Daniel Kelley we use Cozy, it's been great.  The tenant will pay a fee IF they use a CC to pay but otherwise it's truly "free" in that Cozy holds the money for 3-5 days.

We started using Housters for property management. It's great because it also has an app so we can do everything on the fly. We haven't used their rent collection / screening service yet because we have Cozy. 

Housters is $1 per door up to 40 doors then it's a flat rate per month of $40. They have a 3 month trial so worth the look.

@Gisel Lainez-Jimenez looking at your mortgage payment, what interest rate did you plug in? I ran the numbers at 20% down @ 3% interest and 30 yr amortization...the payment before taxes and insurance is $2357. 

On commercial deals the interest rates tend to be .05-1.5% higher (in my experience) than residential so factor 4% - 5.5% with a 20 year amortization (AM). 

I ran 20% down w/ 4% on a 20 year AM and the payment is $3388.

Did you verify the taxes? 

Check with your insurance agent on the insurance premium? Did you factor the cost of a general liability policy above and beyond what the property policy cost? It's a small price to pay for the additional coverage / protection.  

Is the 55% operating expenses before or after rehab? If it's AFTER rehab what can you do during rehab to lower your cost? 

On a commercial deal for planning purposes 50% is a good number to use, but you want to get that down to 25-35% if possible. 

Also, what is the debt coverage ratio? What does your bank look for? Another question to ask your banker so when you run your analysis you can ensure your numbers hit that at a minimum.

Hope this helps.