All Forum Posts by: Christopher Gilbert

The drop in credit score is usually temporary and comes back in a few months.  We have been buying 1-2 houses a year on average and our credit scores have never dropped below 800.  It might drop a couple of points but over time more rental property (good) debt you have that is paid on time will raise your credit score even more.  Usually banks lend on a tier system and as long as your score is not bouncing between two tier levels then it does not affect your ability to get loans. 

Unfortunately you will have to stay on top of it with the insurance company and make sure the bank has made it's payments on time.  If not, you will have to nag the bank if they are late on a payment.  You might be able to call a higher level manager at the bank, show them your evidence that they are not performing and get them to allow you to self-escrow.

This is exactly the reason that we insist on self-escrowing our insurance and taxes.  We use a mortgage broker that works with dozens of lendors to find one that meets our every need.  We have had a few lendors charge us a few hundred dollar "fee" to self escrow and a few others that did not charge anything but even a few hundred dollars is worth not having to deal with them.

My experience has been no.  The first lien holder gets paid first so they usually try to muscle out the second lien position.   Usually whomever gets the second lien has to make arrangements to pay the first and anything left over is theirs. 

This is also why you never want to buy a secondary lien at a forclosure auction, there are a lot of reasons to not get fully paid and very few that work out in your favor.

We have dealt with similar inspectors but have never had one actually damage the property.  I recommend sending the buyer a bill for the damage or at least use it as a negotiation to counter some of their repairs.  Inspectors are generally licensed and there is usually an overseeing board that you can register a complaint as well.  Enough complaints against this person and they can lose their license.

As a side note, reference HUD handbook 4150.2 Chapter 3 has some information about what they require out of an inspection and this is a good starting point to go through your houses and try to fix problems before an inspection. The less an inspector finds the less they are motivated to keep digging.

If the ARV is only $155k I would not bother with it, not enough meat on the bone. Dealing with multiple lien foreclosures can be complicated and expensive. Where we are at, the second mortgage lien holder can "forclose" and the new buyer of the second lien has 180 days to make right with the first lien holder. If they pay off the first lien within 180 days then they own the property. The first lien holder can still sell the property to you but then you can get into a legal mess with the second lien holder and have to have a legal battle or pay them off. If the second lien buyer has had it for more than 180 days and has not made it right on the first lien then you can take a risk since they are not part of the chain of title.

My experience has been that an LLC is not really needed for rental properties. We have an LLC for our flip houses but that is mainly to help link together our partners to make sure we all have equal equity. The LLC adds a higher level of hassle and depending on the structure of it can cost you extra in taxes. I recommend just getting an umbrella liability policy that covers $1MM or at least all of your assets. It only costs us about $150/year for the umbrella policy while it cost us $1k just to setup an LLC and then we have to pay an accountant every year to prepare the tax statements.

Putting a property into an LLC after you own it personally can be challenging as it is not allowed to simply "sell" it to the company if you are an officer in it. There are ways to do it but you will probably have to get your accountant and maybe a lawyer involved to draft up the paperwork which will cost enough to probably negate any savings.

Again, if liability is your main concern just get an umbrella liability policy.

Definately start with the referrals and work your way from there. We interviewed quite a few CPA's and while many of them could handle our rental properties they were overwhelmed with our flips and LLC's. Bring a list of very specific questions/concerns for them and within about 10 minutes you will know whether they are the right one or not. If the CPA answers every question with "I will have to research that and get back to you" it is time to move on.

If you want to use them to do your taxes for you, plan on spending an hour or two with them up front to see how they like to see your financials (quickbooks, etc.) and you can save quite a bit of money on tax prep fees.  We resisted using a CPA for many years and now that we have a good one they have saved us a ton in write-offs that we did not know existed.  Once we counted up the 40+ hours we spent on doing our tax returns each year it ended up being cheaper to let the CPA do them for us.