All Forum Posts by: Charles Evans
Charles Evans has started 6 posts and replied 22 times.
Quote from @Nathan Gesner:
An LLC is useful for two things: anonymity and legal protection. In most cases, neither is warranted.
Warning: I am not an attorney, and this can be a complicated topic. Please note the information provided below is a layman's definition designed to provide a basic understanding for the general audience. You should consult an attorney or CPA for your specific situation.
ANONYMITY: When you create the LLC, your name is recorded on the documents and published on the Secretary of State's website for all to see. So you're not completely anonymous. If you want to be completely anonymous, you can use a Registered Agent. The Registered Agent will record the documents on your behalf so only their name and information appear on the documents. I've done this with my properties because I'm well known in my small town and don't want people to know what I own.
LEGAL PROTECTION: By placing your assets in an LLC, you are legally separating them from your personal assets. If someone injures themselves and sues, they will be suing the LLC and not you personally. If your insurance coverage isn't enough, they could seize the LLC assets, but not your personal assets.
Additional thoughts:
1. An LLC is not free. You can spend as little as $100 to form an LLC, or you could use an attorney and spend $1,000 or more. There are also additional costs of operating and maintaining an LLC, like separate bank accounts, annual report filings, tax filings, etc.
2. There are rules to follow! If you fail to follow the rules, you may open your personal assets to a lawsuit. An example of this would be mixing your personal money and LLC money in the same bank account.
3. You do not need a separate LLC for each property or a series LLC! Don't make your life more complicated than it has to be. Most professionals will recommend a separate LLC for every $1 million in assets but I don't think that's necessary. In my case, I have residential rentals in one LLC, commercial properties in another, self storage in a third, and my real estate company operates in a fourth. Some have more than $1 million in equity while others have less.
4. The need for an LLC is grossly exaggerated on BiggerPockets and other websites. Have you ever heard of a Landlord being sued by a Tenant and losing property? I've been on this board since 2010 and haven't found an example yet. You've probably heard of big Landlords losing property, but only because they were flagrantly violating Fair Housing, running a slum, or otherwise violating the law in an egregious manner. You are more likely to be struck by lightning twice. The vast majority of lawsuits against Landlords are for wrongful eviction, security deposit disputes, and Fair Housing Violations. Your primary insurance policy with $300,000 in liability coverage should be sufficient in 99.999% of all lawsuits.
5. The best protection for you and your investments? Know and obey the law. I manage around 400 rentals with 14 years of experience and have never been sued once. Even if I were sued, I document everything and obey the law, so I won't be found guilty. Even if I were found guilty, the cost would be in the thousands, not in the millions. Insurance would cover it, I would pay the deductible, and no assets would be lost.
If you are in an area like San Diego where people are more likely to sue, a judge is more likely to find you guilty, and the payout is expected to be higher, you may consider an umbrella insurance policy. This policy will provide additional coverage above what your existing policy covers. It's easy to obtain, costs very little, and doesn't require extra, on-going effort to maintain.
Could you give some basic examples of what to keep a record of? This will be my first year renting out half of my duplex, and besides receipts, I haven't kept any records.
Post: Tips for Property #2?
- Posts 22
- Votes 15
Hello,
Back in January, I bought my first duplex. I currently live in one side and rent out the other, covering about 2/3rds of my mortgage. I am trying to do my homework and prepare a strategy to approach getting my second property since I am eligible to house-hack again next year. I want to repeat this process, ideally even get my hands on a triplex/quadplex, but they are extremely rare in the lower Delaware/Maryland area (even duplexes). I am open to all angles, even considering going with a 2-4 unit barndominium if I can find cheaper land, or even an FHA 203k loan for a property in need of some BASIC renovations. I say basic only because I am not a handyman and would like to play it safer since this would be a second mortgage on my plate & would like to limit the risks going into this.
What I am trying to say is: I am open to all approaches if anyone has any idea from experience. Anything would be appreciated, and I would love to read your ideas/experiences!
Thank you
For a house hack, on questions for homeowners insurance like "how many people are living in the household," etc... do I need to answer with just my unit, or do I need to list them as well? Probably a silly question, but I feel like duplexes or more are a little more complicated when it comes to insurance, which is something I never thought about PRE buying the house!!! Any good companies for multifamily houses lol?
Post: What Paperwork Should I Be Keeping Record Of?
- Posts 22
- Votes 15
Quote from @Ryan Kelly:
Here's a list of things to track:
- Formal lease application
- Formal signed and executed lease specific to your state
- Payment history (I recommend using online rent collection like Apartments.com, RentRedi, etc)
- Maintenance requests and receipts
- Accounting for all rental-related expenses (repairs, utilities, etc)
The more you treat it like a business, the more helpful you are to your CPA come tax time.
Would Zelle be appropriate? My bank directly takes Zelle, so its convenient for my tenant and I to do it that way, plus my bank would get it directly leaving a nice paper trail. Or should I see about making a separate checking account to get paid to?
Post: What Paperwork Should I Be Keeping Record Of?
- Posts 22
- Votes 15
Quote from @Aaron Zimmerman:
There’s a lot of great suggestions in this post. I wrote an article specifically for house hackers that lays many tax items out for you. I hope it provides some value!
https://www.straightupchicagoinvestor.com/blog/6-must-knows-...
Thank you!
Post: New Landlord Advice
- Posts 22
- Votes 15
Quote from @Havital Miltz:
Wow a bit of a sticky situation, did you have a conversation with the seller, directly or thru your realtor prior to the closing to find out if the tenant knows they are supposed to move out?
If not, I most definitely would reach out to the tenant, introduce myself and ask if they are going to be out by the 31st or the 1st, I would communicate to the tenant as if I know they were told they are expected to leave, otherwise you may find they "do not know" they need to leave even if they actually know they need to leave....
In the case they claim they are not aware they need to leave, you would need to follow the laws in the state you purchased the property, usually you can find that info on the states judicial branch or speak with a landlord tenant attorney.
Best of luck and congrats on the new property
Yes they know! I toured the property when they were home and they asked me how the living situation was gonna work, which I explained that my loan said that I had to live on the property for a year, and the tenant next door was on a year lease & he was month to month... so he was going to have to leave. He knows that he has to be out on the 1st, but I didn't know if it made sense to contact him and ask him to check up on him! And thank you! I am excited and nervous about this journey, but it is what I've always wanted to do!
Post: New Landlord Advice
- Posts 22
- Votes 15
Quote from @Denver McClure:
Hey @Charles Evans, I would make sure to reference their lease and the new owners. The seller and their agent hopefully did a good job communicating with that tenant to set expectations. I've done this several times, it can be a little awkward sometimes but most tenants understand.
Yes they do know! I was touring the property when they were home and they asked me how the living situation was gonna work out, I explained that my loan stated that I had to live on the property for a year, and the tenant next door was on a year lease & he was month to month so he was going to have to leave. He knows that he has to be out on the 1st, but I didn't know if it made sense to contact him and ask him and check up on him!
Post: New Landlord Advice
- Posts 22
- Votes 15
So I just closed on a duplex a couple days ago & Im going to be house hacking. Theres someone living in the side that I will be occupying until the 1st of February, but since I JUST became the owner, would it make sense to reach out and ask them something like "Hey its __ the new owner, just checking in to see how you're doing. I was told by the previous owner that you're moving out by February 1st, can you confirm that?"
Post: What Paperwork Should I Be Keeping Record Of?
- Posts 22
- Votes 15
I'm a new house hacker here. What paperwork should I keep a paper trail of to make things like taxes and other situations better/easier for myself? Like should I have a folder on my laptop for the tenant and keep a copy of each payment I receive from them? What are some other things I should retain to make the landlord experience easier? Thank you.
Quote from @Jake Andronico:
Congrats!! But be careful expecting to refinance. Don't expect rates to come down.
Is this a new build?
Whats making you think rates wont go down after a couple years given the new administration in charge? The last time we had this leadership, interest rates were a lot better, no?
And its not! it was renovated from the studs up in 2019!