All Forum Posts by: Chris Coleman

@Aaron Marx

I'm not a CPA or an accountant, but I've own numerous LLCs. I'm not sure why your friend would say you have to pay yourself from the LLC. Is he simply saying not to commingle funds since the property is in the LLC? That would be correct. Or what he may be referring to is that any profits in the LLC will be passed through to your personal income, for which you'll be responsible for the taxes.

Depends on how long your going to use the money. Interest rates are likely to stay low for a while, so if you're only going to be using the money for a short period of time and able to pay it back fairly quickly (within say 18-24 months), then I would probably go with the ARM since it should have a considerably lower monthly payment being Interest Only. That will free up more cash flow.

However, if your project requires keeping the money out for a longer period of time, then I would go ahead and lock in the Fixed Rate, so as to mitigate the risk of increasing interest rates over the longer period.

Is the asking price maybe too high for the property?  Does the $18,400/yr factor in debt service on whatever your loan would be?  Is it located in a less-than-desirable area?

@Melinda Harris

There are plenty of Meetups in the DMV, and you can make good connections pretty quickly.

Check out GRID. They have several meetups in various locations.

@Russell Brazil is launching a new Meetup that is no doubt going to be great.

@Jon K.

I'm not an attorney, but I've created many LLC's, made a lot of offers, and signed a lot of contracts.

I don’t think you want to sign an Offer Letter under the name of an entity that doesn’t exist. Seems like if there were any unexpected hiccups in the eventual purchase, it could end up not going in your favor.

I can tell that if I were the Seller, I would not be comfortable agreeing to such in writing. I would probably say that I'll accept your verbal offer and give you 24 hours to establish the LLC and sign the Letter, or something like that.

Why not just state in the Offer Letter that you plan to establish a [whatever State] LLC upon acceptance of the offer in which you will be the Sole Member, and that the LLC will be the Purchaser, hold Title, etc.

Again, I'm not an attorney, but also when you draft the Operating Agreement for the LLC, I would think you'd want to somehow reference the Offer Letter as a Resolution or somehow incorporate the fact the its binding on the LLC.

For state purposes, even for SM LLC's, the LLC is a separate legal entity from you. The LLC is not you and you are not the LLC. It's a separate entity, which is the whole point of setting it up in the first place. So you just want to be sure and preserve that status.

@Julia Jones

Two things:

1. The PM should have a threshold dollar amount for which anything at or above that amount, they get your approval first before proceeding. For example, my PM has a $400 threshold. Anything below $400 they take care of automatically. Anything above $400, they call and get my approval first. The exception, of course, is emergencies that effect the Tenant’s living conditions, like when the A/C stopped working in August at one of the Houston properties.

2. The PM should have a flat percentage or fee that they charge for maintenance and repairs. A reasonable amount in my experience is 10-15%. For example, if the cost of a plumbing repair is $100, then the PM would charge you a 15% fee, or $15, in addition to the $100 repair cost.

But as everyone has said, it now just depends on what your PM contracts says.

@Charlie Moore

When they skipped town and didn’t notify anyone.

When I have to repair or replace substantial items, like flooring, ceiling fans, drywall, doors, appliances, etc...

Refreshing a property with clean up and cosmetic touch up is normal. Having to make significant repairs that could have or should have been taken care of or replace items is different.

@Sheila Campbell

Highly recommend paying off consumer debt that is costing you every month in cash flow and potentially adversely effecting your debt-to-income ratio.

Then look for ways to invest the rest.

@Chase Woodard yes, that's the beauty of depreciation.  In actuality, the property hopefully is appreciating, either through market appreciation, or if you're doing something like renovations to add value to it, or both.  Plus, if you're renting it out, then you're receiving the cash flow.  However, due to the accounting rules of depreciation, it will show a loss on paper for the first few years, which is what's used for your taxes.

So while you're asset is actually appreciating in the market, and you're making real profit in the bank, you're able to show a loss on the books and pay no taxes on it, generally for the first few years.

Its great for single-family properties.  But its even more powerful when you get into larger multifamily properties. 

@Vikas Chug

There are plenty of REI Meetups in the DMV. Check out the GRID Meetups.