All Forum Posts by: Costin I.

@Rama Mulpuri Here is another consideration/opinion: east of I-35 you will have to deal sooner or later with foundation problems. Here in TX the soil is mostly clay, and it shrinks and expands with humidity level (thus the need to "water the foundations" as a measure to avoid foundation cracking), so foundation problems are a common occurrence. But on the east of I-35 it's almost a question of WHEN, not IF you'll have foundation problems.

@Rama Mulpuri

@Rama Mulpuri

1. On a geographic simplistic approach, the closer you are to I-45 in RR and to I-35 in Pflugerville, the better you’ll be.
2. The better the schools, the better the opportunity. Schools rating drive many other factors and it’s an important criteria to consider. That being said, schools ratings also change (e.g. a couple excellent elementary schools feeding into one currently low rating middle/high school will raise the rating of the middle school in the coming years as the kids advance, and vice versa).
3. The property tax can differ majorly from one area/neighborhood/street to another. It’s by sections not necessarily tied to the city or zip code. You can lookup the tax rate on the county assessor website - Make sure you are looking at or calculating the property tax WITHOUT any exemptions (since you’ll not get any as an investor). 
4. Also make sure the property is not in a MUD district for which you’ll have to pay often very high MUD fees (and can’t get rid of those most of the time). HOAs also can change the cashflow of a property.
5. For flood zones you can check flood maps – e.g. https://maps.austintexas.gov/FloodPro/ - if you work with a realtor, they should be providing you all that info.

@Kyle Carter you can do a CSS for $400. Here is a CSS Decision Diagram flowchart intended to bring together all the various questions when assessing the benefits of a Cost Segregation Study (via a professional or DIY).

@Selina Giarla 

1. For asset protection purposes you might want to have asset holding entities (LLCs). Not an S-Corp (you do want to hold real estate in S-Corp). These just hold the assets and do nothing else.
2. You should have a shell LLC for all operations and property management. This PM LLC doesn't hold any assets and it's doing all the interfacing with the public, vendors, contractors, tenants, etc.
3. You and your asset holding entities will have a property management contract with your PM LLC – and you can charge PM fees, thus generating self-income. You can then qualify for a Solo 401K and contribute to it a lot more than with a regular 401K. But you'll have to pay income taxes, so it depends on other factors if you are really saving from taxes.
4. You can do cost segregation on your properties and generate a lot of deductions – but if you can get advantage of those deductions and move them from the passive side to the active side (via REPS) it’s another question (and unlikely if you have a W2 job, maybe a stay at home significant other?).

Here are some diagrams to help you on this quest:

• Asset Protection Decision Diagram - to help assess the need for asset protection, and what to implement: AssPro_Decision_Diagram
• Asset Protection Onion Diagram - what, when, and at what cost one should implement in terms of asset protection - APOnion__Diagram
• How a fully implemented asset protection layout might look. - Asset Protection Layout
• A CSS Decision Diagram flowchart intended to bring together all the various questions when assessing the benefits of a Cost Segregation Study (via a professional or DIY).

Let me know if you have questions or want to chat further - I can give you my investor perspective - text me at 512-368-9940 and we can talk further.

PS. Read this book first - https://www.amazon.com/Every-Landlords-Property-Protection-Guide/dp/1413307000 - before getting into more complicated and expensive measures of protection.

Not a lawyer, so take all this with a big spoon of salt. But I did sleep a lot at Holiday Inn Express studying this dilemma. @John S. @Gordon Middleton @Roger Segura

1. 1. Assess first if you really need asset protection, before you get yourself into complicated and expensive structures.
2. 2. See if Series LLC is available in your state and/or the state you are investing in. One time deal, it will save you from paying to create LLC every time after.
3. 3. Asset holding entities should do just that - hold the asset. No renovations, no interfacing with public, contractors, vendors, tenants, property management, etc. You should have a shell operations LLC that is doing that, with a contract with the asset holding entity.
4. 4. The flow of money needs to follow the LLC structure you put in place (another reason to have one Operations LLC). As long you clearly identify and track the expense per property (and you can do that in Quicken, with properties, categories and subcategories, or in Quickbooks), you'll not need CCs and accounts per properties.

Here are some graphical diagrams to help you on this quest (or confuse you further):

• - Asset Protection Decision Diagram - to help assess the need for asset protection, and what to implement: https://www.biggerpockets.com/files/user/CosIorg/file/asset-protection-decision-diagram
• - Asset Protection Onion Diagram - what, when, and at what cost one should implement in terms of asset protection - https://www.biggerpockets.com/files/user/CosIorg/file/asset-protection-onion-diagram-v2
• - What is needed for complete asset protection OR the domains that need to be intersected to find asset protection. - https://www.biggerpockets.com/files/user/CosIorg/file/asset-protection-spectrum-diagram
• - How a fully implemented asset protection layout might look. - https://www.biggerpockets.com/files/user/CosIorg/file/asset-protection-structures

Let me know if have questions or want to chat further - I can give you my investor perspective - text me at 512-368-9940 and we can chat further.

PS. Read this book first - https://www.amazon.com/Every-Landlords-Property-Protection-Guide/dp/1413307000 - before getting into more complicated and expensive measures of protection.

@Gladys Villa - If you're young, have no kids, and are just starting your real estate investment journey without having experienced the luxury and pleasures of a single-family residence (SFR) with your own backyard and separation from neighbors, the best way to get started is with a duplex. Here are the reasons:

1. Optimal Financing: By moving into one half of the duplex and owner-occupying it, you can access the best financing options available. This is typically more favorable than financing for purely investment properties.
2. Income Generation: You can rent out the other half of the duplex. If you find a good opportunity and purchase wisely, the rental income could cover a substantial portion of your mortgage. Achieving 80% coverage is great; anything above that is excellent. It’s almost like living with free housing.
3. Sweat Equity: You can add value to the property by improving it. Rent out the nicer half and take your time (about a year) to renovate the half you live in. There’s no pressure to rush, unlike with a single-family home or a multiplex where vacant units cost money. Once you’ve finished renovating, you can switch and rent out the newly upgraded half at a higher rate, then start renovating the other half.
4. Experience and Skill Building: After two years, you'll have a duplex with both halves nicely renovated. You’ll gain valuable experience in renovations, property management, dealing with tenants, and handling the accounting and taxation aspects of long-term rentals (LTR).

You can repeat this process with another duplex or scale up to a fourplex. Do this 4-5 times, and you’ll be set for life. After this succession, you’ll be in a great position to purchase your ideal single-family residence, enjoying its solitude and luxury. This progression is typically more effective than starting with a single-family home and trying to move into multi-unit investments later.

@Jace Perry - The best HML with best terms, low interest rate, no origination fees, junk fees, documentation fees, draws, inspections, etc...Yourself!!! with a HELOC or ABLOC (asset based line of credit secured by the equity in one or more of your rentals). PM for more details.

@Rakumarudu Nijam @Steven Kerns @Justin R.

My 2¢:

1. I also used RLS 7 years ago and was pleased with their services. I also know their level of service went drastically down and would not be my top choice currently.

2. After going through the whole process and down all the rabbit holes that open with asset protection, here is my opinion on a few things:

a. Anonymity might be overrated. A lot of the asset protection hype is based on F.E.A.R. - "False Evidence Appearing Real" - and you have to be careful who/how you ask about it (Hint: don't ask an insurance salesman if you need insurance).

Info: The Asspro Nebula - What is needed for complete asset protection OR the domains that need to be intersected to find asset protection nirvana -https://www.biggerpockets.com/files/user/CosIorg/file/asset-protection-spectrum-diagram

b. While asspro works by reducing the target on your back (and by making it harder to collect if it gets to that), unless you structure the whole thing very well, and have your lawyer/trustee sign all your documents throughout all your transactions, from the beginning, you will leave a paper trail behind yourself, relatively easily identifiable if you become the target of an educated person. 

c. It helps by not making identifying what else you own easy. One can't just jump on the county public records search and find out what other properties you own if they are held in a trust. But your name might be on the mortgage deed registration (if personal). So, there are a lot of holes to plug and to keep plugged.

d. It's not a one-time deal, put in place and forget. You need to keep at it diligently. And before you do it, you better have some good reasons to go to that extent of hassle and expenses. And you need to take care of more basic things first, otherwise slapping an LLC on top isn't going to help.

Note: Asset Protection Onion Diagram - what, when, and at what cost one should implement in terms of asset protection - https://www.biggerpockets.com/files/user/CosIorg/file/asset-protection-onion-diagram-v2

e. Lawyers look for easy identifiable and fat targets. So, anonymity helps if that target is smaller on the surface, the lawyer might not bother (especially when they work on contingency). But, my understanding, correct me if wrong, if a lawsuit is deemed valid and it gets to the discovery phase, you'll have to disclose what else you own, and your anonymity is shattered. So, it's not bulletproof.

f. That being said, I would use a WY LLC as the umbrella LLC protecting from the top (and land trusts protecting from the bottom).

Note: How a fully implemented asset protection layout might look. - https://www.biggerpockets.com/files/user/CosIorg/file/asset-protection-structures

PS. Read this book - https://www.amazon.com/Every-Landlords-Property-Protection-Guide/dp/1413307000 - before getting into more complicated and expensive measures of protection.

Two CPAs, a Specialist, and an Advisor walk into a bar..."Where is the attorney?" asks the barman..."Forget the attorney, where are the other customers?" says the lonely investor drinking a club soda alone in a corner. Just kidding, this thread is too martini-dry.  

@Bill B. @Mark C. - liability (LLC), anonymity (land trust) and financing are 3 different components of this. Or tools, among a lot others, that you should have in your REI toolbox and learn how they influence each other and how to use them.

DSCR is about a non-recourse loan (secured by the property and the property performance, not by the personal guarantee). DSCR doesn't offer any liability or anonymity protection, other than the fact the loan note itself is a form of asset protection (because there is usually little to none equity in the property to take from the owner).

Here are some graphical helpers to assist in the quest of answers on this subject:

Asset Protection Decision Diagram - to help assess the need for asset protection, and what to implement : https://www.biggerpockets.com/files/user/CosIorg/file/asset-protection-decision-diagram

Asset Protection Onion Diagram - what, when and at what cost one should implement in terms of asset protection - https://www.biggerpockets.com/files/user/CosIorg/file/asset-protection-onion-diagram-v2

What is needed for complete asset protection OR the domains that need to be intersected to find asset protection. - https://www.biggerpockets.com/files/user/CosIorg/file/asset-protection-spectrum-diagram

How a fully implemented asset protection layout might look. - https://www.biggerpockets.com/files/user/CosIorg/file/asset-protection-structures

Let me know if have questions or want to chat further - I can give you my investor perspective.