All Forum Posts by: Michael Shadow

Just looking for other peoples thoughts on what is the best way to protect your assets. I've heard so many different strategies it's hard to try and figure out which way to protect yourself. How do you have set yours up?

Putting all the properties in individual LLC's sounds like a pita, not to mention that it sounds like it would start to get quite expensive come tax time, why having your accountant prepare 40 different returns for your 40 different LLC's just doesn't sound practical to me. Then you have to pay corporate stock tax on top of all that (a PA law, maybe others).

I've also heard own the properties in your own name and set up a C Corp to lease the properties to and have it manage them for you.

Just get an Umbrella policy.

Trust Deed them to someone you really trust (who's not family) and set it up so they can do nothing with the property with out your permission.

Ugh... the list goes on and on

What have you done to protect your assets?

We chose to use the lowes .60 carpet for everything. The location is an in between area. We'll see how the carpets hold up on this one. Our next purchase though is getting the hardwood treatment where it's needed.

Thanks for your replies.

Because prospective tenants are asking how many square feet the apartment is when they call in response to our ads or off the sign.

When you calculate square footage for your units what all do you include? Do you also include hall space and closet space?

Thanks,

-Michael

Thanks John, I never thought of setting it up that way. So I sign the loan as me then I would also sign the loan as manager?

Would there be any problems with back dating it to the date I loaned the money to the company? And also as far as taxes are concerned I would claim the money the company is paying me as interest income just like I would a bank and have the company send me a 1099 int?

Thanks,

Anyone know how to record in your company's books a HELOC payment on your primary home that you invested in your business?

Confused? I may be able to explain it better with an example:

$10k from HELOC invested in the business

Shows as owners capital in the company's books.

First payment is say $200, $75 for princ and $125 for interest.

Do I record the payment in the books as a $200 decrease in owners capital then increase the owners capital by $125 as a charge back for the interest portion?

Basically the company needs to pay me for the HELOC payment but I"m not sure how to record it so that the principle amount decreased shows as a capital decrease yet the interest shows as an interest payment.

Any insights would be super.

Thanks,

-Michael

I'm looking for a commercial loan for a 6 plex I'm picking up for $110,000. I'm running into a problem that many commercial lenders will not loan < $100k. Anyone know of a lender that would work with such a small commercial loan?

Thanks,

-Michael

My primary is a 2 story modular and we set it in October and it was just my wife and I doing all the finish work (including all the siding) and building the garage (father-in-law helped a bit with that) and we moved in the day before Christmas. If I would have hired it out we probably could have been in it in a month.

For modular though your lead time might be the issue now, don't know how much lead time the modulars need now with the soft market. My wife and I could probably get all the finish work done on a ranch modular in 2 to 3 weeks, so if your building something similar and have experience it might be possible to get it done before the end of the year.

In reality to get this done by the end of the year Pittsburgh is probably the only market that you could do it that quickly in because you should really research the market you are going to invest in before you move your money into it. You proabably have a good handle on the Pittsburgh market because you live there. You know the good neighborhoods, the bad ones, and the ones that are in the middle. You would need to spend some time in the other cities to research that kind of information and you would want to hook up with a good contact from those cities to show you the town.

As for the construction side. If you don't have the land picked out or the modular or permits though you're not going to make it by years end. And that's not just for building a place here, that'd probably be anywhere. You will need to find the land, put in an offer and get it closed then get all your contractors lined up, if they can work on your job right away, get your permits which where I'm at is a 3 week wait (found out the hard way). Putting a house on a piece of land isn't like ordering a burger at the drive through, you have to get all the pieces fit together and at the site at the right time to keep things flowing smoothly. Finding a good GC should really help you with organizing this.

If you use a Mac I can send you a little Applescript I whipped up to calculate the gross rent multiplier. All it does is ask you for the total monthly rent then ask you for the sale price and gives you your multiplier. The formula is: Sale Price/Yearly gross rents = Gross rent multiplier. You'll have to run some full analysis in your area to get a feel for what will work in your area and what you are comfortable with. Personally in my area I like to see a multiplier less than 4. If it's less than 5 I investigate it further to see if a deal can be created. Some of the more seasoned investors here probably like to see multipliers lower than that.

So to work it the other way, take your known monthly rent, multiply it by 12 to change it to yearly then multiply it by the multiplier your shooting for and that will give you your maximum purchase price. After you look at a number of properties you will be able to just glance at the monthly rent and the purchase price and know right away if it will fall within your guidelines.

IMO Pittsburgh is a pretty good market. I was just there last year and your mayor really cleaned the town up and it's been getting a lot of good press lately. Once I get my local experience built up, Pittsburgh is the first long distance place I want to invest in. All the other areas you mentioned are mainstream now and you want to get into an area before it becomes mainstream. Sometimes the greenest grass is right under your feet.