All Forum Posts by: Dennis Cosgrave

You have a choice. Set up an LLC or get really good insurance. When you are dealing with the public you have to protect yourself from potential liability which can be significant. In addition to the liability protection, an LLC offers a number of tax benefits.

Shaun, the seller might agree to an extension but will likely want some form of compensation. This happened to me once, and the seller wanted the deposit increased by $20k before she would agree. 

I learned a long time ago that you NEVER give financial control to anyone! How do you know that the property manager is not inflating the quotes and getting kickbacks under the table? Those are commonly known as “brown bag” deals. Contractors show up with a brown bag of cash for the property manager. Managers of condo associations are notorious for the is practice. Unless you have known the property for a long time and he has earned your trust, I would be getting some quotes myself and compare them to quotes he is getting, just to keep him honest. If he knows you are likely to do that, he will not try to scam you. 

Hire a lawyer and get him to do the title search and prepare the offer. An LOI carrys no legal weight. The few hundred dollars spent on the lawyer is well worth it. Get that offer to purchase signed before you do anything else.

Buying a property that has been divided up into 5 units with only one meter waves a red flag for me. If the house was legally divided and permitted, building code in many jurisdictions require separate meters. Before you proceed with the purchase, check with the municipality to confirm that it is a legal 5 unit dwelling. 

John Corey is correct. The name of the game is always adding more value than it costs. If you can add a tile backsplash for $250 and get an extra $1,000 on the price, it is a no brainer. Just be careful to keep the finishes neutral so that the property appeals to the most buyers. 

Direct mail used to be great, however, it is now more expensive and much less effective than other types of digital marketing. For the same money you can contract with someone to do an email campaign. Another option is to build a website and buy ads on Google. You could also do a texting campaign. Direct mail costs at least $1 per unit whereas digital campaigns are 5 cents or less per unit. 

Welcome! I admire your enthusiasm but living in Illinois, I suggest you proceed with caution. Illinois has huge financial problems which the government is trying to paper over with higher taxes. This has resulted in a net annual migration of people out of the state. If the current trend continues supply of housing will outstrip demand resulting in lower prices and lower rents. If you choose to invest in Illinois do not over leverage yourself. That could put you in a difficult position down the road. 

The model is good based on the assumption that the market continues to go up. As we all know, that is definitely not the case. The market moves in cycles and it seems we are at or close to the top of the current cycle. My question is, do you have a contingency plan if the market takes a sudden drop like it did in 2008-9? A lot can happen in a 3-5 year time frame. One the one hand, the worst that can happen is that the tenant fails to exercise his option and you are relegated to being a normal landlord, the tenant moves out and the next tenant will likely pay less rent. How does that affect your cash flow? 

I agree with most of the posters. Renting to a friend is the same as lending money to a friend. It has the potential to destroy the friendship. Having said that, if you decide to go ahead, i would definitely have a written and signed agreement. As my mom always said, a verbal agreement is not worth the paper it is written on. The benefit of having it in writing is that it makes it clear to both parties what the terms of the agreement are. Niether one of you can come back 6 months later and say, I never said that, or I never agreed to that.