All Forum Posts by: Greg Scott

Unless you know some sort of Jedi mind trick, your best bet is probably cash for keys.

Food for thought.  On all of our multifamily purchases, we've had multiple attorneys.

- An SEC attorney to create the PPM paperwork

- An attorney hired by our SEC attorney to create our local state LLCs

- A local contracts attorney to assist with the PSA.

- In the states where we bought, title insurance and related activities are handled by Title Companies, but if South Carolina is an attorney-closing state, you would need one of those too.

- And, occasionally, we've had to bring in another attorney for some specialized issue.

Transferring a property out of your name to your LLC is a common occurrence.

Doing it to inflate the value and then take a phantom loss is simply tax fraud.

Actually, a vacancy is not the worst thing.  Much worse is having someone living in your unit who is not paying.  They are costing you wear & tear and utilities and you have no revenue coming in.

You have been very lenient, and now you have set the expectations that you do not follow your own lease.  I would say that you should let this tenant go, mostly so you can start over and set appropriate boundaries.

Want to see the end-game?

I spoke to a guy recently who was trying to figure out how to make it to retirement. He had a quad in California about 1 block from the beach. The property is worth a mint. He had owned it for 30 years and should have been making bank on cashflow.  He wasn't.

He had one sister (disabled) who was living in one unit for about 25% of typical rent.  He had another sister living there at about 50% typical rent, and one cousin that was also paying about 50% typical rent.  The fourth resident was unrelated, but a long-time resident not paying market rates. The rent increases over the year hadn't kept up with inflation so he was roughly zero cashflow after taxes, insurance, and maintenance.

He didn't feel he could sell, because family was living there and did not want to raise his rent either.  Emotionally and financially, he was stuck.

Assuming your lease clearly states it, yes. You can also charge her court costs for filing the eviction and late fees.

Whether or not it is worth your time, is a different topic.

I would look to cash-on-cash returns and equity capture as your two primary metrics.  Nobody can gauge appreciation with any precision so just ignore that.

Cap Rate is effectively meaningless on a 4-unit property.  Comparative Market Analysis or comps are used to value quads.  Commercial properties, including 5+ unit multifamily are valued using the income approach.  Cap Rate is a critical component of the income approach to valuation of commercial properties.  Cap Rate has no use for single family, duplexes, triplexes or quads.

I haven't but know people that have.

The reason they bought the LLC instead of the property is because they thought that buying the LLC would not trigger a change in the property tax assessment. However, they were wrong and the taxes went up anyway.

My attorneys have always advised against buying someone else's LLC because that LLC carries all the past baggage including any liability, and the LLC operating agreement may not have been set up the way you would want. Also, if they did not maintain the corporate formalities properly, the LLC can be thrown out in a lawsuit.

The SEC is cracking down on the sort of behavior you describe.  People who's primary function is to raise money and do not have a true role in the GP are breaking the law unless they are licensed to raise money.

Do you want to give money to someone who then just hands the money to someone else, without any real control over the deal? 

I'm glad the market is shaking out most of these money-raisers.  They were a sign of excess in the space and the industry won't fully recover until most of them are out of business.