All Forum Posts by: Martin M.

@Noah Ehler

Nice job thinking ahead. This book may be worth picking up for you. The gist of it is it's like two books in one. Volume 1 is dedicated to smaller multi family, 4 units or less I believe and volume 2 for larger multi family.

Link to volume 2:

https://store.biggerpockets.com/products/the-multifamily-millionaire-volume-ii

I don't know for sure how much is in there around underwriting.... there may or may not be much, I haven't read it, but for the price you can't go wrong

@Ethan Tramel

Sounds like you're hoping to combine two things... where you want to live... with wanting to make a few bucks through a house hack.

A couple of random things to consider...

The loop is very office ish (if that's a word). Walk around there on a weekend if you haven't done that already to see if you think it's for you. The lakefront nearby is really nice of course.

A lot of recent college grads prefer areas like Lakeview, Lincoln Park and Old Town... but condo prices will also be much higher there than in the Loop.

If you're hoping to rent the condo out after you move out of it... this is limited or pretty much prohibited with many HOAs downtown.

When you go to sell, selling a downtown condo is possible of course but takes longer because it appeals to a smaller buyer pool than most other types of residential real estate.

Here's some good news though.... condos are generally so much simpler and cheaper than SFHs to house hack because they're smaller. (But you'd likely be limited by HOA - as far as which days and hours you can make noise in it remodeling)

If you do stick with the plan for buying in the Loop, and have access to cash, whether yours or you borrow.... family, hard money lender etc...

I'd look on the 'Judicial Sales Corporation' website. They auction properties for Cook County. I've seen a handful of Loop condos on there in the last year or so. A lot of investors steer clear because of HOAs and the potential long hold when trying to sell.

From what I've seen you won't see much in those other areas mentioned by a few downtown ones do pop up.

Good luck!

@Kashyap Shah

A lot of your questions have been answered before in the forums. I'd start by searching through the forums.

Most importantly, insurance coverage > LLC for liability protection

That said, to answer your questions...

1. The LLC that will hold the property is often formed in the same state as the property. This works best for many investors

2. There is a lot of 'it depends' with this. If you have a WY LLC that owns a TX property and you get sued in relation to the TX property, the TX courts may not acknowledge WY's laws. This is a question you'd want answered by a TX attorney.

3. Check with the TX Secretary of State

4. In many cases an out of state LLC, also referred to as a 'foreign entity' simply needs to register in that state to do business. In your case TX

5. Yes. LLC laws are very state specific. The reason you hear so much about WY LLCs is because of their anonymity and 'charging order' protections, but things get complex fast when you get into a WY LLC actively doing business in another state.

Google WY Holding LLC. It sounds like this may be what you're looking for

@Allan Smith

Ask your realtor to show you the data that they used to comp your place to arrive at their suggested list price. This is so important. They should show you a minimum of three other properties similar to yours that they based the comp off of, and the properties should be geographically as close as possible to yours.

Once you're confident that it's been comp'd accurately, if you can hang on for another 2 months I would absolutely list end of February. We're in the dead season right now and even if it's priced well it may not sell and become 'stale' (not because of price but season)

From there, in Feb, if you're not getting a lot of buyer interest, proceed to cut the price. How aggressively you do that, e.g. when and how much by, is up to you. If it were me after listing in Feb, after a handful of weeks of being on the market with no offers I may start the price cuts.

You want to avoid stale but also get market price for the place. You'll get there. Good luck!

@Sean McKee

Seasonality I'm sure is coming into play, but the fact that it's a Garden level apartment could be your biggest challenge. I'm sure you know but these can be much less desirable than the units in higher floors.

Have you comp'd it to other garden apartments in Humboldt Park?

Also as you've said you want good pics too. This is key

@Doug Frisch

Have a conversation with an accountant about which tax classification is best for your LLC. If you think that's Corporation then what you do is 'elect' to be taxed as a Corporation by filing IRS form 8832. (You may not need a corporation at all though. Again talk to a CPA)

Also keep in mind your LLC Operating agreement should likely list the tax classification of the LLC that you choose. Even if it's just the default of 'disregarded'. Hope this helps

@Lor Fara

I'm sure you've considered this but the Roosevelt property has an ADU. So it's not quite a like for like comp to yours.

The properties are in different school districts it looks like. Neither district seems to score well. So that may not make a difference.

I'm assuming the realtor walked you through how they came to the list price with 3 or 4 other properties. Is your list price in line with those? Ideally these would be properties located as near to yours as possible.

The pics are fine. You'd maybe want to pull back all of those curtains to open the home up a bit. For the bathrooms sliding clear shower doors would go a long way. They'd also draw attention away from the fact that the shower walls aren't tiled.

Looks like the days on market are fairly low for Richmond as a whole, e.g. demand is strong - but it also looks like there's a high variance in crime rates depending on what part of Richmond you're in. Some areas are high crime. Others are low. Is this particular location in a higher crime area? Are your comps in the same area?

Are you getting showings and no offers or no showings? What feedback is your realtor hearing from potential buyers?

Delisting and relisting in spring is not a bad strategy provided that you're priced right for the market.

Good luck with it. You will get there

@Leslie Beia

Great questions! You're obviously putting a lot of thought into this.

To answer your question 5, yes. Absolutely I'd speak with a business attorney.... as well as a CPA familiar with real estate investing. Sounds like you have a CPA.

For your question 2....

S-Corp is a tax election of an entity, e.g. an LLC can file as an S-Corp, a Corporation can file as an S -Corp.

The income from 'Active' flip investments is taxed higher than 'passive' rentals. This is where the S-Corp election of your entity that holds the flip property or properties can keep taxes more efficient.

There's a catch though..... maintaining an entity filling as an S-Corp has a lot more overhead to it than a basic 'disregarded' LLC. With the S-Corp there's quarterly payroll that you have to report, you pay yourself a reasonable salary and so on. CPA can expand on this.

The advice I'd been given in the past from a good CPA was, if you flip just 1 or maybe up to 2 properties a year, you may not need to go down the path of an S-Corp.

Once you get into more flips than that, S-Corp starts to look good. Google 'dealer status IRS' to get a good idea of how your income from flips can be taxed.

Regarding how many LLCs you need, as a general rule of thumb, it's pretty common to keep your flips and passive rentals in separate entities from each other for a few reasons. Some are tax related (discussed above) and others are limiting your liabilities. Flipping has more potential liability than rentals.

It's also common to have your properties contained in an LLC in the same state as the property.

This stuff gets tricky because you don't want to get carried away setting up a bunch of complex entities you don't need, yet you still need to keep things tax efficient and limit liability.

Google 'Holding LLC' as that's one approach often used for somewhat simplifying things when you're operating 'actively' in multiple states. For example you may have a Delaware Holding LLC that you own, and that LLC owns a flip LLC in TX, a flip LLC in MI and a flip LLC in TN. Only the Delaware Holding LLC files as an S-Corp. The benefit is you're not having to file multiple individuals S-Corps (for TX, MI and TN) it's just the one for the Holding LLC/S-Corp.

Again though, speak with your CPA and a business attorney. They'll best advise you.

Lastly... from a liability protection perspective... hands down a good insurance policy is more important than LLCs.

Hope this helps. Good luck!

@Julie Smith

Google lien position. It's critical to understand this before bidding at auction. If this is your first auction purchase you probably want to pay for a professional title search first.

Generally speaking, any liens attached to the property that are 'junior' to the foreclosing party's lien are extinguished from the property at auction sale. Any liens attached to the property that are 'senior' to the foreclosing party's lien remain attached to the property. Hope this helps

@Bradyn Melser

Not sure how long you've had the first 2 properties, but something else to keep in mind in case you're not aware. A lot of lenders will let you count the rental income on a property as income, after you've owned them for 2 years. So the rental income from them basically lowers your DTI