All Forum Posts by: Gino Barbaro

@Steven Hutzley

Hi Steven

I am in partnership with two other friends/investors. We form an LLC for each investment and fill out an operating agreement per the LLC stating all the rules to abide by, percent ownership, owner draws, responsibilities, etc.

LLCs are flexible and you can draft the operating agreement as you and your partners see fit.  Just make sure you start out right and spell everything out , or else there will be problems down the road that could have been avoided.

Gino

@Pavlos Kasselouris

Franchises allow the small business owner to implement systems to run the business.  As Michael Gerber says, systems run the business and people run the systems.  If you  are unsure of how to set up a business and run correctly, this may cut your learning curve and give you a head start, albeit at a price.  You have to calculate if this help is worth paying for.

Many small businesses fail in the first 5 year, but franchised businesses are more successful.

Good Luck

Gino

@Karin

I form an LLC for each property or business that I own. I want to keep all of my assets segregated so I do not commingle funds, have asset protection for each entity and have proper record keeping. If you start out, you may as well start out correct.

If you own 2 houses that are let's say 30000 each, it may not be worth forming 2 LLCs.  That is your own personal decision.  But if a tenant sues in property A, then both properties are at risk,  What is the chance of something egregious happening, not very high.  But unfortunate situations do occur and you need to protect yourself.

It is best to speak to an attorney as well as a CPA who won real estate or has clients with real estate holdings and ask them what they would do with their portfolio.

Once again, people will say it is expensive and a lot of work.  I would rather pay a bit more to know that I have a level of safety.  And once you begin to grow, as I'm sure you will, protection will only become more vital.

Gino

@Josh Emory

What's truly great is that your initial venture into real estate wasn't a huge success, but you stuck with it and course corrected.  That is the essence of success.  I know you will crush your next deal, start building those multis for cash flow!

Good Luck

Gino

@Kris Haskins

Hi Kris,

I'm just waiting for people to come out and say you can't do that.  Keep looking for those motivated sellers!

Sounds like a great deal.  Congrats and good luck on the net one.

@Sid Franklin

Hi Sid

I have the same issue here in NY, with property taxes basically out of control and eating at any profit.  I had to invest in another market because cap rates were too low and the market was nowhere near an emerging market.  If your market has substantial job growth, at least 2%, it is a positive for apartment rentals.  NY has no job growth, unless you are in the city.

You use cash in real estate to negotiate a better deal, and then can refi to pull the money out.  One of the keys to making money in real estate is to buy correctly, that is at a discount to the market.  You need to find properties where you can add value, i.e solve a problem such as low rents, deferred maintenance, unruly tenants, motivated seller.

You have to truly understand your market and what type of strategy works there.  Values in investment properties fluctuate with income on the property as well as current cap rates.  The exodus of people from the North into the south is one reason why real estate in NY has been pretty flat the last few years and Florida has reemerged.  You see the landscape dotted with cranes and job growth expanding.

Good Luck

Gino

@Aron Teran

Hi Aron,

Those are good terms for your first deal.  AS you progress, a bank that you build a relationship with may extend the amortization to 25 years, allowing you to cash flow better and the term may extend to 7 years.

My first couple of deals had 20 yr amorts and 5 year terms, and we just refinanced and got 25 yr amorts and longer terms

Good Luck

Gino

@Jamie Wooley

Hi Jamie

I use quickbooks for my businesses, including real estate.  Once you set up each entity, it is fairly easy to maintain.  You can hire a bookkeeper to input the work, but I would keep each entity separate, so you can track the progress of each property and calculate values.  You may want to refi or sell a property, and maintaining separate records would facilitate the process.

Once you start growing, you may want to begin forming LLCs for protection, whereby you definitely have to maintain separate bank accounts so as not to commingle funds.  It is more expensive and time consuming but offers a level of protection to your business

Good Luck

Gino

@Lenny Wilbourn

Hi lenny

I would contact your attorney immediately.  For your next deal, have the seller put money in escrow for any repairs that need to be performed, and have it released when the actual repairs take place. I know that is little comfort now, but may help for your next deal.

I think the only way you may get some help is if it was stated in the contract that this work needed to be performed and it wasn't.  

I wish you luck

Gino

@Justin England@Jake Stenziano

Hi Justin

You have to plan for the end in mind. Are you going to buy and hold or fix and flip. The ideal scenario would be to set up LLCs for each entity and open accounts for each entity so that if you have to sell one property, it will have its own set of books and can be valued. You do not want to commingle funds from one LLC to another, don't get into the bad habit of not keeping good records. You need to know how each property is performing so you can adjust approach if one is underperforming.

It does cost more and it is more laborious, but if you have a lawsuit in one LLC, it will not affect the others. Better to plan and be safe than sorry. Hire a competent accountant as well as a bookkeeper.

Good Luck

Gino