All Forum Posts by: Grant Shipman

Thanks for your feedback @Bettina F.  It sounds like you are suggesting I keep everything BUT ditch the credit minimum and ditch the rental/employment collection & verification.  Do I have that right? What amount do you suggest for a max SD? 

Thanks so much to you too @James Carlson for your feedback!  I'm looking now at the TransUnion BP tool- how did you decide between the $25 and the $35 option? 

I greatly appreciate the help- Along with the goal of wanting to gain great tenants (for the landlord and fellow tenants sake) I have the goals of making the application process as easy as possible for both me and the applicants.   The feedback is very valuable to me! 

@Jay Patadia & @Ashish Acharya

Thanks so much for the feedback so far.  MyCPA sent me this as a short answer and said he would follow up with more information.  Do you have any feedback on what he's told me so far?  I just started with him as my CPA, so I'm still in the vetting process. 

"The short answer is that your references are partially correct, with a loose interpretation of Code Section 707 and a court case (Pratt Vs Commissioner from 1975).  It's a gray area and the IRS specifically disagrees with not calculating SE tax on any Guaranteed Payments." 

This is my first rental property....

I have a 7 bedroom home, and have opted to do 4 month leases that convert into month-to-month leases.  I'm not interested in comments on this strategy at this time.  I am interested in hearing feedback on how this could change the screening process.

Here's my current screening process:

1. Collect & Verify last 5 years of rental & employment history.
2. Run Checks: criminal, credit, and eviction.
3. Income Requirement: 3x monthly rent (this can be substituted by paying a security deposit of 4x rent)
4. Phone Interview
5. In person (or video) Interview

My rental strategy seems to greatly reduce my risk (eviction, damage to property, vacancy, etc).  I was entertaining the idea of changing the screening process to this: (changes in bold)

1. Collect & Verify last 2 years of rental & employment history.
2. Run Checks: criminal, credit, and eviction.
3. Income Requirement: 3x monthly rent (this can be substituted by paying a security deposit of 4x rent)
4. Phone Interview
5. In person (or video) Interview

I'd super appreciate your feedback, so I can brain-storm this through.  Maybe I'm not considering all the factors I could be or I'm considering factors incorrectly....

@Mark Leavitt  Great to read your post!  Greeley is part of my farm, so a hearty welcome to you :) 

I have a great realtor, mortgage broker, cpa, and lawyer if you need any recommendations.  I lived in Greeley for 8 months last year, and I have investment property in Loveland where I now live. 

I highly suggest ready HOLD and the BP book on rental properties- at least they were the biggest helps to me.  Also, I just saw a triplex for sale in greeley for 230k i think.  

Thanks so much @Jay Patadia and @Ashish Acharya!

I have been trying to pick between setting up an single member LLC to be paid for the property management in order to eventually have it taxed as an s-corp in order to minimize SE tax.

This GP is a new concept to me, so I'm grateful you brought it up. Can GP only apply to me as a 50/50 owner of the LLC, or can it also apply to me as a SMLLC who is providing pm services (that would fit the GP services described above)?

Anything else I should know? 

This is my first property, but I plan to rinse and repeat this strategy over and over again.  I would like to have it setup well in the beginning.

My investment partner and I will own a sfr property soon. it will be in an LLC owned by both of us. We will split the rental income equally. however the ten percent we budgeted for property management will go to me since I will manage the tenants. Will this ten percent be taxed as rental income or something else. how do I understand my options?

I really appreciate everyone who has chimed in so far.  Thank you for taking the time to not only share your knowledge/wisdom, but also taking the time to carefully explain what & why.   

If anyone else has anything helpful to chime in, please do. 

I was choosing between rentec and buildium. I think I've landed on rentec. How do you like it so far @Scott?

Yes thanks. I know that.  Do you have experience with how those codes in regard to my post?

The Scenario

• My investment specialization is buy-and-hold single family homes with 5-8 bedrooms and rent them out by the room, marketing specifically to professionals (rather than students or section 8). 
• My farm is Loveland, Windsor, & Greeley.
• Occupancy Code in Loveland is no more than 3 unrelated people living in the same single family home.
• Loveland does not require a disclosure of occupancy. (compared to nearby Fort Collins that does). 
• My investment specialization would put more than 3 unrelated adults in the same single family home, so my specialization would violate the occupancy code.

My Questions

• Would Loveland, like nearby Boulder, tolerate single family homes that violate this code for years until finally making them legal through a special permit (housing coops)?
• Could the occupancy code paired with the absence of a occupancy disclosure requirement, be taken as the code is there IF problems are caused due to over-occupancy BUT is ignored if there are no problems?
• Could the above question imply that, as long as I ensure my properties/tenants are not a nuisance to neighbors, I can proceed w/out concern?
• How have other investors in cities across the country related to scenarios like this?
• What BP members have actual experience with this and what do they think? 

My Proposed Plan(please critique)

Disregard the letter of the code and follow the spirit of the code, which is to make sure my investment properties are beneficial parts of the neighborhood not a perceived or actual nuisance in any way due to a higher occupancy.  In time, join efforts to create permits for Loveland and, when permits are available, attain proper permits.