All Forum Posts by: Anna Laud

@Sam Gra

Hi Sam!

Congrats first of all = ) I think it mainly comes down to the type of property and the usage you're looking for with it- I'll explain;

1.) Inspection - well for a buy and hold scenario, house hacking the same usually- most, if not all major issues are found during the inspection period. A lot of investors (that are out of state or country) will opt for a full inspection here to uncover any major issues as well as help determine the reasonable  remaining lifespan of things that are more costly like the roof, siding, etc. 

If it's a flip, there's really only the need to have an 'investor's inspection' done, a 4 or 5 point covering the heavy hitters like the foundation. Why pay to have things inspected you're replacing anyway being the idea.

2.) Zoning- Usually this doesn't apply to most residential transactions and can be more area specific, but can come into play in certain scenarios. For example, this week we were looking at a possible flip in a very hot area but we ran into some zoning issues as we were looking to convert a church into a SFR. This can happen in some states with duplex properties as well, mixed use properties, etc. Occasionally we run into SFR that are zoned commercial, yet we see them as the SFR they are and think of a buy and hold/flip and this is an issue too. For example here, we have an area where there are a few commercial zoned spaces, operating out of SFR in a Class A area where we would be factoring in the appreciation over time as part of the investment, but we get a little hung up in getting with the zoning board to convert the zoning back to residential. To be clear, these are like a single law office, practicing from a ranch style home in these areas that we are looking to convert back into residential for buy and hold investing- not 10,000 Sq Ft box style buildings ha. This can come into play with raw/agricultural land, but I don't think this applies to you.

3.) Occupied status- if these are tenant occupied, you need to make sure you've got copies of the lease agreements for either an end date to the lease or weighing out cash for keys options OR, if they are tenants that desire to stay evaluating rent comps with rent rolls etc.  If occupied and going to maintain the buy and hold status verification of the PM/PM group and their history with this property is helpful. Utilities- who pays what and on duplex deals are they set up properly with dual meters, etc. 

4.) Rehab costs- ideally we have a contractor walk the property ahead of time to get an idea of the SOW involved if it's a flip or a buy and hold with needed updates so there's a general idea. Again, this usually applies to out of state or out of country investors or those that aren't familiar with ballpark estimates on their own. 

5.) Comps- running rent comps for buy and hold or ARV for flipping and using various platforms to get the clearest picture, also where an agent is helpful in professional advice

6.) Local laws- area specific in terms of what a landlord will pay for in things like utilities for a buy and hold (as deemed legally necessary to do in the state), tax rates for a non owner occupied dwelling or non owner occupied out of state owner property.

5.) The contract - this is where most investors will find using an agent helpful in terms of closing date, inspection period if it applies, refundable or non refundable EMD, etc. Most of the time this is where using a wholesaler will have a major difference in terms of having a nonrefundable EMD. Title search, back taxes etc all come in here as well.

If you've covered any major defects, established rehab or updates needed in terms of cost, run accurate comps, verified tenants/PM's if this applies/they want to stay, verified zoning if it applies, tax rates/title work, local landlord legislation for buy and holds, and the terms of the contract, you should be ready to rock and roll = ) 

Hope this helps!

@Jacob Disher

You bet! Happy to help = )

@Jacob Disher

Hi Jacob! 

I think maybe this will depend on your set up as it was during acquisition- somewhat at least. If you purchased property through an LLC, this would (in most cases) mean that your LLC had it's on EIN for taxes and the bank account from which funding was pulled to acquire property. As you're asking about this question however, I don't think maybe you purchased them through an LLC and did so under your personal name maybe.

I would assume at this point you at least have an umbrella policy if you're not using an LLC to have a little personal protection maybe and this would be where your question seems to fall in line more. Most people would simply consider it easier to have a separate bank account for expenses and colleting rent.

This would be much easier come tax time to do a quick P&L for your CPA from the overview of one account as it directly pertained to the properties alone. As it pertains to a business account (usually in opposition of DBA under your personal name) usually these do require articles of formation at set up unless you have a grandfather-ed account.

I say this from personal experience and within the last year having the branch manager looking up the filing with the secretary of state before I was able to open a business account. Now, this pertained to one of my S-Corps, but the same thing with each LLC set up and this particular bank.

If you're not doing any of the LLC set up and keeping these in your name, another checking account in your name would suffice it seems. One thing to keep in mind is that the minimum daily balance required for a business account will be higher than a personal account in most cases. If you're just starting out, or this isn't a positive cash flow situation just yet, this might be something to consider, later moving onto a business account with or without LLC setup. Usually this difference is minimal for most involved in REI (the difference between $500 and $1500 avg) but for for negative cash flow situations or beginners it could matter.

If you do get set up with a business account, I would shop around for the best bank to go with as some banks offer minimal business support, a minimum of five checks per month written for example. Again, this is more of a personal issue perhaps in that for my S-Corps and having shareholders I disperse dividends to, five checks didn't work. As it pertains to an LLC, cutting checks to contractors, etc could get cumbersome quickly, unless you can use a business debt card.

So to recap; 

If these were purchased in your name, it seems like a separate personal account would maybe work - basically you're acting as the sole proprietor-ish in this case, and while missing on the tax advantages of an LLC and the pass through income, it's all coming back on your personal taxes anyway is what I mean.

Having a separate account would at least help to streamline things for expenses and revenue now, while also being easier if you ever decided to move assets from your personal name into ownership of an LLC in the future.

Hope this helps some! 

@Robert Wright

Hi Robert! 

While I'm not an attorney, I would advise speaking with one to get the most clear answers. One step here would be to offer to pay for the initial meeting with an attorney with the sellers to accommodate the sale of this property.  

There could be some issues concerned with the trust itself and how it was written up; is it revocable or irrevocable? 

It would likely come down to getting both of their consent to sell as both hare beneficiaries of the trust. As part of the distribution of assets this falls under the corpus of the trust, and he's (the owner) is likely worried over taxation penalties upon sale. This is where having a real estate lawyer chime in would be helpful as there may be professional guidance here that applies greatly. 

I'm sure he's considering the taxes, however there are certain tax clauses that apply to an irrevocable trust that do not necessarily apply to a revocable trust. We don't really know which one it is at this point, so seeing the trust itself would be helpful. 

In most cases capital gains are not considered income to irrevocable trusts, so they might not be subject to the taxes they are expecting. This can apply to revocable trusts as well I believe, but again, I'm not an attorney. 

The other consideration here is that he's (or she) is still very bitter about the divorce and they are playing the waiting game. Meaning whomever passes away first would be removed from the trust (in the other's mind) and they are assuming to take the full benefit of the sale of the property in time. This might not be so wise or apply if there are children (subsequent heirs to mother's/father's estates) to proceed in line for future asset distribution. 

My best advice would be to set up a Zoom/Skype meeting with both beneficiaries of the trust, a real estate attorney familiar with trusts,  and yourself to answer these questions accurately. I'm sure it will come up that he alone has paid the taxes on this property and there may be further questions asked than initially thought, better to get them all out of the way as soon as possible. 

Hope this helps some!

@Theresa Harris

Yes Theresa- I know, it was a "WOW" price for sure. Not too many buyers would find that affordable, and this is by far on the extreme end of high for sure. $600/mo includes a boat dock here in Indy on a reservoir, tennis courts, pool, a clubhouse, winter snow removal services and landscaping but no utilities- not even trash pickup. It seems pretty location specific as far as fees go, if they even apply. $325 with all utilities included is pretty good and gives some affordable insight! 

@Jason Lemus

Hi Jason!

This mainly depends on where you're thinking about having this condo as a STR, both in city location and the building itself. I think you're aware the PM fees for STR are on average higher than long term rental PM fees (it's just more frequency of work), but really it's going to come down to city legislation and the building condo association.

Florida is a state where it can be very tricky to get in a STR area- in some cases it can be even divided within the city by street for being legal to do, and some of these current SRT were simply 'grandfather-ed' in under legislation that no longer allows STR properties.

The other part to this equation would be the condo association and making sure that there isn't anything in the covenants to prevent STR if the area allows for it.

I suppose my best advice here would be to connect with an agent that was very familiar with STR laws in the area you're thinking about, and would only show you condos without association covenants preventing your STR goal.

I would advise checking out the condo association dues (if there is an association) wherever you're considering buying as these can be pretty hefty in some cases. For example; On the lower end of things here in Indy there's one condo area with a $600/mo, while in Miami I recently had a client looking at dues of $12K/mo (a very high end property). Low end or high end, worth keeping in mind in fees along with PM fees. 

Hope that helps! 

@Wouter Krusemann

Hi Wouter! 

While I have zero experience in STR "innerhalb von Deustschland" I am curious as to why these specific areas- and while I don't know SFR legislation per region, with STR in mind I might only suggest to look into Berlin as a more lucrative area- thinking along the lines of tourists specifically.

An area like Friedenau might be more of a destination location for some travelers, and here's why;

1. Many folks will find the more direct commute from the Frankfurt airport acceptable and it's easy enough via the Autobhan by taxi

2. A more center location to sites such as the Berlin wall with historical sight seeing relevance 

3. Other destinations nearer by; Pergamon museum and Potsdam Parks, Palaces/Sanssouci - both are phenomenal sites to visit

4.  The Wannsee and day trips

5. There are countless local places to eat, night clubs, the Philharmonie Berlin, Christopher Street Day Parade in July each year, and here there are more than German cultural influences as the second 'Turkish capital of the world' 

Berlin is more of diversified, modern city that seems maybe more of a tourist destination than other areas in Germany. 

While SFR can be limited in parts of Friedenau, the possibility of finding a flat here and using as a STR might be reasonable- just a suggestion in making sure you're setting sights on a prime location for visitors. One down side to Berlin is the volume of the emergency response vehicles, but apart from this most everything a visitor could possible need is within walking distance, accessible via taxi or S-Bahn. In many ways, the layout of Berlin mirrors a much smaller Manhattan and it seems to draw in tourists accordingly.

It's easy enough here to find numerous banks within walking distance for currency exchange, most of the folks speak German, English, some Turkish and other languages as well, there are no shortages of things to do/sites to see, dining of local cuisine as well as international restaurants (from American to Australian), and shopping from both major retailers as well as open/local market shopping. 

So, I suppose I didn't get to your direct question, yet maybe offered a little area insight to make sure you had (and maybe you already knew and this wasn't needed!) one more suggestion in a German area to invest in. 

Hope this helps some! 

@Vaishnavi Thaker

Hi Vaishnavi!

It sounds like you're probably off to a good start with your REI journey- congrats there = )

To answer your question I think it depends on your financial situation most of all and what makes the most sense to do on paper. A lot of folks will refinance the investment property and use these funds for the acquisition of subsequent properties. 

Some investors may have cash to simply purchase other properties, skipping the refinance method - though using refinanced funds can put you in line to be a cash buyer as well. 

Other folks will draw from IRA's to have cash ready to use for acquisition, while some will find a family member or friend to split the cost with- but also the returns in this case.

Depending on a few factors like how much this first property would appraise for, your debt to income ratio, credit score, etc. (I'm not a lender) usually refinanced funds can be the 'cheapest' funds to borrow in terms of interest- just keep in mind you'll be paying on the cash out refinance from the date it closes, so you should have a few deals in mind to reinvest it in quickly. 

There's always the option of house hacking as well too. This would be like finding a new primary residence that you could rent portions of, collecting the monthly rental income on a portion of it, then you could refinance this one to acquire more properties as well. 

Another option would be to look for seller financed deals - usually these will be more on the back end of the deal however as you're using an individual as the 'bank' and there needs to be a reason they would want to do this (it's usually more money, especially in a seller's market)

I think it depends on your personal financial situation and what your goals are most of all- you need to know how much money you're needing here, then the best way on paper to go about it. 

Hope these help! 

@Daniel T.

Hi Daniel! 

It seems like option B is your best plan maybe. One way to go about this is to call all of the utility companies and ask for a bill breakdown in a pro-rated fashion. This usually works best if the utilities were in the tenants name and while you're switching them back over to your name, but it can be done by date as well. 

You only have a certain amount of days to return the security deposit (usually by state legislation) or a breakdown of why it's not being returned fully, or not at all. 

I would recommend updating the lease agreement to include, "any unpaid utility balances incurred during occupancy" or some version of this for leases moving forward. 

It can be two fold on splitting utilities;  

- putting all of the utilities  in the tenants name usually makes them more responsible with things and they won't be running the heat at 78* in the winter, likewise the AC at 66* in the summer and more costly bills are avoided (just examples of being wasteful on your dime)

- however some investors (especially in areas where the winters get very cold) wouldn't prefer to do this as an unpaid bill in the winter may result in frozen pipes and will spilt or keep utilities in their name to avoid more costly repairs

I personally would put all of the utilities in the tenant's name and just make sure I was screening my tenants well ahead of time. Now in some states you still need to provide water etc as part of the rental, but I would recommend usually putting as much as I legally could in the tenants name. 

I offer to help them set up budget bills to avoid unexpected increases and this works out well- they know each month how much gas and electric will be and can plan ahead. this won't usually be the case with water bills, but most tenants aren't watering lawns in the summer, filling up pools, etc.  anyway, so it's not an issue. 

Yes, I would avoid small claims court. You'll pay way more in legal fees that $200, and at that point it would be better to simply 'eat' the loss. 

I would verify this is the last bill to come in as well before I returned the portion of the security deposit as well. 

Hope this helps! 

@Daniel Walker

Hi Daniel! Hopefully I'll be able to help you out here a little with this;

When I'm working with my out of state, or out of country clients, I do have a standard checklist of showing points- the standard point of my checklist could be easily applied to your situation for renters. 

Here's what I try to cover in video and picture footage; 

1.) Exterior views, walking the parameter 

2.) Roofing, gutters, windows etc. 

3.) I will take some exterior footage of the area as well from the front of the property and the back- neighbors 

4.) Inside I will cover major systems; HVAC etc. 

5.) I will do an initial walkthrough for layout, then go room by room

6.) In all of the pictures I will try to capture ceiling and floor footage

7.) Any appliances I will turn on/off, lights etc, faucets on/off etc.

Now to put this to use in your case (an idea in qualifying renters prior to unnecessary showings) I would send all of these files to a dropbox that any interested tenants could have easy access to - a complete showing prior to entering in other words, a virtual walkthrough, simply include the dropbox link in Zillow 'for rent' add or mention it in the ad. This will either entice the renters in that will see the property as a fit, or not waste time with those that it won't work for. 

You could also simply create a free YouTube channel an upload this footage here, include the YouTube link just the same in ad

Much like a written offer contingent upon showing (like with a tenant occupied property sale) this can be done prior to scheduling anything. Again, to not waste time in unnecessary showings to renters who wouldn't qualify/pass screening, you can say 'showings available after screening' in some cases. 

When it's time to allow people inside, if you've already screened them you can simply use a lockbox with keys in it for showings. Set an appointment and have them text you when they arrive and leave (free google voice number works well here). It seems unlikely you'll have any issues with folks coming back around to enter the property after they know you've already screened them and will make the connection their info is already on file in connection with the property. 

Now this might not work for all areas, but (at least here in Indy) this would suffice in Class C+ through Class A areas. 

Hope this helps some!