All Forum Posts by: Jason V. Henderson

Setting up the LLC is generally not where you run into asset protection problems. A DIY business entity can be just as valid as one created by an attorney. You may want to seek out an attorney if you are looking for a registered agent or if you are going into business with a partner, because there can be numerous decisions that need to be made regarding the arrangements between the members of the LLC.

Asset protection problems usually arise when you don't run the company as a separate entity. One of the most common methods is by combining business and personal funds. 

The area you should consider speaking with an attorney is regarding the purchase of the home and ensuring title is accurately placed within the LLC. Also, be careful reviewing the loan/mortgage you will be taking out on the property to verify that the LLC will own the property or, if transferred to the LLC after closing, that the transfer does not trigger the "due on sale" clause of the loan.

This really depends on your particular situation. Sure, you will slow down the process of compound returns, but cash flow is only one of the benefits of real estate. You will still be benefiting by paying down the mortgage and increasing your equity, modest appreciation of the property and potentially the tax benefits of tax free cash flow and a passive loss to offset earned income. Taking some of the profits to enjoy yourself is hardly a financial disaster.

Up to $25k in passive losses can potentially be applied to earned income if you make less than $100k if you are active in the real estate. There is a sliding scale to use passive loss between $100k and $150k. After $150k you can only use passive loss a non passive gain if you or your spouse is a real estate professional. 

However, passive losses can accumulate to shelter future passive gains or future capital gains when you sell the property.

The rate sounds about right. Remember, a HELOC is a revolving credit line that is secondary to any existing mortgage you have on the property, so it will never be as good as a primary mortgage. Your rate is not only based on your income and credit score, but also your available equity on the property and how much of that equity you are looking to place with the HELOC.

It depends on the specific area of real estate law. You want a responsive lawyer who has experience in your area. For condo rentals you would look for someone with HOA/condo association experience because often the bylaws prohibit such an arrangement and you don't want this to be missed. Otherwise, check references, search sites like www.AVVO.com or Lawyers.com, their firm's website should be maintained and provide specific resources on topic (this is a good indication that the attorney is tech savvy and more likely to check their emails), you can also see if they are active and have good support on social media sites such as linkedin.

There are plenty of online resources for creating an LLC. The main thing to watch for is that the LLC needs to actually exist prior to you granting it title of the property.

Creating a separate entity such as an LLC will never provide 100% asset protection. If managed correctly they can add additional layers between the different areas of potential liability. It will all come down to whether you truly managed separate accounts within mixing funds, did you maintain the proper business filings for every separate entity, or where the business just created to defraud creditors, etc. There are all sorts of possible attacks that can be used to attack your various assets, and their ability to succeed largely depend on your state laws. Sometimes parties will go for easy money and settle, other times they will attack insurance and personal assets and stop, sometimes they will go for everything possible. The degree to which you want to plan ahead and consult professionals depends on your risk tolerance.

You should definitely consider speaking with a local attorney before refusing to return a security deposit. In general, regardless of what terms you have in your contract, courts may overrule the contract for public policy reasons. 

In general, fees are not supposed to be arbitrary, they need to have some basis in actual costs rather than as a penalty for leaving early, landlords also have a responsibility to make reasonable efforts to find a new tenant once they have given you sufficient notice. 

Additionally, courts in many states do not like landlords playing games with security deposits and if they determine you have wrongfully withheld SD money, they will make you pay the tenant 2 to 3 times what you should have returned to them in the first place.

This is not to say that you cannot have a justified reason for refusing the new tenant, or keeping the SD, you just want to be very careful and talk with an attorney.

It depends on how the rate is amortized. Assuming it is at 30 years you would be paying around $270/month for 3 years and then on the third year you would owe the entire remaining balance. You can play around with an online mortgage calculator to find out the payments, but remember the balloon payment is when the balance is due, not the basis for the monthly payments.

Check with your state's office of banking and insurance. Sometimes you will not need a license based on the quantity of deals you do each year, but each state is different.