All Forum Posts by: Jerry W.

@Lianna Utley, one of the things I do for my regular rentals that have a lot of bedrooms to only one bathroom is add a sink and mirror to a bedroom or two if possible.  This lets them put on makeup, do hair, brush teeth, etc. and saves the congestion to just using the toilet or shower.

@Wes M.thats amazing appreciation, home run on all counts.  Great job.

@Earl Kamps, just so you know, rent is based upon the market, not what you pay for the property.  The 1% rule is just a cash flow indicator for some folks, it is not used to decide what they will charge for rent.  A lot of actual costs may skew the 1% rule heavily.  Who is paying utilities, how much are taxes and insurance.  How much work needs done on the property?  A 100 year old property and a 10 year old property have massively different amounts of repairs needed in most cases.

@Victoria Cashin, to clear up a few misconceptions. First if you jointly hold a bank account they will NOT freeze the bank account if one of you die. If somebody mistakenly does it is easily fixed. If your name is on a bank account the bank must give you access to it except in very limited situations. Next trusts do not limit liability. The point of most trusts is tom bypass probate which is an important tool, but that can also be done by using an LLC or a corporation. Stocks can have TOD or pay on death designations just like bank accounts. Having an account in only your name with a TOD is a guaranty they will lock the account until your survivor gets a death certificate to take in.

I agree that doing a wholistic view of your life and business is important.  

I like LLCs because if formed right your heirs get a free step up in basis for income taxes, provides protection from liability, and escapes going through probate if done correctly.

LLCs are very inexpensive to form if you shop around or you can file one yourself, but get educated on how to use one or it might not help. There is often a slightly higher interest rate from banks for using an LLC compared to a loan in your personal name, and usually minor costs with licensing your LLC each year. That cost can vary from state to state.

Life insurance and planning how to handle the death of one of the principals in the business is important.  Even if both people work in regular jobs losing one can be a massive blow, let alone if one is running a large real estate enterprise.

I hope this helps.  Good luck.

@Wes M., thank you for the update.  Congratulations!  You have really worked to help out the financial future of you and your family.  You have a lot to be proud of, including the courage to pull the trigger and the hard work to make it happen.  I know you were hoping to see appreciation as well as profit.  How has the value on the house changed if any?  Have you bought more or are you planning to buy more?

I have posted on this subject before. Having entity protection is a great thing. Clearly Elon Musk needs high quality legal entities. That being said getting educated on your entities is extremely important, A great entity is not much good if you run it incorrectly. You don't need an armored bus to drive around town in to be safe. Yet a heavily structured bus with dozens of safety features is clearly safer than your average car. Your business might be able to profitable if you spend an extra $200,000 per year driving a bus rather than well built car. Just putting your seatbelt on will provide massive amounts of protection. Bad driving will result in a dangerous crash either way. The cost of taking an hour longer to go to work and go to meetings, and the cost of more insurance, higher repair costs, hiring a driver with a Commercial driver's license, gas mileage of only a few miles per gallon, not being able to park anywhere is a huge burden on making a business profitable. A well build Cadillac or Mercedes, or even Toyota driven safely with your seatbelts on is only slightly less safe, but hundreds of thousands cheaper. Can you afford to drive a bus and still have the profit you want? Anderson Advisors sell a product for much, much more than other attorneys. The product is basically the same, but maybe slightly more elaborate. The cost would make most real estate purchases much more costly to buy and run and much more complicated. I am always leery of any company that claims to sell a special sauce that no one else has that is guaranteed to work. If there was a magic way to never have liability every lawyer would sell it. The truth is that having an LLC does create a lot of protection if you run it correctly, but if you drive a company car drunk and crash and kill someone you will be successfully sued as will your company. Every layer of safety comes with some cost in time and money. You should probably invest in some, but don't bankrupt the house doing it. If you are only buying multimillion dollar properties or large apartment buildings maybe you can justify it, but if you look at the really big players on this site who buy and sell millions of dollars of property, how many of them have 4 layers of companies and remain anonymous? None! Use entities when you get more than one or 2 properties, run them correctly, buy good insurance, and run your rentals correctly. That is the key to being profitable and safe.

@Spencer Fry, welcome to BP bud.  I would definitely give @Nathan Gesner a call.  I have worked a few deals with him and I was very satisfied.  He is honest and pretty sharp in all of my dealings.  I am over in Thermopolis if you ever come through feel free to give me a shout.  I don't have the hundreds of properties under management that Nathan has, but I really enjoy talking real estate.  I have mostly long term rentals, but jumped up to 5 vacation rentals last year.  Would love to chat.

@Carl Schreiner, I second what @Chris Davidson said.  I would absolutely contact @Dave Foster.  He helped me on 2 different 1031s in the last year clear out in WY.  Figure it out BEFORE you sell.

@Frederick Gilpin Welcome to BP bud.  There are lots of opinions on that subject.  While I like LLCs, let me just tell you the pro's and con's.  First are you a high wealth person, or will the house be a large part of your total net worth.  The reason I ask is that LLCs are y

to protect your welath. The less wealth you have the less reason to worry about getting an LLC right away. You can always form an LLC later and transfer the property into it later. I would suggest getting an LLC in the state you are going to invest in. Wyoming has great LLC laws, but the law of the state the property is located in is the law that will apply, not Wyoming law. Next you will have to get a loan and you will have to personally guaranty the loan anyway, but in my experience getting a loan in an LLC costs about 1% higher in interest than getting a loan in your personal name.

Anonymity is nice, but if you will be the one making offers, cleaning it up, hiring contractors, buying insurance, screening renters, signing leases, etc. you probably won't have any anonymity. Now if you have everything done by a property manager you could probably get anonymity. You won't have to get an EIN number if you you are the only member and you can put the property on your own 1040 tax return unless you elect certain tax treatment. That will save having to prepare a separate tax return for your LLC.

If this is your first property I don't see a lot of difference. Maybe try it in your own name first and see how it goes. If you like it and want to do more then form an LLC and move the property into it then.

LLCs are cheap to form, but you need to educate yourself on them to make sure you run them correctly, or you could lose the benefit they confer. Some folks have a separate LLC for every property, but I lump multiple properties into one company until it gets big.

The most important thing is to take action.  Too many folks get worried about everything but getting the property.  Figure out the local market, then buy a property that will cash flow.  Figure it out from there.

@Kelly Thomas, Great job!  It took a lot of guts to buy a VR during Covid.  I had made an oral offer on a house before Covid, it was a junky old house, but I knew I could get it cash flowing.  Had a bit of heartburn, but bought it and was able to put it under a lease with option less than a month later.  I like how you waited over one year to sell so you could do a 1031.  Nice job, that counts as a home run!