All Forum Posts by: Jerry W.

My cleaner does the laundry.  We keep at least 3 sets of linens and extra sheets for each bed, just change them and do laundry later.  In a pinch if you have sheets ruined you can always have an extra.  Also we keep a spare set at the rental unit.  If my cleaner gets stuck out of town I or myu wife can run down change sheets, wipe down tables, clean bathrooms, and vacuum, do dishes, etc. in a third of the time if we don't have to do laundry.  We are working on adding a backup cleaner, but it is hard to keep a backup if you rarely use them.  So far at most we clean once a month when the cleaner has to take her mother to the doctor, etc.  there are no professional cleaners in my town.

The nearest big box store is over an hour away, and a place like Medard's or Home Depot is almost 3 hours away.  I order a lot of stuff online and pick it up weekly.  I usually have extras of lots of stuff in my warehouse.  Spare doors, water heater, lots of extra faucets, supply lines shark bite valves for bathroom or kitchen sinks, saw blades, paint brushes, rollers, even paint.  We do have a local hardware store for items as well that we use a lot.  I am mostly buy and hold not flip though.  So I spend about 2 hours a week at the store and 2 hours online.  I have started having an assistant do my online ordering using a list.  I then review the list and make sure its accurate.  That saves a lot of time.  I have things like baseboard trim delivered by a local lumberyard.

@David Thoeny, there are several threads on this in the forums you can look up for more information.  It is hard to give advice without looking at a particular deal.  My belief is that the best time to invest was 20 years ago, the next best time will be now.  Waiting gets you no where.  At least start looking at houses, running analysis, see about getting your credit lined up, etc.  If you don't jump in you will never know what a good deal looks like and will never get one.  It is possible that real estate is in a bubble, but I personally do not believe it is.  Demand of people looking to live in a home is very high, it is not driven by speculation that I can see.  

The Covid problem is like any other problem, you can run, or stay on the sidelines, or jump in.  Maybe your first deal won't be a $50K profit in one year, but it might be over 10 years.  There will always be a reason to wait if you let it control you.  As to Covid keep looking and if you buy be very careful on placing renters.  I have been putting a waiver about the eviction moritorium in my leases.  I am not sure if it will stand up, but why not?  You might also be able to buy a place at a massive discount that has a renter in it who is not moving out and get a property cheap.  Maybe you will have to wait 6 months to evict, but it may be worth it.  You can look for opportunities or look for reasons not to invest.  Look for a place to flip since values are climbing so fast, or look for a vacation rental.  There are lots of options, just get out there and find some.

@Seidu M. Lawal, you might try getting a credit card or 2 and using them once in awhile.  You can also go get a small loan on a vehicle or something from a place that does payments for a stove or refridgerator, etc.  Making the payments on time and being prompt will build up a little credit.

@Alex Throckmorton, you might look some old threads and articles on different software options.  I know I have read several threads about different companies and many were compared on articles on BP.

@Nicholas Aiola, the reason I mention salary is that my accountant says I should not draw any money out of the Sub S Corp unless I have paid myself a salary of the same amount or more.  She says I can only do a regular draw of capital after I pay salaries.

@Orly Howard, real estate laws vary a lot from state to state. That being said often a restriction on a deed can be termed a fee tail. Generally fee tails are not permitted if they restrict the use of land, especially if they are perpetual. If it is only in your deed then someone must have standing in order to file to enforce it. The most common fee tails struck down by the courts were the ones that prevented people from selling their house to negroes. It is substantially different when it comes to covenants that are for an entire development. That is part of a common scheme or plan that is intended to keep the value and aesthetics of neighborhoods. Those usually have a HOA or even things that allow anyone in the subdivision to enforce it. They must be reasonable both in word and application.

@Nicholas Aiola, I have an eclectic bunch of rentals. I originally bought into a Sub S corporation that had 4 folks in it. Now I have bought all of the other partners out and am the sole owner. It is my largest company and holds probably 60 to 70% of my rentals. I like this structure because I can buy and group my expenses without tying them to a specific house. I often buy several water heaters or large batches of shingles when they are on sale knowing I will use them within a year or 2. Drawback is that I have not paid myself a salary so get no benefit from the Sub S structure. All my extra money goes back in buying more properties and growing the business. Three rentals are owned in my personal name and just go on schedule E. I also have a Sub S that I bought the other owners out of that is a commercial property. Finally I just started a single member LLC that I have purchased several rentals in that property. I like that it will get a free stepped up basis in going to my heirs, but hate doing accounting for each property separately for accounting reasons. These properties are intended to be high cash flow.

Questions:  First Each of my Sub S companies will be selling a property, one will be selling 2,  that it has held for many years and has little depreciation left so lots of depreciation recapture, and decent profits.  Should I pay myself a salary so I can do a non salary draw?  Or will my long term capital gains and recapture taxes be at just as good of a rate?

Next I have a property that my Single member LLC purchased that I hope to fix up by next year and resell just after one year of ownership. I would have preferred to fix it up and rent it, but I have so many projects going that I have no chance of getting it ready to rent anytime soon. I actually have 4 projects going right now and it just needs too much work and is in a neighboring town so I would work on it least. I am considering doing a joint venture with a contractor and seeing what I might make in a crazy housing market.

I showed a loss in 2019 because a hail storm took out about 20 roofs and I was only able to put 3 new ones on that year and the leftover insurance money is taxed as income.  (I decided to buy a new truck for $50k to reduce taxes)  In 2020 I put a lot more repairs in and showed a loss last year. and showed a loss.

Do you have any suggestions on ways to reduce taxes, or get the free stepped up basis for my children?  I hate that my Sub S companies cannot get a free stepped up basis when they pass to my kids, but I love just doing books on expenses as a whole and not detailed to each property.

I have not received any real advice from my tax accountant, we do our own books.  The accountants will answer questions, but when asked for general advice they usually say I am doing a great job and they don't have anything to add.  

Can you add anything for advice? Thanks for this thread and the advice you have been giving folks.  Sorry it is so long.

@Nicholaos Koufoudakis, you have gotten some great information here and some not very good mixed up information here.  For example @Joe Splitrock, gave advice that is dead on.  Other folks gave advice that is correct in some circumstances and dead wrong in other circumstances like @Account Closed. For example, if you get a personal judgement against you then charging order protection does keep them from getting your LLC properties, but they can attach any payments from the LLC to you. However a lawsuit from within the LLC property would leave you protected personally from the judgement unless you had done a negligent act personally that enabled you to be sued personally too. There is some truth to not getting the free stepped up basis to your heirs from a multimember LLC, but I believe that if you have a single member LLC that the property will pass to your heirs and get the free stepped up basis. Multimember LLCs also must file their own individual tax returns and give out K1s for each member, but single member LLCs can just be added to your personal tax return. What form of LLC do you have and what type of taxing structure did you elect? If you elected a Sub S structure then all of this goes out the window. If you elected the partnership taxation then some applies, and if you went with a single member and pass through taxing then most of it applies. I have over 40 rental units currently and some commercial units. I have one large entity, one small entity, 3 in my personal name, and I am now putting all new acquisitions into a single member LLC that just puts the properties on my personal tax return. Their are pros and cons to any method you use. You need to do the one that lets you sleep best a night.

I have been sued several times from my day job, but never anything related to my rental business.  In 30 years of business I have only seen one lawsuit that came out of the operation of a rental business, and that one was covered by insurance.  It was a slip and fall.

Thanks for starting this thread bud, I have enjoyed most of the answers, but remember not all advice is good advice.  Listen and learn.  Do not forget to give votes to the folks who took the time to give you great advice.  Best of luck.

Very tough situation.  You want to provide a safe place for tenants, but do not want to choose the wrong person.  If you do nothing one or both can claim you did not take steps to make your unit safe.  I had something less intense, but similar.  I advised my tenants that I had no way to tell who was telling the truth and I was not law enforcement.  They were to call law enforcement in the event of violations of law, I would however be happy to take action if the courts made a decision.  I took steps to not renew either lease.  If it was clear who was the aggressor I would have taken legal action, but the evidence was not clear and was one person's word against the other.