All Forum Posts by: Jerry W.

@Levi Kissack, congratulations.  I have seen massive swings in the real estate in Wright over the last 4 decades.  From massive shortages for housing to 4 out of 5 houses empty.  How is the market now with the coal issues Gillette is having?  It is a pretty area, and nice get away from Gillette.

@Account Closed, I have to agree, your comments are not in good faith and seem to be justified by your own opinions you state as facts.  If you approach it with an open mind, not suggesting folks are evil and destroy neighborhoods you would understand better, you may not agree, but you would not call them evil or greedy.

I own a vacation rental.  I bought and fixed up a property that was in bad shape.  It reeked of cigarette smoke so bad I had wash walls multiple times before I could even paint them.  The neighbor on one side offered me 1/3 of my purchase price and said it was the value of the land minus the cost of tearing the place down.  He wanted to make a large garage for himself on it.  That place is sweet now and beautiful.  The neighbors on one side love my VR.  I have often come by and see them having barbeques with my guests during the summer.  I have terminated renters before.  It does not make me evil.  Some places I wanted to fix up, some places I wanted to put to a different use.  I gave them plenty of notice.  I am currently moving one set of renters out in order to make another VR.  I gave 3 months notice.  Guess what?  They had planned to move out and had never given me even a weeks notice, when there new place place fell through I still let them stay for the remaining 2 months I had initially promised.  Is a tenant evil for moving out of a rental into a cheaper or nicer one?  No, and neither is a landlord.  Is a grocery store owner evil for not giving free or cheap food to poor people?  No.  Is he evil for marking food prices up 100 or 150% over his cost?  No.  Is a lumberjack evil for cutting down trees to provide lumber to build houses with or to make toiler paper with?  No.  There are some folks who get ahead by being evil, but the vast majority of folks are honest and hard working.  The ones taking the risk and doing the work deserve to profit from it.  Most are considerate of others.  There are shortages and higher prices of houses in some areas exacerbated by VRs, there are also some areas where poorly run VRs might add to problems in neighborhoods, but those are the exception not the rule.  80% of the properties I buy are distressed, or I couldn't afford them.  I put new roofs on, I paint, add siding, update furnaces, replace windows, fix weed problems, kick out drug dealers or even addicts.  Nearly every property I own is an improvement to the neighborhood.  It is in my own financial interest to act this way, and I prefer it.  I actually had a town clerk in a neighboring town say she was glad that I just bought another property there because I fix them up and get rid of bad folks.  Try seeing this through the eyes of folks who do this, don't assume evil and greed to motives.  Think about folks who grew up poor trying make sure they can send kids and grandkids to safe schools and even college.  Think about the folks who do it for love of family and a good work ethic.

@Cassidy Burns, my goals for 2021 are to acquire another $500K of producing real estate, pay off three mortgages and flip 2 properties that I have neglected for years.  I also have a goal to hire an assistant as my first full time employee, and to turn at least one of my LTRs into a short term rental.

I have had an unexpected development however, a large mass of out of state buyers have bought up nearly every single property for sale in my town and the state. Currently there are only 14 properties left on the MLS that are not under contract, and none of those has any chance of cash flowing.

Maybe I need to add a goal of finding out how to acquire more cash flowing properties in a sellers market.

@Sheri Fluellen welcome to BP.  Your story is very intriguing. (took a few tries to spell that right)  I have always plowed my profits back into my business, but my business exploding is more like little puffs of air every other year or two hehe.  I did try a life coach about 2 years ago and I really liked it.  it was only for 3 months, but the insights I gained were very beneficial.  I often wonder if I should try another form of coaching, but wonder where I would fit it in.  I admire those who go in big, which is one of the reasons I admire @Nathan Gesner.  He is killing it in Cody.  Lots of folks might say wow the market turned great and I am making money, but Nathan doubled down and won again by plowing the income back into real estate.

I know that you are obviously ramping up your investing if you are set on 24 new acquisitions, and I would not mind ramping up either, but the recent surge in sales has left me a little bewildered on how to grow more. The recent surge in local housing sales has left only 14 properties on the MLS in my town that are not already under contract. I simply cannot buy a cash flowing rental at this time. Is this a fad or a trend of investing in small towns?

I have kept my day job, but now my rentals are taking up a fair bit of time.  Maybe my next move forward is to grow my overhead operations to handle the rentals so I have more free time to really find a way to invest more.  If you have a new buying formula you want to share please do so.

Best regards

@Rob C. maybe this will help.  If you die and your child inherits the property they cannot call the loan.  If you just up and give your child the house now while you are alive they can call the loan.  Do you see the difference?  One is for inheritance and the result of the estate passing it, one is a current transfer.  That was the big reason for the law.  They didn't want banks calling loans on widows and children when the main wage earner had just died.  If you are not retaining title in yourself you have in effect transferred a current ownership.

@Rob C., yes you have quoted the correct law. The portion that is important for trusts is (d) 8. In your situation when you name an LLC as the beneficiary you fall outside of the protection of the law. I did not word my answer very well, but the normal way a trust works is that the beneficiary is the settlor until the settlor's death, then the trust must pass to another person within 21 years of a life in being. That is the testamentary portion of the trust, and it is intended to bypass probate and vest the property in the new heirs with or without special provisions. When you are not the beneficiary it is not intended to give a transfer in the future, it is giving a current gift if you are not the trustee, or is not actually a transfer at all if you are the trustee but it is revocable. I am not doing a good job of explaining, but keep in mind the meaning of the word trust. It signifies you are holding the property for the benefit of another. Most trusts are a contingent ownership to a person in the future because you really own and control it now. When you are not a current beneficiary or owner it vests immediately, thus you have parted with ownership. When you are the beneficiary you do not part with ownership.

As to all layers of protection striping away from a real suit I also said it wrong. All anonymity will disappear. It really is impossible for most folks who do any hands on investing to remain anonymous in the event of a truly serious lawsuit. Now all the protection of an LLC will still apply if you run the LLC or corporation correctly. What you cannot insulate yourself from is your own decisions. Example, you are picking up supplies for the LLC, say paint, in the LLC owned vehicle to take to the house for you or a contract painter to paint it. You had a few too many beers and run a stop sign and kill someone. Having a trust own the house and the LLC be the beneficiary won't protect you from a personal lawsuit. Now same story, but you are not drinking but run the stop sign, same result. Now you are driving sober and legal and a kid darts out in front of you, not in a crosswalk and you run over them. If they sue, they will still name you personally, and it will come down to a decision of were you negligent in your operation of the car, did you breach your duty of care and was it the proximate cause of the death of the child? In every one of the scenarios the company would also be sued. The line blurs when it is based upon a judgement call that you make. Did you know the furnace was faulty and fail to hire a plumber, did you send a handyman who was not qualified to make the repair, or did you do the repair yourself and the carbon monoxide killed the family? When it is serious, discovery will follow the trail backwards to the person who made the decision and anonymity will strip away leaving only the question of negligence and liability. It doesn't matter if your lawyer is the Trustee if you are the one who told the property manager to hire a handyman to fix the furnace that killed everyone. Do you see what I mean? When millions are at stake discovery will be grueling, when it is $100k or $200K not so much. There are many ways your liability shell will help in frivolous lawsuit, but not so much in a multimillion dollar one. it all comes down to did you screw up or someone else.

I forgot to mention cable TV and wifi costs bud.  Here we have yard care and snow removal as well.

@Brad Johnson, 10% a year gross of purchase price seems a bit low to me. The 1% rule for buying long term rentals suggests you would get 12% a year in gross from a long term rental per year. I would want at least 15% maybe 20 before I would consider a STR. They are a lot more work than a regular rental. When you say gross fees does it include the cleaning fee or not? Does it include the fees taken out by VRBO or AIR BnB? Are there and Condo or HOA fees? There is a lot you have not told us. Find out those facts and give us more information. I cannot guess on monthly costs because I don't know your normal utility bills. Are they normally $500 per month or $1500 per month? Does your cleaning fees include cleaning supplies? You will need to plan on replacing towels, bed sheets, lots of toilet paper, paper towels, napkins, salt pepper, coffee, tea, sugar, light bulbs, dish soap, dishwasher soap, trash bags, hand cleaner, shampoo, soap, etc. I have a very small 2 bedroom STR (800 sq feet) and I figure that my costs of utilities and supplies runs me about $800 per month. That does not include new linens and towels. It is a duplex and I estimate I pay about $25 per cleaning. Somedays it is more, but days when they do both sides I pay a little less per unit.

Probably the best lifestyle investment I have made recently was buying a new truck.  I drove the same truck for over 27 years.  No A.C., little to no suspension, turn knob 4 wheel drive, cruise control, more than just an a.m., f.m. radio, 110 volt plug ins on the new one, The back up camera, I could go on for quite awhile.  I could have kept driving the old one and saved about $60K, but my lifestyle is much improved.  The new battery powered tools I bought are quite nice too.

@Klemens N., the lawyer is willing to serve as trustee because he makes a lot of money doing it. If he is sued as the trustee they take the trust property not his. The basic fundamental of ALL trusts is that they are a legal entity and the property they own must be vested in a Trustee. The way you access the property to sell it or sue the trust is through the trustee. If a trustee can signa lease to rent the property or a deed to sell it the court can order him to transfer the property to the tenant or to sell it and give the money to the tenant. This is true in EVERY trust or it is not a trust. High powered words do not make a trust not a trust. Trusts give zero protection from law suits, they are used to hide ownership sometimes, but they are made to control property for the benefit of a special purpose. Keep in mind there is a federal law that prevents banks from calling a mortgage due if a property is placed into a trust for estate planning reasons. If the reason is NOT to make an estate plan the bank can call the mortgage due upon transfer. Hiring a lawyer as a trustee, then making the beneficiary an LLC that you are the only owner of is not for estate planning and the bank can call the loan. Lying about the trust would be fraudulent and violate federal banking laws. Now if they don't ask you are fine, but they can require certain portions of the trust.

The real reason that I don't like the secret sauce approach of trusts and LLC beneficiaries and attempted anonymity is the cost. This set up is expensive. If a lawyer has to sign every lease, hire every contractor, sign checks, sign taxes, possibly sign mortgages you are going to spend a lot of money. How do you pull equity out to buy more houses? What about liability insurance for the Trustee, filing annual reports for the LLC, etc. The amount you spend in time and money on these extra steps is real. The loss of opportunities is staggering. If you are anonymous you cannot network and build relationships with realtors and bankers. You cannot get word of mouth deals, etc. This might be fine for 200 unit apartment buildings or even million dollar houses, but if you own 20 SFRs you are in trouble.

Anyway good luck either way.  There is no magic way to avoid all liability.  Manage the property well, be fair, follow the law, get educated and buy good insurance.  If you can afford the extra steps then do it if it makes you sleep better at night.