All Forum Posts by: Jerry W.

Own the VR in my Sub S Corporation.

@Jason Malabute, I can only speak to what I know about Wyoming law. First Wyoming has a very strong set of statutes and case law supporting that entities that are properly run get liability protection. Corporations are run for the benefit of shareholders, so shareholders need to know what the business is doing, ultimately they are the beneficiary and owner. It doesn't matter if the shareholder and President are the same person, the way you behave should be the same. Do minutes, hold meetings. An LLC is really a partnership that has been given the same liability protection that a corporation gets BUT they get pass through tax status. That is the huge benefit. I cannot speak for any state but Wyoming, but since the owners are usually the operators the rules about keeping minutes are more relaxed than in a corporation. At least in Wyoming not having minutes absent something more is not grounds to pierce an LLC.

You didn't ask this question, but I am wondering, how do you make any profit with every property having the annual $800 or $900 CA corporate tax? I believe that LLCs and corporations if properly operated in many situations give a lot of added protection rather cheaply. The idea of stacking a lot of them together seems rather stupid when you consider the added cost especially for someone from CA. there is a risk that you will die or be involved in an accident every time you drive a car. Does that make you have 3 layers of LLCs to own your car? Does that make you quit driving? Why do you act that way with rental property? Do you hire a bus to drive you from place to place so you won't get killed in an accident because the bus will be safer than a car? there becomes a point where the protection is ludicrous. Do one or 2 LLcs at the most for say a million dollars of property. it depends on your situation. Put 10 of your $50K properties in one LLC, not one LLC for each. Like driving a car, don't drive drunk, don't text while driving, be careful. run your business right, obey the law, have really good insurance. Don't focus so much on a rather small chance of liability that you ruin your total likelihood of success. What is it that you plan to do that is so massively dangerous? Who really pushes the half a dozen entities and land trusts and shell corporations? The people who sell them! No one else does. I finally set down and counted doors for the first time in years a few days ago, and I have over 40. The idea of having 40 entities is insane. I would literally NEVER be able to manage them correctly. Really? Do books for every house? I buy a box of bolts or some tools, or buy an extra stove or fridge at a yard sale what entity do I put it in? If a faucet goes bad and I grab one out of the warehouse who did I bill it to the first time, and how do I change the books to reflect who got it? Really 40 sets of books? Forty sets of minutes? Forty annual filings and filing fees? Granted I have allowed too many to be in one entity and I am now up to 3 entities, but even 3 is a lot more work than one. I do minutes for every place I buy and finance. It takes me 3 hours at least to do my annual filing on my biggest corporation, heaven forbid if I did 30 or 40. I would probably do a separate LLC for every joint venture with a different person, but not for every property. That being said if you need 20 different LLCs to sleep well at night then do it if you can afford it, but look at the really big players. Do you think Brandon Turner or David Greene or Brian Burke have an LLC for every property? I bet not. Why not? Because they would never have the time to really grow real estate if they did one corporation for every property. The next big thing is who runs your business? The guy who unclogs his own toilet or installs his own carpet, etc. really doesn't get that much protection from corporate type entities because he can be personally liable for so many things. Now if you just buy the buildings, hire contractors, and hire property managers the odds are they won't really be able to get to you. One or 2 good entities should do it. Now if you run a bar you better get a lot of entities stacked up and go for the anonymous as much as you can, but real estate not so much. Some states like CA are so incredibly sue happy I get being as careful as you can, but for example in WY it is remarkable different. There will be a lot of states inbetween those 2 extremes. Either way relax, look how other folks are doing it and read and learn. Good luck bud.

@Account Closed, I want to add to what I said earlier. While your method of investing is risky in the event of a market correction, I also envy it a bit. Your market is appreciating at a pretty rapid rate and so are rents apparently. I have to manage 30+ doors to get over a million in value and to be honest you will see more appreciation and rent increases with just handling 3 units. The cost of replacing 3 water heaters or 3 roofs is negligible compared to what me replacing 30 of each will be. If I was 30 I would probably be all over that if I was near your market. No great gains without great risk. If you can project to have enough reserves to pay your PITI for a few years at only half occupancy plus say $5K for emergency repairs you have done a lot to reduce the risk. I would not pursue your strategy at my age due to risking what I have spent 25 years building up. If you can get a 4 plex using the same method great, but you might also consider really looking hard for some good positive cash flow to offset some of your risk. I made a lot of mistakes early in my career, but a rising market and some rent increases were very forgiving of some mistakes. Good luck.

@Account Closed, my situation is so different from yours that I don't know if it will help any.  First I also owe a $1 million, but I have over 30 doors.  I don't see much appreciation or rent increase so the property MUST cash flow.  The idea of only getting $100 per month in return for a $300K property would scare me to death.  I try to buy properties that are disressed and fix them up for an initial value add.  Then I use either a 15 or 20 year note.  The scary part is that they are 5 year ARMs so the rate could change every 5 years.  I try to keep 2 months of bank payments around in cash in my operating account, and about $10K in my repair account.  I am actively still buying so I don't hold lots of cash on hand.  My safety net is a $100K line of credit I can tap into to fix a sewer etc.  I also use it to buy cash then refinance out when I make a few repairs.  My second safety net is having a property or 2 paid off.  I can always count on being able to have that one or 2 big rent payments with no mortgage.  I had 6 units come open on Feb. 1.  Ouch, couple that with I just bought 3 units that are all empty.  The good thing is by having cash flow of $100 per unit I can live with it.  I can spend much those months, but I don't go negative.  I do have a credit card or 2 with a big limit just in case.  With a 15 year mortgage in as little as 5 years I pay off about 20% of the principal so I can always tap into one of those for a refinance or to take out a second mortgage to use a down payment on a new house.  Every investment plan is different, so mine may not help you much, but it can give you perspective.  I think $7K is the most expensive single outlay I have had to absorb for replacing a sewer line through a bunch of other utilities.  Other than a hail storm last year that took out 20 of my roofs I have never had 2 big items hit the same month.  The hailstorm is a story by itself that is not finished enough to tell yet.  Good luck.  You are betting on appreciation and it is working, but it has danger.  Figure out what makes you sleep well at night.

@Jon Hill, to be honest it was fear of the unknown that slowed me down the most.  I had a duplex with just one side fixed up.  Furniture had been left in both sides.  I picked through it and put the best in one side then supplemented with stuff I bought online and at yardsales.  I posted on VRBO first, but really should have went with AIR BnB at the same time.  I put one on instant book and one I had to approve within 24 hours or decline.  Absolutely use the phone app for it.  I do 98% of my renting through the phone app.  Buy at least 2 of every bathroom item you think you need like towels, same with sheets and bed spreads.  I spent less than $1K on furnishing the entire thing.  The hardest part was cleaning between guests.  We did it ourselves for awhile, but finally hired a good cleaner.  Expect some trial and error there.  It will be easier to hire someone if you get several VRs.  No one wants a job where you only work 20 times a month and make $25 a day.  Find a housewife with kids in school and if they clean 4 units and make $100 a day and never have to worry about getting kids to school or being home to pick them up they will love it.  The second unit I spent more time and money on, I also added a cowboy theme and went the extra mile on it.  I did hickory hardwood floors, new countertops, new stainless steel appliances, Oak furniture (still bought at yardsales), very nice bed spreads, walk in shower with nice tiling, etc.  It rents about 30% more than the plain side.  I am considering adding another VR this year.  Fixing it up and furnishing it took the most time.  Managing them is not bad.  Good luck.

@Steve Smith, bud if she returned your half of the money be VERY grateful and take it and rent your own place.  Thank her for being so fair.

@Vic Hartounian, the thing that will kill you is the CA tax.  Even if you invest out of state they tax each entity.  Suppose you cash flow $200 per month, you still have to pay the $800 fee in CA and pay income taxes on it.  You will lose over 33% of your NET profits.  Other than moving out of CA you might set up a single out of state entity to hold all of your properties, or even consider having a very high insurance policy and an umbrella policy for a few million.  A lot depends on your current financial situation.  I personally do not like trusts in doing asset protection, but I do know some smart folks with different opinions.

Hey @Cheryl Packham, welcome back.  What a surprise hehe.  Good to hear from the rest of you.  @Robert White, I was born in Rock Springs, and still have a lot of family there.  Good luck.  it has large boom bust cycles there.  Buy smart to weather both of them.  @Alexander Knowles, the only time to work on the exterior in Laramie, where I owned and went to college at was when the wind wasn't blowing, but then the wind always blew hehe.  Seriously the best time is summer.  The demand is way down, and you really need to be ready by at least july as everyone will be rented up before August.  I am madly busy, but if any of you come through Thermopolis please stop and say hi.  I would be glad to give my 2 cents on real estate issues, but cannot guarantee how good it will be.  I have been doing it for over 20 years on a part time basis.

@Jon Hill, Please understand that my question is not meant to be sarcastic, but is genuine.  Why not do both?  If you have a system for the duplex, then execute on it and then start working hard at trying out the vacation rental.  I know that there are a lot of real problems that could be present like getting the down payment, figuring out the market, etc., but you won't learn the market overnight, so pull then trigger on the easy one and immediately go to work on the second.  What do you have to lose?  I agree that developing a niche is great, but how do you know what you will like if you don't try another?  I have both monthly rentals and 2 vacation rentals, but they are mostly in my home town.  Buy wisely, learn the area, learn the business, then go for it.  Fulfill your dream and hers at the same time.  I will warn you that vacation rentals are MUCH more work than monthly rentals.  They do get easier over time, but be prepared initially to spend a LOT of time on it.  Just my 2 cents, and probably not worth more than that, but consider the possibility.

I am not as familiar with Jackson.  If you can get a place to cash flow anywhere close to it I would go for it.  there is serious money in Jackson, and the skilled workers cannot afford Jackson anymore. Eventually the population will be forced farther and farther out.  It has changed a lot since I first walked the wooden boardwalks.  Wish I had bought a place back then.  Jackson is not based on boom bust things like coal or oil.  It is here to stay.