All Forum Posts by: Jesse Waters

Oh, as far as moving property to a LLC, it was fairly simple. It cost us $220 total to move the deed's on our last two properties to LLC. Our insurance company listed the LLC as an additional insured. We didn't really worry about the due on sale since a) we told the bank we were going to do this when we got the loan and b) we are still paying the mortgage & personally liable for the mortgage and c) we are going to roll all our properties under a blanket loan and get it all under a new loan to the LLC.

I put all my rental property that I hold with my business partner into LLC. We still hold the loans personally, but we are working on rolling all our properties under a blanket loan with the LLC as the mortgagee. For us it was the better option, and we eventually will have our personal credit's clear of the mortgages. Depending on your state, a husband & wife still count as a sole proprietorship & as a result are granted less protection by the LLC. Give your favorite lawyer a call, it didn't cost us anywhere near $1000 to set up the LLC. It was closer to $500.

The income from the LLC is pass through & there is a lot less paperwork than a C or S-Corp.

@Christopher Gilbert is correct, it is much harder to get financing as a LLC, particularly with no history. However, if you are looking at larger commercial properties then some lenders will require a new LLC set up for that specific property. They will want to know where the down payment is coming from and the numbers on the property.

Hope that helps.

David, I enjoyed the blog post.  It was a good & insightful read.  When it comes to me and my business, I cheated, I had a business partner & we both put money up equally & both put our credit on the line for our first few deals.  I have asked around with friends & family if they would be interested, I have even had a few seriously interested & my father will be partnering with on our upcoming deal.  I always thought that real estate should be a team sport, not just with the out side professionals used in the process, but people with a direct interest in the success of your own business.

That being said, I realize that my reputation would be seriously on the line either with success of failure.  As one guest on the pod cast pointed out that Thanksgiving could be real difficult if a deal was going bad.  "Could you pass the gravy & $25k please."

So, after I bought my first property, I felt like an all star, had a plan for the next & casually put it out that I am looking for partners.  No real takers, but I really wasn't interested.  To sound cheap, I have a long term agenda.  I would love tons of partners/investors etc.  I wanted to get it out that I am looking & open, but I wanted to get a series of success under my belt first.  Although, past performance doesn't guarantee future success, its a pretty strong indicator.

We are currently courting a potential investor that was refered to us through our accountant.  To me, just the referal alone, was a serious vote of confidence for our business, methods, strategy & success.

For the first time investor, I would say do one deal on your own, learn the game, get going, then bring someone else in.

Personally, I would have a hard time investing with someone who had no track record, I would have to very seriously consider the terms of the deal, my protections & vet the deal very carefully.

Sorry for rambling on. 

JW

Brandon, Welcome to BP.  I have been investing since 2010/11, accidentally at first, then I realized the upside potential and I started buying intentionally.

This is a great place to learn, gleen from other & ask questions to refine your goals and plans.

Sounds fairly reasonable. However, the bank may want proof of funds rather than just money from a HELOC. Make sure that if you are going to rent out your current house then the rental market is strong enough & the rent are high enough to support your current payment, insurance should go down, however, your taxes may increase. Where I live, owner occupants get a break on their property taxes, while investors get hammered. My primary residence is worth $290k and I pay about $1100 a year in taxes. I have a single family rental close by that is worth $100k and pay $3200 a year in taxes.

You may want to also consider duplex's, tris or quads, while you live there, you will have other people helping to pay the mortgage, rather than just having to pay it all yourself.

I have two attorneys.  One for each area that I regularly buy property.  Ask folks you know, or other investors for recommendations for a good attorney, you want one that is experienced in each particular aspect of business that you are doing.  Most will tell you what area's they specialize in.  Ask them if they deal with investor's a lot or if they own any of their own rentals.  That is my usual basic qualification for everyone on my team: broker, property manager, lawyer.

Generally the market will dictate your rents.  I don't know what your market rent is, nor do I know what you could rent your place for.  If you are going to self manage, your mortgage is $900 & market rents are $1100, then go for it.  If your mortgage is higher than market, I think you might better off selling.  

Jason, Sounds like a good plan.  This is generally consider house hacking.  Have you considered keeping the house that you currently live in & renting it out, even if you cover the expenses & mortgage then tenant will be paying down your mortgage while the property gains equity.  Also, you may want to also look at tri or qual plex units.  Hope this helps.

JW

@J Scott To me planning & execution go hand in hand, too much of one makes the other suffer.  I think the struggle we all have to one degree or another is to find balance between the two.  I tend to get a partial plan then execute: Ready, Fire, Aim.  While, some go more the other way: Ready, Ready, Aim, Aim, Aim, Ready, Ready, Aim.... F... F..... fire.

The true balance would be to come up with a plan that any could execute.  Which, would be along the lines of systematizing a business & getting it to a point where it runs better without me than with me...  Which is my goal.

Hey @Anna Shaver yes, our goal is to roll it into a commercial blanket loan. Some of the properties that I am looking at are renting below current market value & I would have trouble getting a lender to finance the property as is, the rents would need to come up. I have run the numbers a few times & even getting these properties with 0 down, in 5 years we will have enough equity. The thing about commercial lending is that the rules are different. Generally speaking, they don't care what the purchase price of a property, they are concerned about the appraised value & that value is based on the property's income. So, if a property is selling for $500k and the appraised value is $600k with 75% LTV then I would only need to come up with a down payment of $50k. Where as a residential lender would require $150k down payment. Also, each lender is different, but the ones that I have been talking with require a LTV of 75% for a blanket loan, with a minimum between $500k-$1mil. With commercial, there isn't PMI. PMI on residential real estate generally goes away after you have 20% equity.

Going with a blanket loan has both advantages & dis-advantages. One payment, easier to leverage the equity in one property towards another one, rent increase drives up the value of the whole package etc. The down side is interest rates are higher than residential loans, the minimum amount of properties can be higher, my lender requires a minimum of 5 units, so you can't get a commercial blanket on 4 SFH & the loan terms are shorter, requiring re-fi every 5-10 years. Also, they have prepayment penalties & its harder to sell one property out of the package.

Hope that answered your question.  Sorry @Kenneth Stump wasn't trying to hijack your thread.