All Forum Posts by: John Lenhart

While we do not charge for fish or birds or reptiles, nothing says you can’t. If you are not thrilled by the concept of a lizard or want the additional income of a reasonable pet fee go ahead. As you mentioned, the heat lamp increases risk of fire as well as other potential animal related damage. 

Nothing says you can’t compromise on a lower fee eithrv

It is going to be difficult counting doors to figure out the exact size of the unit behind the door. Best to put an offer in on your best assumptions and CAP rate and then retrade if you find out in the diligence period it is much less. Good Sellers disclose the information upfront so they don't have to worry about the deal falling apart. Price in a slightly higher CAP rate to account for some of the increased diligence risk.

Who do you use? Definitely high for a five unit building. I suggest contacting Brodbeck Porter Agency in Cincinnati. They will be able to provide a good policy for you

Get your inspection done and verify the tenants match up to the lease. Go online and verify the bills. Develop your plan to execute on the value added changes after you close

@Amr Moussa if you are looking to see if the property may be in a flood zone you can go to the FEMA website and search the address to see if it falls in one of their defined flood zones that would require flood insurance

 John

An LLC is a pass through entity so it is taxed on the individual level not on an entity level. If you are the sole member of the LLC it will be treated as a disregarded entity by the IRS and treated like a sole proprietorship for tax purposes. If You currently own the apartment building, it really shouldn't make a difference for tax purposes.

Ideally you want to form the LLC in the state where the property is located to get the best asset protection. You would want to consult with your personal tax advisor regarding anything more complicated such as a Nevada corporation or Delaware trust, etc.

In regards to forming an LLC and getting a loan The answer is, it depends. If you buy anything from a single-family to a four family, and you use traditional financing through a bank that has been remarket it through Fannie or Freddie, there are often loan covenants that State you must be an individual on the loan. This means, you must acquire the property in your individual capacity. Many times, investors well then subsequently move the property into an LLC. Well technically a loan violation, 99.99% of the time the bank is going to do nothing about it because you are still personally guaranteed on the loan. Therefore, it's just one minor hoop to jump through to get the property into an LLC. Now, if you're looking at a commercial loan and commercial bank financing, the bank will not have a problem with you taking the property directly to the LLC from the start because, they are going to make you personally guarantee the loan anyway

There is nothing wrong with recourse loans. Typically, the benefit of having some type of recourse loan will result in much cheaper closing costs. Typically, recourse (bank loans) may have more flexibility in payoff, and the documents will not be as intensive. A bank loan typically has smaller penalties (some don't have any) for early payoff whereas a non-recourse loan typically has yield maintenance or defeasance which can be very expensive. 

A lot of times on value add properties, people will start in a bank loan, stabilize the property and then pull out money through a cash out re-fi by doing the non-recourse route and lock in for a longer fixed rate term.  

new Toilets in multi family buildings. If the building is older and they have the large tanks in there, switch to a smaller tank toilet and your water bill will noticeably decrease

@Allyssa McCleery In order to do a 1031, he will need to find a qualified intermediary who will I need to handle your funds at closing.  The long and short of it it is, that when you sell a building, and there is a delay on the closing of your purchase, you are not allowed to touch any of the proceeds you received upon the sale of your Original property. This is why the qualified intermediary is required. They hold the funds in escrow and provide the paperwork used to complete the forward exchange.

Get a local attorney. Some states even require attorney's at all real estate transactions. A California attorney does no good in those cases. Plus, CA attorney's are going to have much higher rates than most other areas of the country.