All Forum Posts by: Llewelyn A.

@Ahmed Saad

Hi Ahmed!

Any news on your potential investment since this thread is 4 days old?

Brownstone Brooklyn IS one of my primary areas of Investing, but more in Clinton Hill, Bed-Stuy, Crown Heights.

If you PM, I can walk you thorough my own calculations, including a 10 year IRR.

LLew

Now that I'm older, I have gained the wisdom to know that I would gladly trade a Million Dollars to have a life long friend, spouse or family.

Case in point there are still a lot of lonely millionaires out there and a lot of wealthy people who need to go to therapy.

I don't count my accomplishments by the Money I have but rather the friends and family that I have!

@Dave Foster

@Kristen Bouvier Scoville

Yes, that's true that a member has protection under the LLC.

BUT... I still am a bit Paranoid with just selling the LLC.

Suppose Kristen sold the Asset and terminated the LLC. If there were any potential baggage, I don't think they would be able to do anything against a terminated LLC.

BUT, in a scenario where the LLC was sold to new Owners and the baggage made a claim on that LLC, the new owners of that LLC may want to sue Kristen personally if it was for something like Gross Negligence?

Kristen, what does your Attorney in the Sale to the new owners advice? Sell the Asset and terminate the LLC or just sell the LLC? Just curious!

@Dave Foster

@Kristen Bouvier Scoville

I remember reading somewhere, probably here in BP, that it is BEST for the Buyer of the Property to NOT take the Property via the purchase of the LLC.

The problem for the Buyer is that any pending or future Lawsuits that would be filed against the LLC can affect the new Owners of that LLC.

This is all from memory so I don't know if this is 100% Correct.

BUT... if it were me purchasing the Property, I think it's too risky as I would inherit any potential problems from the past history of the LLC, even if it has a good Credit History.

Just curious what you think.

@Kristen Bouvier Scoville

@Raymond Dipre

I think I got it fully now!

Each Property is held in a Single Member LLC

The Owner of the SMLLC is a Partnership LLC

By doing it this way, only the Partnership LLC files taxes as the SMLLC's are disregarded.

The Partnership LLC files Form 1065.

It will fill out Form 8825, adding all the Properties owned by each SMLLC's.

By doing it this way, the Partnership LLC will have just 1 Bank Account which represents the Operations Bank Account for all of the SMLLCs.

The Profit and Loss is reported for each Partner via the K-1 on the Partnership LLC.

The K-1 then gets recorded in the Individual Partners of the PArtnership LLC Schedule E form, specifically Part II of the Schedule E.

Therefore, no FICA tax since Schedule E is reported on line 17 of the 1040 and a Schedule SE is not needed for this Tax Return Line Item, unlike Schedule C.

If I got this right up to this point, then I have to say, YES!! That's an AWESOME way to do it!

There is one problem that I can think is something that will require work.

If you are filling out Form 8825 for the Partnership LLC, you need to compartmentalize the revenues and expenses on a per SMLLC (for each Property) basis.

BUT, since you are using only 1 Operating Bank Account, how easy is it to determine what bank transaction is for what SMLLC?!

For instance, when my property tax comes out of my account, it looks like this: NYC DOF DES:NYCPropTax (*Then the Owner of the Property, in this case, the Partnership LLC).

Now, I don't have a problem with separating my individual property transactions now because I have them in separate bank accounts. But I can imagine the difficulty to determine what bank transaction is for what SMLLC.

Same for Rents. My Rents come in from my Online Collection website. It does not have the property in the transaction description.

If I had to guess, the big issue with using ONE Partnership LLC is filling out the 8825 accurately and you will need to know what bank transaction is for what property.

I think this is where I'm getting a roadblock into using this Single Partnership LLC and it's single Operating Account.

Just curious what you think.

@Pedro Rodriguez

Here is a couple of scenarios that I like to use to explain the difference between ROI and Cash on Cash Return.

FIRST, both are Returns. HOWEVER, they are calculated differently and therefore, will get a different answer.

Here is Scenario 1:

You buy an Investment for $120k Cash. It pays you $1k per Month or $12,000 per year.

Because you collected $12k the first year, your Cash on Cash Return (CCR) is $12k / $120k = 10% CCR.

Here is Scenario 2:

You buy an Investment for $120k Cash. It pays you $1k per month or $12k per year. HOWEVER, because you need to sell it in the beginning of year 2, you wind up selling the property for the same $120k. BUT, it cost you $6k in Closing Costs and $6k in Commissions for a total of $12k in closing expenses.

Your Overall RETURN is calculated as follows:

Investment: $120k

Cash Flow: $12k

Closing Costs + Commission: $12k

Profit: ZERO

ROI?! ZERO

I have been investing for 21 years. I don't use CCR... EVER. I use more comprehensive calculations that give me a total cost as well as total profits.

I anticipate ALL profits and Expenses over a 10 year holding period and then I pretend to sell the Investment. We call this a pro forma business plan.

CCR is used often but I don't consider it to be an actual return.

CCR to me is just a calculation of the 1st year Cash Flow from the money you invested. But that's it. Doesn't tell me anything about how much is my return until I calculate the actual closing costs on the sale of the property.

Makes sense?

@Michael Plaks

@Scott Smith

@Kristen Bouvier Scoville

I have a question on using the Operation LLC.

So let's say you have several properties in LLCs. The Operation LLC collects rents and pays expenses.

Because these entities are "For Profit", does not the Operations LLC HAVE to eventually make a profit otherwise it can be labeled as "Self-dealing" or some other issue?

Secondly, if the Operations LLC HAS to declare some profits, because you are performing a service to other LLC entities, this Operations LLC does NOT hold Real Estate. It is a service company. Therefore, does the profits have to distribute FICA taxable profits?

I can imagine that having an Operations LLC makes you wind up converting a non-FICA taxable profit to a taxable profit.

Would appreciate your thoughts!

@Tim Viviano

@JD Gunter

I am in agreement with JD Gunter.

In fact, I don't really think of an LLC as a Corporate entity for Liability purposes. That's what my Liability Insurance is for.

I can buy additional Insurance such as Umbrella and be really protected.

What the LLC does for my Partners and I is help works out all the Tax filings (since you have to file a Partnership LLC Return) and then issue K-1's to each Partner.

The LLC also work much better for us to transfer ownership of the underlying Property.

If we held the Property in our names, then you would still have to Sell the Property with the old owners and Buy the Property again with the new owners, even if the Partners are the same except for maybe one partner.

The Loan would still have to be redone in that case also as the Partners changed.

Not only that, NYC and NY State has a Transfer Tax which we would be responsible to pay after each change of partners.

If the LLC owns the Property, however, none of that has to happen. We just merely sell the Interest of the Partner to another Partner. The Selling Partner may have to pay some Capital Gains. That's pretty much it. Very simple compared to having the Property in multiple names with a loan in a personal name.

So in my opinion, Liability Insurance is our Protection against Liability.

The LLC is more of a conduit to conduct business where the Business has Partners.

@Benjamin Vail

@Kevin Lefeuvre

The interpretation that the story gives a bad rap to the "Normal" AirBnB host is not legitimate, in my opinion.

If the majority of people reading the story already have a bias, either for or against the host who used the platform illegally, they will continue their bias. I believe that's called "Confirmation Bias."

I believe I am reading the story unbiased because I would love to become a Host myself, but not by breaking the Law, as these Hosts did.

I believe in the platform to help people who would like to legally use it and there are millions that do it.

What the article is points out is that this host severely abused the platform, causing NYC to take notice, and ENFORCE the existing law.

There are also those that have legitimate BnBs. I REALLY feel sorry for these guys because they HAVE to conform to the Hotel laws, including sprinklers and egress, plans for evacuation, etc.

HOWEVER, these hosts circumvent the building code by re-classifying what is a defacto Transient Occupancy business such as a Hotel as if it is a long term residence.

This is dangerous not only to the Guests because they wouldn't know that the apts do not have a mass evacuation plan, etc. but to the neighbors who paid money, sometimes millions, for their luxury condos only to find out they are living next to a hotel in the next apt! Is that really FAIR?!

It's funny, but I really think people have been hacked because they seem to only see ONE side of the story in their biased way.

If you can see that this host enriches himself at the cost of the Landlord's that own the apts he rents on AirBnB, the Hotels and the real Bread and Breakfast owners, then you should be sympathetic to this article.

IF NOT, you should question yourself to ask WHY don't I feel this guy is a criminal?!

He is, no doubt. It's not about the Hotel Lobby.... it's about what you are allowed to do legally and this Host is NOT doing it legally.

AirBnB understands that and knows that to continue doing good business, they need to shut down these bad operators.

Don't make this guy out to be a Matyr.

Question your own facts and opinion if you think this article is biased towards the Hotel Lobby. It's Not... so figure out why you may think that is the case.

The way I look at it is that if you understand both sides, you can't really think the Hotel Lobby is the bad actor. I can see how some people like this host is pushing it because there are a certain amount of people that will soak up that particular biased opinion.

HOWEVER, if you think that way, I would question WHY you think that way. Something deeper is there.

@Kevin Lefeuvre

Just curious about what YOU think about someone who ILLEGALLY uses the AirBnB platform to enrich themselves?

Is it that the Hotel Lobby is counter attacking an HONEST player or is the Player trying to GAME the system?!

I really find stuff like this to be very counter to growth and innovation.

I'm doing GREAT for what I have, which are about 10 residential buildings in Brooklyn.

BUT... there are "Investors" doing GREAT!!!

How are they doing great?! Well.... they are buying CHEAP rent stabilized buildings, targeting the long term low rent paying tenants and filing evictions which cost them $75 to file in our Housing Courts.

If the tenant does NOT show up, he gets evicted. If the Tenant comes to court, the Landlord claims the eviction was filed by mistake.

It has cluttered up the NYC House Court so badly that if I had to file an eviction myself, it may take months longer to get the case heard.

These Landlords make a lot of Money. They are completely dishonest. They GAME the system.

They buy the buildings CHEAP because they are rent controlled.. harass the current tenants, get them out, and then make MILLIONS by converting to condos and selling them at market.

It's not fair to guys like me who don't have the means to do it and even if I did, I would not cause the suffering of so many people in order to enrich myself.

Guys like me suffer because I am unwilling to play their illegal games. They get rich, screw up the courts, rub elbows with other big players, scheme even more and write more laws which gets them richer.

In this case, these bad actors who are using other Landlord's apts to get rich are creating HUGE problems for themselves and the LANDLORD.

We can get caught up and have to spend money on attorneys to defend ourselves because we will be named in the Law Suit by NYC as if we were accomplishes. We basically will have to go to court and PROVE we were not part of the illegal scheme of renting whole apts. The City won't believe it because until you prove you did not raise your rents in order to get a piece of the profits.

AirBnB is a Sharing Economy. It's not made to convert buildings into Hotels.

If that were the case, then I would be a BILLIONAIRE right now.

But what happens is that these people basically steal by profiteering from Landlords like myself as they make the "difference between the rent and the AirBnB price."

They need to go to jail and people need to STOP doing illegal AirBnB.

If you really want to make it legal, then lobby the Governments to make that change so ALL OF US can make money..... not just the criminals.