All Forum Posts by: Kerry Baird

@Nathan Gesner, having that line of credit will enable to you make a quick purchase, should you find a gangbusters option OR to handle damage from a storm, or what-have-you. Where did you get the LOC? Same bank that you use for your business?

Navy Federal CU has a longer draw period and longer repayment period than other lenders.  That has its own appeal to me. 

We just discussed this in our real estate meetup. One of the guys' mentors, who has some 700 houses, has all of his Alabama properties in one LLC, and all of his Ohio properties in another LLC.

My structure is very much like you describe: a management LLC that operates the two LLCs, one is a FL LLC for the properties in Florida and the other a TX Series LLC that owns houses in Texas. We do not have WY LLCs, and we'd have to file a foreign business filing if we did.

As it is, the tax returns are expensive, as we need to file taxes at about $1200 per series of the Series LLC, plus the TX and FL and Management LLC. It starts adding up. The goal of the management or Operational LLC is to get me paid a salary, and set up a solo 401k.

I have a business checking account and business credit card for each LLC so we can keep the expenses straight for bookkeeping purposes. Less can actually be more.

For my business, I like both the Chase Ink and American Express Business Blue.

@Tom McGee, You are going to hit some problems that you possibly do not know about if you set up a Wyoming LLC to hold these properties. Off the top of my head: transfer tax is assessed in my area if I change title. Using a foreign entity in another state results in foreign entity filing if operating business in my current State. I do not see much need for "asset protection" for only 2 duplex units. Cost to file taxes is higher for entities, and multiple entities each require a tax return...Mine cost $1200 per entity to file each year. Interest rates are higher when we purchase for an LLC owned property vs a personal owned property. We still PG (personally guarantee) DSCR mortgages on properties held by LLCs.

We went forward buying houses in our own names until the point where our DTI got out of balance, and where the reserve requirement was higher than the next down payment. At that point, we moved into DSCR mortgages, and set up entities.

I argue that the best place to set up a new LLC is the State where you do business, i.e. the place where you own properties. We got both legal and CPA advice and then set up the current entity structure, which is this: Our trust (set up for asset protection) has membership interest in two LLCs (one in Texas and one in Florida, where we own rental houses). We have an S-Corp that manages both LLCs, so I can take payroll and contribute to retirement accounts.

If you can buy owner occupied property at the lowest down payment and lowest interest rates, occupy for 2 years and move on to the next for a few years...you will have strong winds behind your back, in terms of cash flow and equity buildup.  When you are ready to sell these first properties, then consider buying the next tier in the entity you set up for that purpose.  

@Nathan Frost, go to myfico dot com and look for the tab that says "Community" rather than the aspects that provide your FICO score.  Under the community side of things are a bunch of forums, so scroll down to the Business forum.  Look at the top for pinned posts, one of which has business credit cards that report to your personal vs ones that report to your business score.

I'd confirm with your lender, so they don't back out at the last minute.  That could cost you time and money.  

Maybe start with a title agent or real estate lawyer, and ask them for a referral to an experienced agent.  I have been attending meetups for the better part of 30 years and rarely find an agent who understands sub2.

@Nathan Frost, I recommend looking at the MyFico Community tab, and going through the pinned posts at the top of the Business forum.  You can see which business cards report to personal vs report to business, and can search through their forums for best BLOC available.  People post their data so you can see what other folks are getting, what NAISC code to use, and so forth.  I haven't found very much on this site. 

I have found that I can apply for business credit cards, which enable me to do renovations or pay for utilities over a period of time, while I save up for down payments or what have you. I can also get points for my business with Chase or Amex. 

Business lines of credit in my experience will often be high doc, so you need to have your articles of organization, the EIN number from the IRS, any other mbr/managers may have to be signatory to the debt (vs non-PG), and depending on the bank, they often want to see business tax returns.  Some will use bank statements to show a year of income.  They vary quite a bit.  LLCs over 2 years old will be easier than LLCs under 2 years old. 

Call the local-to-the-property community banks and credit unions.  Ask them.