All Forum Posts by: Michael S.

@David S.  You bring up an interesting item for conversation.  However, let me give you two hypothetical companies.

Company A owns 10 houses.  They have acquired them from elderly owners who were duped into selling them for less than market value and fees that were shady and possibly illegal.  

Company B own 1000 houses.  They were completely transparent in all business proceedings from acquisition cost and fees to legal matters.    

Which company poses more of a "threat" to the greater good?  If the companies you referenced acquired said properties legally and fairly, and the sellers were satisfied, I have zero issue with it.  Thats just my two cents.  

We have an LLC AND an umbrella policy for the properties in the LLC; totally worth the cost in my opinion, but everyone has to make their own choices. I don't like leaving much to chance personally.

We have a tenant with an emotional support dog.  So far, she's been a good tenant.

Be mindful of how you handle this situation, as you can quickly find yourself slapped with a violation of the rights of individuals with disabilities if you are not appropriate with your actions.  

@Mike S. makes several good points above.  

One item of caution - using articles from other investors on here runs the risk of your articles including terms that are not legal in your state of incorporation. What is legal to include in the articles for an LLC in Texas may be an illegal structure or arrangement in New York, for example. Be very careful doing this unless you're using articles from another LLC formed in your state.

I am not a lawyer whatsoever, so please don't take my advise as any formal legal guidance. But I am very familiar with the workings of an LLC.

If you want the LLC to be recognized as a true legal entity, then you must have formal articles of incorporation and share certificates; you're better off paying a lawyer to set this up correctly than notarizing something off the internet. Why? Well, your state government can audit your documents anytime. You also can not apply for a business account and/or loans without proof of incorporation, which includes the articles, as well as obtaining your EIN from the federal and state government. That being said, if you are spending more than a thousand dollars in legal fees to set this up, you may want to shop around, as this type of LLC is very basic and not expensive to establish. Good luck.

@Joshua Lyon  I would personally do the following:

1.  Print out EVERY single email correspondence regarding this transaction, both received and sent, immediately so you have a hard copy.  

2.  Document all conversations you've had with all involved parties immediately.

3.  Print out all bank/wire related documents that are available.

4.  Contact a local attorney who specializes in this specific area to see what your rights are.

5.  Do not discuss this issue further in a public domain until the issue is fully resolved one way or another.  Everything written here is now "discoverable" and available for any parties involved.  

I am NOT saying you have a case or don't have a case, or that this will net you any revenue whatsoever.  I am simply stating what I would do if I were in your exact situation.  Good luck.  

1. You absolutely need an LLC in a partnership business in my opinion and personal experience. You need to be mindful of the articles as well, and tailor them to you and your business partner(s) - for example, what if your partner wants to sell some of his "shares" to a third party? Is that allowed? Think about all the "what ifs" that could go right or wrong, and figure out how you want the business legally structured. I would avoid any partnership that is not equal shares, because it can go sideways very quickly in that arrangement.

2. The bank will want to see you and your business partner(s) tax returns and personal financial statements. However, any and all "seed money" needs to be a capital contribution to your LLC. Keep ALL monetary items closely recorded, and absolutely separate - aka do not mix business and personal accounts whatsoever going forward once the LLC is set up. If you contribute money to the LLC, it must be done equally with your partners and recorded as capital contributions for tax reasons.

3.  We set up our own spreadsheets and analysis.  There are many others on this site who can answer that question much better than me, as I don't do nearly as much analytics as the full time investors here.

4. A word of caution - there is a big difference between a "friend" and a "business partner". Be aware there is a reasonable chance your friendship could end if things go wrong. If you are transparent and honest with each other from the day of LLC inception on ALL money matters, you have the best chance of success and preserved friendship. Good luck.

So I find this topic of interest, because I'm curious if this could be a significant advantage to keeping your real estate business in a completely separate LLC.

If you use your personal HELOC to make a capital contribution to your real estate LLC BEFORE you apply for a loan with your lender, I am unclear how they could claim it was a HELOC downpayment anymore, as legally you have made a capital contribution to your business, and your business has the right to do with the money as it pleases so to speak. As long as you book keep this correctly with your accountant, it really is no longer a HELOC contribution, because the money now belongs to the LLC. I am not a lawyer or CPA, but I am very familiar with LLCs and separate tax entities; I am not aware if there is a federal statue regarding how long the money must be in the LLC before it is recognized as the LLCs "own money" so to speak.

Good for you for starting your real estate investing at such a young age.  I'm impressed.  The last thing on my mind was buying real estate when I was in my early 20s. 

@Paul Evans - yes, but we only have single family homes;  I don't have any experience with multiplex properties, as this is a side business to my full time employment, so we are keeping it simple.  You are correct about Huntsville - the property value/rent/appreciation is very tightly correlated with zip code/location.  35801 and 35805 are right next to each other, yet the difference in properties is tremendous.  The market here is ridiculous right now compared to one year ago - cost per square foot is dramatically up.