All Forum Posts by: Michael Seeker

@Terrence Bayly - My suggestion for LLC vs. personal in general hinges on financing:

If you plan to grow over 10 properties AND use financing, go with LLC. If you plan to max out at 10 or fewer or buy all cash then either is fine.

Owning 10+ properties puts you firmly into the investor camp and you'll need to work with commercial lenders if financing. They strongly prefer LLC ownership and many require it.

Under 10 units and you can go the conventional residential financing route which (aside from some questionable title transfer approaches) will require you to own the property in your personal name.

If LLC ownership subjects you to rent control, then I'd lean towards owning in your personal name.

There is a big BUT to this which was not a consideration just several weeks ago. If you own in an LLC, you now get favorable tax treatment that you do not get owning in your personal name. You should look into the tax differential and potential downside from rent control and weigh the two to see what makes the most financial sense.

From a protection standpoint, in either case you want to make sure you've got sufficient insurance coverage both for the properties and for liability.

I think the point Jeshua is making is that if you're getting 50+ responses on the first day or two then you could have easily asked for a higher rent.  Maybe the answer is that "'market rent' is higher when advertising on FB Marketplace"...but if you had that much interest that quickly, it makes me think you could have easily asked for $650 and still gotten a solid tenant.

What is the source for the rent ranges you provided?

Do you mind sharing where the unit is located and what the rent is on it?

@James G. - If the property is a good investment and terms are reasonable, then the 5 year balloon should not be a hindrance to you.  I've been investing for years and all of my investment loans except for one are on 5 year balloons or shorter.  If you can demonstrate positive cashflow and a solid payment history, then you shouldn't have any problem finding a lender to do a refinance for you in a few years.

As for liens, a federal tax lien is related to non-payment of federal income taxes.  Doesn't sound like that has anything to do with the property you're buying.  The seller would hold a mortgage on the property which would be removed when he is payed off.  That occurs at the time of a refinancing and is done all the time, nothing complicated about it.

With regards to timing, there are always good deals to be found in high markets and bad deals to be found in low markets.  If you're buying with the hope of appreciation, then now is probably not the best time to do so.  If you're buying on strong cashflow, then the timing of the purchase with respect to the overall market gyrations should not matter.

@Jordan Moorhead - you can find out who the owner of the property is by searching on the address at the PVA website: https://jeffersonpva.ky.gov/

If the owner is an LLC, you can also look up who is involved with the LLC on the KY SOS website: https://app.sos.ky.gov/ftsearch/

Occasionally this will only get you to a registered agent or an attorney who filed LLC paperwork. It may be harder to dig past that level, but I've found that it's pretty easy to find the owner of most properties in Louisville using these two tools.

@Jason Carter - you've got yourself in quite a bind here.  You've learned the hard way that permits need to be pulled up front for major work.  Now that the appropriate inspectors have put stop work orders up, you don't really have much of an option outside of compliance.  Your best bet is to go in and talk to the respective inspectors and figure out what is the most cost effective way to come into compliance.

Selling the home to a prospective buyer without disclosing the known issues is a big no-no.  You're asking for a lawsuit IF somehow the seller or closing attorney doesn't find out about the stop work orders before closing.

It's a bad spot to be in, but there is no sense in digging yourself deeper in the hole by trying to cover up your mistakes and screw somebody else over

@Daniel Spaizman - rates and terms are different, but not prohibitively so.

Residential
Pros: lower interest rate (25-100 basis points), 30 year term and amortization
Cons: No LLC, strict underwriting guidelines

Commercial
Pros: has flexibility on terms and underwriting, typically requires LLC
Cons: normal structure is 5 year term and 20 year amortization, interest rate slightly higher

These are generalities and depending on your area and banking connections, you may have much better or much worse luck with commercial loans.

This is not accurate.  I have commercial loans on 2-4 unit properties with numerous lenders in multiple states.  I have not explored commercial loans on SFRs which I believe are much less common, but they are absolutely applicable and very useful in the 2-4 unit space.

@Daniel Spaizman - I highly recommend Commercial Mortgages 101 by Reinhard.  I had spent several years toiling away within the confines of Freddie/Fannie loans until I picked that book up.

A great way to structure what you're wanting to do is through an LLC. Set up an LLC, make each of the contributors partners in the LLC and outline the partnership structure within the operating agreement. I'd suggest having a lawyer draft or review this before everybody signs it and writes their checks. The next thing to do is call around to commercial lenders and see who the big players are in the area you're looking to invest. Talk to them about what you're trying to do and how it could fit within their underwriting structure. You will not find terms as good as a residential mortgage, but you will also find a lot less red tape.

Hope this helps!

I would generally agree with the statement that housing prices are growing faster than incomes, but that isn't sufficient to say we're in a bubble. You also need to consider job growth/stagnation, household formations, LTV's, and a host of other factors which point to us being in an upswing, but not necessarily bubble territory.

I just returned from a weekend in Nashville with some friends.  We stayed in an "okay" AirBnB, so I decided to look at what houses were going for in the area - $400-$500K.  The house we stayed at might sell for around $200-250K or less in a comparable part of Louisville.

If you travel to many other comparable major metros, you'll see that you get a lot of bang for your buck in Louisville.