All Forum Posts by: Mike Dymski

I wish I knew more about historic cash-on-cash returns for C class apartments. I know the market is hot right now and cap rates are compressed but with low interest rates, it may or may not still be a good time to invest. I have a 25 unit apartment, 2 duplexes and a single family home. I am blessed to own the duplexes and single family home free and clear and debating about borrowing on them to fund another apartment. There are 20 units for sale in my existing complex where I can get approximately 10% cap, 21% cash-on-cash and 27% NOI less interest (I call this IRR). That seems good regardless of region or market conditions. Let me know if anyone has historic statistics or experience with C class cash-on-cash returns in the southeast to provide a benchmark. I am switching from flipping homes to holding multifamily...need something more passive; so, I am getting up to speed on this space in the market. I'd feel better about buying in a hot market if I had some perspective on cash-on-cash expectations in a normal market. My guess is that I am looking at properties and in markets that are not that susceptible to large swings, good or bad, and the returns above illustrate that statement.

Thanks. The intent of getting a commercial policy would be to remove my personal name to improve the protection of my personal assets that are not in the LLC. That's the advice I am getting from a new potential agent. The less stuff (bank accounts, loan, insurance policy, management, etc.) that is in your name, the better your personal assets are protected.

I am considering transferring 2 duplexes and a home into an LLC. My insurance agent said we would add the LLC to the existing landlord policies. I had another agent say that I will not want my name on the policy and he would put the property/LLC in a commercial policy. A commercial policy sounds more logical in preserving the corporate veil. What is best practice? Thanks in advance for the help. I have a 25 unit apartment complex in a separate LLC with a commercial policy, if that matters.

Thanks for your feedback...hopefully we will have more. It's great that we have replies from both attorneys and insurance agents and the attorney is in favor of LLC and insurance agents can get comfortable with just using a personal umbrella. I think that gets to the heart of why there is ambiguity and debate on this subject. I spoke with my company's general counsel after my post and he mentioned two benefits of the LLC that resonated best with me (1) insurance companies can find reasons to deny claims (2) the catastrophic claim we mentioned above. He almost seemed to find more protection in an LLC than an insurance policy. Maybe insurance agent's and attorney's perspectives are driven by what is in their wheelhouse. Another option is to put financing on the duplexes/home while it is in my personal name and then move it to an LLC afterwards. That leaves a chink in the LLC armor but is more protection than without the LLC (and may create a due on sale for the mortgage, that many investors ignore)...many people do this with their primary residence and deed the home to their non-working spouse. Anyway, I will be on the lookout for additional replies.

New to the community; so, thanks in advance for the help. Been reading the forum for years. I have a 25 unit apartment complex in its own LLC and two duplexes and a single family home in my personal name. I have read numerous threads on the forum and spoken with an attorney and two insurance agents and am still having a tough time determining how to best structure my properties among LLC and personal ownership (and the related umbrella coverages). All the professionals (and many investors) say use the LLC but struggle to answer my question on why personal ownership with a large personal umbrella is not just as good. If I would have put the apartment in my personal name, I would only need a personal umbrella and not need both a personal and commercial umbrella. If I move the duplexes and single family home into an LLC, then I may need a personal umbrella (for my non-rental stuff) and two commercial umbrellas. On top of that, I am fortunate to own the duplexes and single family home free and clear and may want to pull out that equity in the future to purchase other properties and the LLC will eliminate favorable residential financing. I am not concerned with anonymity, I use a 3rd party management company, and I am not aware of any tax implications of the LLC as they will be disregarded entities. Please help me understand why there is a preponderance of evidence that I should put the duplexes and single family home into an LLC and why the personal umbrella is not the better option. The only scenario I can think of is a catastrophic lawsuit above the large personal umbrella.