All Forum Posts by: James Hamling

May just be me, and fact I am in #1 lawsuite state, but for me when it comes to the LLC vs Corp. questions and twists, I always look #1 at liability, and then at taxation savings.

I had a large company, organized as a c-corp, and yes it was a hassle, and yes taxes where hell on the surface, although i hired a good CPA who I could barely understand his strategies, I just followed them and saved. I had a lot too loose, so the absolute protection of the c-corp was great.

On the other side of the coin, my LLC's are super ez, and I like that. But I really dislike the ease a good attourney would have tearing into it, attaching other companies, and trying to connect as many "dominoes" as possible. Tax speaking, really once I just do as the CPA says (which I again can barely follow) it generally comes out similarly in the wash.

For me, I K.I.S.S. (Keep It Simple Stupid).

Best words in this is:
#1, Organize for what your doing, each calls for something different
#2 if your not an expert at an aspect, hire one. Or try the "free lunch Q&A", you would not believe how much great nearly free advice and answers I have gotten that way.

True, very true. Same as your point on different ways of doing things, very true.

I would like to say, my main point for investors is, there are major major discounting opertunaties out there, and I have never meet a sub-contractor ever who has had access to them, nor 90% of contractors. For subs being excluded, it is a licensing detail, because the manufacturers license licensed contractors as distributors (not easy usually), and I have never known a sub to be licensed.

The other side, is imports and similar unlicensed manufacturer direct relations. I have never seen a sub ever go thru the work to get this, nor 90% of contractors.

Countless times I see investors and others going to supply houses of big box stores fighting for maximum discount, but never from the actuall supply, where those people get it. Cut out ALL the middle people. I did it on my windows and it slashed my cost in half. I can price compete with the U.S. #1 window installer, and I have heard them claim to be #1 manufacturer but I think it is a marketing ploy.

I am no where near that big, but I get them from the manufacturer, directly, not a supply yard, the plant. I have saved tons rehabbing my homes. Cabinets, I found out who was making the lines you see in H.D. and Lowes over in China, and so I buy them from the correspondent in China. I can put in high end custom cabinets with ever add on for the cost of a lawn mower shed, it is sick the discounts.

That was my point, getting the best discounts at a supply yard is far from the best discount you could be getting. And the difference is reliably in the 50% range, sometimes more, possibly much more.

the second example is a flip right James?

Yes, the 2nd is a flip example. Lots left out of those numbers though, and really, there far from factuale, it was for an argument point on a true net net R.O.I. (return on investment) in rentals vs many others.

Far far far far too many new investors do there math without all the accurate data until it is too late. Usually it is costs of sale and associated holding costs. As well with rentals, maintenance re-investment, updates, vacency and so on. There are also bennefits many miss, different ways of structuring the monies in a flip to maxemize tax bennefits, and in rentals, taking advantage of multipule outlets for free upgrade and reinvestment funds, and on and on, as well as funds structuring for taxs.

Really, the math gets pretty deep.

But short story was, by using the power of long term financing in a rental (interest being a deduction) then a person is amplifying the capital they have to earn far more for the actual cash investment. Where in a flip for example, it is a large outflow of capital for a slightly larger amount of return, although percentage wise is much less.
10K return on 20K invested is a 50% annual return, so what if theres 80K financed, that is not your money invested. (for the points sake)
20K return on 100K invested is only a 20% R.O.I.. Now if you factor by time, and did it say 3 times in a year, you "could" say you have 60K return and 60% R.O.I., although issue is you have truly invested 300K for that 60K. AND assumed the risk factoring 3 times, where in the former it is a risk factoring once.

Thing is, I AM a flip investor, I have all the reason to argue to the opposite. I am currently completely retooling my operation BECAUSE the math - dos not - lie.
Rule #1, never invest emotionally
Rule #2, remember rule #1

[quote=Tenant problems are not just a PM problem, but also an INVESTING problem.

Property manager management, and tenant management are "subsets" of RE investing.

I just love it when property sellers (wholesalers, turnkey vendors...etc.) pass the buck on to PMs

I agree, yes, P.M. IS a sub-set in the big picture of a investment. In that aspect, so is the light bulbs. For anyone who reads my post, I believe they will get the point of what I wrote.
I imagine you yourself are a P.M., and I would like to say, no offense meant at all, I know many great P.M.s, I have employed many many stars.
Best shortest way to clear the issue, is a book called "the one minute manager". Any and all should read it 10 times, greatest writings on large logistic managment.

And to address any question in that last quoted phrase, I am not a wholesaler, I am a private investor, and a logistics master. Before going FT private, I was a executive field operations supervisor for one of the single largest commercial residential rehabbers and builders in the us, the largest in my region. On any given day I was in direct oversight of operating projects in a area the size of Texas, many of them residential complexs with anywhere from 20-400 units in process per site. I know logistics, and the immense importance of having competent people in there positions, competently carrying out there missions without hand holding.
I was one man alone, one truck, one desk, one truck, if I had to be hands on on each of my sites and units, no way, absolute impossability. I oversaw 32million in annual projects.
All done because I held my sight foreman accountable for being proficent in there mission to carry out the sight goal, and that made my job to simply empower them, and review.
I had many P.M.s that ran 800 units with more ease then the 1 you spoke of, and believe me, the owners never would entertain the idea of spending 1 second on sight personally resolving a matter with a tennant or unit, that is a P.M.'s job, if not, then what are they employed for.
When I hire a P.M., it is clear, they are to P.M. to certain expectation, I am NOT paying them so I can deal with tennants and units, if so, there gone, period. And guess what, I never have had to deal with a single issue, ever. Not one beyond my choosing, not even the tax filing preperations for my quarterly and annual fillings.

Jarcelyn Dorsey
I am not a wholesaler, so I have no experience looking for cash buyers, but I thought of something you could do, because I know myself.
As a cash buyer, I don't use just any old closing company. I use a investor friendly closing co., and there are not many who are skilled at working with investor structured closings, not good ones. And I also use a real estate attourney to execute my redemptions.
I imagine you could reverse engineer the process, think like a cash buyer, make calls to title companies as if you are a cash buyer to qualify them. In that process a good one will say "oh yeah, we process for many cash buyers". You get that, call back a day or two later, and network to either get there info or forward your info. And throw a bone, promise to process all sales thru em or something.
For me, other then the realtor blood hound, I'd have to say that would be the shortest route.
Hope it helps

i appolagise if I mislead making rentals sound risk free. to the point, NOTHING is risk free, NOTHING. Driving to the grocery store has risk, breathing has risk, LIVING IS RISKY.

Rentals have risk. In my opinion and analysis, operated well, rentals have the greatest returns, with the least work, and most "outs", and if bought and managed right, least risk.

I am shocked how many people are quick to argue my point, but inject little to no counter point, or data.

Yes rentals have a element of risk.

Myself, personally, I am rental focused now. I still do flips, and was primarily a flip investor. Todays market, I am not earning the R.O.I. I can obtaine with rentals.

With rentals, I can use financing to suppliment my cash, so where if i hard money lent 100K I'd be in 1 property, where for that same money I may be cash flowing in 4 or 5 rentals. PLUS I have control.

If I have 20K in a rental, and it cash flows 10K, what is my annual R.O.I.?

If I have 100K in a property and net 20K pre tax in 3mnths what is my R.O.I.?

Now factor in taxes, and watch those R.O.I. vastly change.

I funnel all my flip returns into rentals, because of taxes.

Re: Phillip Gainey andd your nightmare P.M. story, I am very sorry to hear your troubles. Although I need to pint out, your issues are pretty clear cut as a P.M. issue, not an investment issue.
If doing a flip, with a crappy contractor like that P.M., who over charges, under performs, you'd loose money there.
It is not an investment issue as it is a logistics problem. Fire that crappy P.M. stat, get yourself a hero not a zero. With a P.M. like that I could give you a home for $100.00 and it would still loose money.

Re: Chris Clothier and hand off as a hard money investor;

Being a hard money lender is far from hands off, or risk free. 1) you have lots of cash betting on a other persons performance, which you have little to no control over
2) you have to really do your due dilligence, what if it is not a clear title? Lawsuites? the investor burns the property down on accident?
3) It requires a lot of cash up front, out of pocket.

And someone mentioned stocks, Lol, do I really need 2go there? I was a guy in stocks, WAS. I have rode 3 bust cycles, and lost far far more in stocks and bonds then anywhere else in my life ever. PLUS a 5% return is NOT a 5% return, what about inflation? A inflation rate of 4% makes a 5% return a 1% return. No minus trade fees, servicing fees, TAXES! My R.E. is a deduction.

I will defer to my original advice: #1, evaluate your resources, knowledge, risk tollerence, and time. #2 research your resources applications #3 move forward from there.

And yes, rentals/ holding IS a slow wealth build program, as opposed to what? "get rich quick"?. I don't watch late night television anymore, I am too busy getting wealthy slowly, steadily, reliably.

In client comparison, my largest client holds just over 4,700 units, all rental. I WISH I had his units, trust me, they don't loose money. Can you name me one, just one major property rental company loosing money?
Again, to blanket label rentals as poor or bad investments is just as foolish as the countless people who tell me it is a bad R.E. market and theres no money in R.E.I., it is an misinformed, bias, remark, with countless proof to the contrary.

But hey, by all means, please feel free to stay out of the market. I would LOVE to be the sole provider of the millions upon million of renters. OMG, I would have to build a vault like Scrooge McDuck and swim in my millions, no BILLIONS, lol.

Come on people, theres oppertunity left and right, changing state 2 state, market 2 market. All of us active in it know this. There is no 1 size fits all.

I somewhat agree, there IS risk. Can you tell me where in R.E.I. there is not risk?
Flips: the market can turn, you have lots of money tied into the property, after sale you can get sued and forced to put more work into it

Buying REO, you can get sued by the previous owner that they were victum of predatory lending, and they are fighting to retain the property post foreclosure. OR it looks good, and once into it, surprise surprise, there is massive mold inside some walls that inspection didn't show and banks sell "as-is" with no way to go back.

All aspects hold risk, it is a question of how much risk and what type. I respect that your personal feelings are rentals are high risk. I could fill a Raddison with investors who will argue to the ends of the earth that rentals are the safest and they would never touch anything else.

I am indifferent. I evaluate each situation on it's individual merits. I will say, generally speaking, rentals are the strongest right now.
1) lending for home purchase has tightened greatly, greater difficulty qualifying to purchase a home = more renters.
2) market average pricing is at a near dead = price with rental rates. meaning far easier to cash flow WITH financing
3) many markets are seeing the smallest vacency rate in decades. In my market, vacency rate is <3%, market average has been 10%. That means huge demand, and I can be ultra selective.
4) A rental is viewed and taxed as a business, ie. a person can deduct all those managment costs, depritiation, and so on, creating non-taxed profits, as well as mortgage interest being tax deductable, so numerious tax advantages, where flips have capital gains
5) With a full managment company, you do NOTHING, they do 100%, from showings, lease's, too evictions, cleanups, and so on. My m,anagment co. gives eviction insurance, tennant warrenty. You are incorrect, a investor does NOT need to be involved a drop more then desired.
6) Rents can be raised, especially in a high demand market
7) Local, State and Fed agencies have programs to provide funds FOR rental investors, I have never found 1 cent for any other R.E>I. system.

I just want to point out, rentals do have many up sides. To root out rentals a generically being bad, is like saying the stock market is great because Microsoft stock went up.

Some markets and areas are NOT good rental areas, as with all R.E.I. one must KNOW the market area.

For my money, I am pressing my holding booking bigger and bigger. And I personally never deal with prop. managment issues, EVER. It is not effective use of my time. And myself, I have only profited. We had an add to rent a 2bd 1bth unit recently, we recieved 100 e-mails in 24 hrs, it was insane. I could require blood testing and physicals in my rental ap's and I think i would still be flooded, lol.

I am able to cherry pick who i want to rent to.

I respect your opinion that you don't like rentals. My numbers, and many many other investors, aside from emotion state holding is a home run right now.

EXACTLY and SUPERB points!
All who are newer save that whole post, print it out, frame it and put it on your desk because without due diligence C.I.A. style a good investment can turn into complete financial ruin in a snap!

Bank accounts are safe and passive, and 1.1%.

Great point on C.Y.A.! And if it looks good but the gut is giving weird signals, DIG DEEPER!

I just had one too good to be true. Hedge fund, selling a 500K property for 120K. Only needed updates. They required all cash sell, and fast closing, and they said that was why the steep discount because most don't truly have those capabilaties.
All my searching was clean, clear title, property was good, it was just too good to be true, it made no sense.
So, on a hunch, I called the city and spoke to the Mayor (was a rural small high end town).
Turns out it was a split lot, where the property was fine, BUT, the prev. owner still owned the property next to the home which had the driveway running thru it, and was refusing access, to the extent of building a steel gate. And the land on each side to cut a new drive, was registered wild life preserve and wet land water shed, and would require major polatics.
Dig deep. To make that work, I would have had to by other land, convert it to water shed land per Gov. regs, just a huge mess. Would have lost a lot of money.

There is 1 passive investment possability, if your willing to waite a few weeks. Turn key rental investments

My partners and I are opening a new division where we use our banking interests to gain properties, fully rehab them, install a top prop. managment co. we have ties with, install a renter, and we resell them as a full turn key rental investment.
All you (the investor buyer) needs to do, is 1)wake up and breath 2)watch your bank account recieve rent payments 3)write and pay your bills like tax's and payments. thats it. A literal hand feed profiting investment, with all the work done.
We are also working a deal to offer seller financing, so you would need about 10% purchase price out of pocket, which is offset by the deposits you recieve the day you purchase (1st mnth, last mnth, security)

Why are we making this offering? Because EVERYONE wins. We make money on rehab, the investor makes money on renting, managment company makes money on managing. The only looser is the bank, who sells to us at a huge discount....... but....... we ALL paid them already via bail out bucks so...... we all win.

This is truly the ONLY low risk, low work, low investment, easy, verefied, cash producing investment in R.E.I. I know of. If anyone knows difernt, please correct me. Seriously, I have looked and don't know of any legit person doing this.

And yes, i know of other "turn key" systems, everyone I have checked has been a scam of some sort. Requires escrow to bid, we don't, has fees, we don't, has cash flow based upon projections, we have it producing before sale, and so on. We just build em, rent em, have em cash flow producing and 100% hands off, and sell em.
We look at each other every day asking "how could we be the only ones?" but I am reminded, someone has always been first at anything, maybe were just the first at this here.

And yes, we hold some. I could hold all and be greedy, but I figure I can split it 50/50, hold and be greedy on half, and share the wealth on half and earn. I am an open book guy, I make profits on my rehab. If you look into investment JV's like this, thats what you want, an open book honest guy who says "hey, you will make money and so do I, I make this much here doing XYZ".
People who hide things have things to hide, and I have yet to have something good and wonderful hidden from me.