All Forum Posts by: Wesley W.

I was listening to what I consider a reputable finance podcast this week, and they were saying that there were already some ways for third parties to "end around" and retrieve that information. One need only look at some of the recent news stories in the last couple of years to see that abuse of sensitive data and personal information is rife, including inside the government. Needless to say, anytime I am providing yet another government agency with such information, it does not instill me with much comfort that they will excerise the appropriate stewardship of that data. To your point, if the DOS already has that information, why am I being asked to hand it over again?

You can ask the seller to deliver the property vacant, but almost no one will agree to that these days.  Instead you can offer a lower purchase price, articulating the business risk you are taking on based on the dynamics.

My sense is this is a tired landlord situation, so any way you can make the deal more "clean" (e.g. cash offer, no contingencies) might increase your chances.  Also, if your agent is any good, have them probe the seller's agent to see what their pain points are.  If you know what the seller's "problem" is, you can craft an offer with a solution, thus making it more attractive.

Maybe you can explain to them that your LLC is your management entity, and it exposes you to personal liability if the LLC is named in a lawsuit?

I would tread lightly with the lender, as with this climate of higher lending rates, they just might bite on a "due on sale clause" to get a better return on their money.

Alternately, you can transfer ownership back into your personal name, and then get a commercial umbrella policy.

With this new FINCen reporting rule that just went into effect, I wonder aloud how corporate veils might now be more easily pierced, thus mitigating the advantage of the entity?

Good Luck!

They are probably valuing the property at market rents.  To that, I would retort, "well, stabilize the property at market rents, then give me a call."

You will have your work cut out for you with the inherited tenants at below market and a pittance of SD.  That tells me a lot about the tenant screening and current management style.  I would factor in 2 evictions to be conservative in your numbers, as well as the associated holding costs during such.  Even odds they will just stop paying once ownership changes hands and you inform them of the repositioning.  I would not try very hard to keep them; the writing is on the wall.

Your rehab budget is always going to be more than you project.  Until you start digging into the update, you really don't know what more needs to be done.

Make sure you factor in an increase in taxes based on the purchase price.  It could be significant, based on your jurisduction.  Where is the property located?  

Good Luck!

For your own deal analysis purposes, I would count her rent payments, if that's what you're asking.  In terms of accounting, her repayment of acquisition costs probably are not considered income, because they were paid by you at closing and you are just settling up between the owners of the property (I assume she will be on the note.).  I'm not a CPA, but from my understanding I think you can deduct half the expenses and declare half the income of the property (assuming units are similar in square footage), since only half of it is in service as a business venture.  If her rent is substantially lower than market, I think that muddies the water a bit.  What is your goal?  To try and mitigate the tax liability of the property?

I wish they would.  How do I get off Mr. Toad's ride?

 Agree completely.  SF assets are a completely different animal.

To answer your question, I would personally assist my own family members rather than foisting that responsibility on others.  "Grandma" would be my duty, not some small busines owner.

As Margaret Thatcher said, "the only problem with socialism is you eventually run out of other people's money."  This troll is perfectly willing to use his righteous indignation to reorganize the balance sheet of small business owners trying to maintain a reasonable standard of living.  As others have pointed out, he is silent on the repeated suggestion of helping to finance the tenant in this scenario using his own household's money.  

Uniquely, this "greed" narrative only occurs in our industry due to some inexplicable form of cognative dissonance.  I wonder how many emails Daniel has sent to the corner gas station, advocating for a "sliding scale" on fuel prices, or to the neighborhood supermarket to stagnate food prices from when they were first a customer?  Has he petitioned for lower shipping rates for them?  How about Uber fees?  Restauarant prices?  Where's outrage and ire there?

Every dollar of "profit" in our industry is a property owner's INCOME.  People touting this "greed" fable usually have a secure government W2 job that is financed through our tax dollars.   Those tax dollars are paid when the small business's revenue exceeds their expenses.  "Profit" pays those salaries. 

 What @Al Pat said.

Also, if your lender is giving you pushback about a MTM lease, I would educate them on its practicality versus a term lease, which is honestly just a false sense of security.  If your term tenant flakes out 3 months into your year lease and you find yourself in front of a judge seeking a money judgement for the balance of the term, he will tell you to put on your big boy pants, go out and find another tenant and to stop clogging up his court docket.  (At least that's would happen in my neck of the woods.)  This is called "duty to mitigate" and it exists in most markets these days from my understanding.  In reality, a term lease only obligates the landlord, not the tenant.  I have an average of about a 3 year stay from MTM tenants in my 1 and 2 bedroom C+/B- class multi-family buildings.  I'll bet that is very similar occupancy to those with term leases in similar RE assets.  You need to explain to your lender that if someone needs to leave the unit, they are going to break the lease anyways.  The MTM contract gives YOU flexibility to part ways if it's not working out, like in cases where you have a bad apple that is driving all the other good tenants out.  Your goals and the lender's are aligned.  You are trying to operate a profitable business, and entrenched bad tenants shielded by a lease term are bad for business.  It's much harder to evict someone in a term lease for violations apart from non-payment or holdover, but these folks can be just as bad for business.  Again, educate the lender on the world beyond the balance sheet.  I've written about this extensively on the forums here, but that's the short version of why I find MTM works for me in my extremely tenant-friendly market.

This is reason #42 I only offer MTM leases.  And if I did ever offer a term lease, I would not offer it to an inherited tenant until my property was stabilized/repositioned and I had a long track record of cooperation and compliance from them.  At the risk of painting with a broad brush, inherited tenants almost never work out after the building changes hands.  Every single one of my inherited tenants either left or was asked to leave after a relatively short period of time.  The longest stayed for three years (as I updated the other units), and I would be more proactive next time as that relationship was strained snd management intensive the entire time.