All Forum Posts by: Leon D.
Leon D. has started 0 posts and replied 182 times.
Post: need some accounting advise!

- Investor
- Chicago, IL
- Posts 190
- Votes 85
Allow me to be more clear. An LLC can have employees, but @Brian Roberts can't be an owner AND employee. The LLC could be owned by his wife, and he'd be the employee (maybe, but I doubt it'd pass a sniff test), but all the LLC income would show up on her return (or theirs if filing jointly), so effectively it's close to the same thing as not being an employee.
If he's the sole member of the LLC, he can't also pay himself a salary, since the LLC is disregarded in his case. If the LLC has multiple members, then he puts himself at the mercy of the others members, that they don't having a falling out and mess things up for him.
Agreed though, lenders almost always prefer a small W-2 to a large 1099. It's a hateful, upside down world.
Post: Landlord not renewing lease

- Investor
- Chicago, IL
- Posts 190
- Votes 85
Why not just file the complaint and let the Commonwealth of Virginia figure it out? Perhaps the landlord is using the noise complaints as an excuse to kick out an ethnic minorty. It wouldn't be the first time that had ever happened.
File the complaint. You can't get what you don't ask for.
Post: Landlord not renewing lease

- Investor
- Chicago, IL
- Posts 190
- Votes 85
Your only recourse is to file a complaint with Virginia's Housing Development Authority and/or Fair Housing Office.
Seriously, just google "Virginia housing discrimination" and get your answer. Good luck, hope things work out for you.
Post: need some accounting advise!

- Investor
- Chicago, IL
- Posts 190
- Votes 85
Post: What would BP do? - What to do with Primary Residence

- Investor
- Chicago, IL
- Posts 190
- Votes 85
#3 is out. Never count on the equity.
#4 as you said, is out.
My answer to 1, 2, and 5: dump the condo. Use the HOA savings to either increase the size/value of your new SFR/MFR primary residence (since your mortgage payments can be higher by that HOA amount), or use the money you save by not paying an HOA to buy/invest in real estate.
Post: Halfway house/transitional living facilities

- Investor
- Chicago, IL
- Posts 190
- Votes 85
"If the tenant releases." Bingo.
You need to evaluate this just like any NNN. Never count on the tenant exercising lease options. Assume no residual value from the property (as you said) should the tenant leave at the end of the primary lease term. Will you have made enough from the lease to repay your equity, pay off the loan, and carry the vacancy until you dispose of it in some way?
Keep the analysis simple. Don't overthink it with regards to zoning, funding, or regulations.
Post: Help ! Need strategy for traditional mortgage

- Investor
- Chicago, IL
- Posts 190
- Votes 85
1) How do you know the tenant will actually buy it from you? Because they said they would? That's not good enough.
2) Why can't the tenant buy it for $100k? If they can't afford $100k from the current owner, they're not going to be able to afford $140k from you.
3) You should have the appraisal done now, before anyone really commits to anything. Who says the retail value is $140k?
4) I don't follow your reasoning: are you buying it cash for $100k like you said in the first paragraph, or for $140k like you said in the second? If it's $140k mortgage with $40k back, that's mortgage fraud. If the deal is for $140k all cash (and you get $40k right back), you're probably OK. but any half-wit loan officer the tenant uses will see right through what you did, which is to artificially bump up the market history of the property to influence the appraisal and mortgage size the tenant is applying for.
Post: Re-appraisal downsides??

- Investor
- Chicago, IL
- Posts 190
- Votes 85
I can't speak for any peculiarities in Canadian law, but I would say that as a rule, municipalities do their own appraisals separate from banks (which is why you generally see home values for property-tax purposes being lower than what a home would sell for).
In the States, it's very common for a home that's had a single owner for 30 years to be "property-tax appraised" at a very low number, and then get a huge bump up when the place sells for a big number and the price gets recorded by the taxing authority. Since this would be a bank/lender appraisal, I don't see how a high(er) appraisal would affect your taxes, unless Canadian lenders are required to report the results to the county, city, province, etc.
Sounds like she gets a 1099? Banks hate 1099'd loan applicants. By definition, no matter how much they make, the employment is a sort of contractor/temporary thing, and the bank will use quotes around the word contract just like you did. My experience has been that making $40k as a W-2 employee is a lot better than making an annualized $80k with a 1099.
Post: Business Partnerships for Single Family Homes.

- Investor
- Chicago, IL
- Posts 190
- Votes 85
"He is fair, honest, hardworking, smart, and a good communicator." Famous last words. You're describing him now, as a coworker/colleague. No guarantee that's how he'll be as a partner.
How to start, to protect both of you:
1) Do not buy the property in your names. Do not share title. The partnership's entity (LLC, corporation, etc) should have title to the property, not you as individuals. In turn, each of you would have an undivided share interest in the entity. You will want to put a gun to your head, or your partner's as the case may be, if you share title and something goes wrong with your relationship.
This is a lot like dating and marriage. Not everyone you date, you would want to marry. Sometimes marriage is a mistake. Sometimes it's great for a month, a year, forty years, and then goes bad. Don't be romantic about this, it's business.
2) Sit down for a few real, heart-to-heart talks about what you each wants out of this, and what your expectations and goals are. From each other, from the business. You should each write it all down, make sure there's no misunderstanding between you both.
3) Each of must hire a separate attorney. Don't wait on this. Your atty needs to look out for your best interest, and his atty likewise; there will otherwise be a conflict of interest if you both you the same person. You draft the operating agreement that describes things as you understand them, and then hand it over for your partner and his counsel to review. There will undoubtedly be changes. A few of the things to consider, since there is no such thing as too much detail:
a) Make sure management roles/authority are well documented. To that end, a 50-50 split is always a bad idea.
b) Exit plans, should one of you want to leave/dissolve things, or one of you dies or is otherwise incapacitated.
c) The ability of a partner to sell his interest in whole or part to someone else (maybe a complete stranger).
d) Dispute resolution. Fights will happen, you're fooling yourself if you think it won't happen to you.
e) Form of the "partnership": LLC, LLP, corporation. You may each have reasons for wanting something different from the other.
Good luck.