All Forum Posts by: Oren K.

For the Cleveland market I would recommend Midwest. You can PM me for more detail.

Oren

Eric,

As a landlord the bottom line is return on investment. You would not upgrade to marble in the kitchen if the rents did not justify it and the increased rents provided a reasonable return.

At the end of the day, I would suggest you look at what you would be out of pocket after all rebates / incentives and what the benefit (cost savings) are. As most systems I have seen advertised have a payback period of at least 10 years (if not 15 years or 20 years), most landlords are not willing to forecast out that far. It just creates another possible CAPEX responsibility (in my experience nothing is completely passive forever) and may not increase the value of the property (a bad combination).

Other considerations are if it helps justify a rent increases, attract a different desirable tenant base and as mentioned above, if financed and registered on title, possible selling issues.

If you plan on holding forever (or at least well past the breakeven point) perhaps something to consider (e.g. personal residence) but until they bring in the breakeven point inside of most holding times (3 - 7 years), a long shot in terms of actually seeing a return.

Oren

Not fun an my sympathies.

A couple of suggestions;

Check RECENT references - a reputation is difficult to build and easy to destroy.

Separate materials from labor and pay / deliver material to site yourself. Note - now if material is not there on time, you are the one at fault.

Pay minimal upfront fee and schedule payments on completion of various tasks / stages.

Hold back final payment (10%?) until every last nit picky item from the final inspection is DONE.

Mike,

Depends on what you are trying to achieve and what your goals are.

An 80% HEL grosses you ~560K. You have to pay off the 100K outstanding (leaving you with 460) and close with the 200K you have to put down. You have ~60K extra that either becomes an emergency fund or toy fund :)

With a HELOC, it is unlikely that you will get anywhere near that LTV. Probably get 50% LTV or 350K of which you will probably have to use 100K to pay the outstanding HEL (possibly not) leaving you with 250K + your 200K down; ~150k SHORT of the 600K purchase price. If you don't have to pay off the HEL, you are still 50K short but closer.

Does not look like the HELOC will work unless you have another source for the ~150K (50K) or my assumptions are incorrect. Both leave the new property unencumbered. An HELOC clearly would have more flexibility; interest only as needed.

Figure out an answer to the first line and the rest should fall in to place.

Oren

Weina,

Your SSN and EIN are two separate things and I would highly recommend that you keep them that way.

Yes - Get an EIN for the LLC and use that in all communications with the IRS, Contractors, Tenants, Service Providers, etc.

NO - Do NOT give your SSN to anyone that does not have 'right' to it (e.g. Bank when opening account). When you do provide it (e.g. applying for loan in your own name), make sure they are a reputable company.

Unfortunately identity theft is a real thing and can really screw up your life for year and years once it happens.

Oren

Maybelle,

What does a 'certificate of abandonment' mean. Is it just that that the tank is disconnected or that the the tank was pumped out and filled with some inert material (e.g. Sand). The former may still pose an environmental hazard depending if there is any oil left in it. Also, when it eventually does rust out, there is a void and the land around it could settle. The latter is 'should' mean that the authorized agency is satisfied that everything that needs to be done is done and that there is no risk.

Also, depending on how much you are making and how much it will cost to remove it, it may simply be worth doing it to close the deal.

Good luck,

Oren

As is usually the case; Quality counts.

A triple net lease from a major well preforming brand is like clipping a coupon. A strip mall with non-branded new entrepreneurs (most will fail in a year or two) will see turnover. A suburban strip mall that provides needed local services (e.g. dry cleaner, nail salon, variety store, coffee shop) is going to be much more stable then a declining neighborhood which can only attract payday loan & burner phone stores (how many of these do you need per block!).

As with any branch of RE, you need to educate yourself, get 'good' advice, and have deep enough pockets to ride out early mistakes as you learn.

@Jason Johnson aside from the current owner having to file (it's their name currently on title) as @Ryan Arth points out, you may also face a challenge when your name goes on title as your contract will likely be a few years old (2, 3, more?). The BOR could then argue that the market value has changed since the contract was signed.

You should speak to a lawyer that does this regarding your options and it should not cost you anything just for a chant. There are several around Cleveland who only do this like Sleggs, Danzinger & Gill. I've used them a couple of times (successfully).

Good luck,

Oren

Dennis,

YES you still have to file with the IRS each year. If you elect to have the LLC treated as a company, you need both a corporate return and personal return. If you rely on the pass-through aspect of the LLC then you just need the personal return.

Also make sure to speak to who ever does your Canadian taxes as there are schedules you need to now file.

Not sure about W-9's and 1099's. If the PM is a licensed agent, then they just charge the property their fee and as far as I know, no further forms are needed. A non-agent PM may be a different story and I don't know enough to even guess.

Oren

What the other posters have said it all true and I agree for the most part. Having said that, I have depended on it less and less. The costs of certain operating expenses are relatively fixed regardless of what the unit rents are; Heating, Electrical, RE Taxes, Trash Pickup, etc.

It doesn't matter if you are charging $300 per unit or $3,000 per unit, the electrical for the common area will be the same, the cost of heating the building (just common area or also in unit) will be the same, the number of lifts of the dumpster will be the same. RE Taxes might be appeal-able but that is indirectly tied to rent and more to NOI / CAP rates / etc.

Similarly, certain CAPEX is independent of rents (e.g. Roof, Heating System) but closely tied to property size; a flat 5,000 sq ft roof on SFR or on 3 (or 10) story multi-family should be about the same

As others have said, a good first pass test but not much more.

Oren