All Forum Posts by: Paul G.

@Account Closed you throw a lot of shade without actually saying anything.  Of course there is going to be pushback on your response.  You didn't actually say anything besides saying that everyone else is wrong.

Why is owning a PUP a bad thing? How would it be better than owning an LLC. I'll show you one quick example that proves that PUP is better than LLC in a standard case.

Take for instance you have a 500K property completely paid off. Liability insurance of 300K on the property and it's in an LLC.

Someone trips and falls and sues the "owner" for 1M. 300K gets paid out by liability insurance. and now the LLC is still on the hook for 700K. There goes your 500K property. There is still 200K left that the person suing will attempt to come after as well. Lawyers, who mind you are very good about piercing the veil, will find a way to do it to make you personally liable. Unless you can prove that your LLC was perfectly run, and after the transfer 0 funds were even comingled, they'll get their 200K from you.

Net result: Asset is gone, you may (or may not) be on the hook for an additional 200K.

Now.  Say the same thing happens, but you have a 300K liability insurance and 1M PUP but the property is under your name.  300K out of the liability insurance, and the remainder 700K out of the PUP.  You still keep your asset and you pay 0.

Net result: Zero change besides your insurance premiums going up.

Sorry, I'll take a PUP over an LLC any day of the week. You also forget to mention that PUP covers for more than just liability. It covers extra for your auto, libel, slander, primary residence, etc. Quoting two books isn't going to change my mind on that.

The one disadvantage of a PUP is you become more likely to be sued, since the lawyer will see that it can be worth suing because there is money to be had through your policy.  Whereas if you didn't have the policy and they realized that you'd probably just default they would recommend not suing because no one would get paid.  I'll still take my chances with a policy though.

Now, once you get into mutli-million dollar apartment properties, that can potentially be another story.  But again, you are assuming that they will have no way to tie that back to you.

Why do you want to put your rental into your LLC?

You can Quit Claim it over, but you have a chance of triggering your due on sale clause.

Just get an Umbrella insurance policy to cover extra liability coverage and leave it in your personal names...  Unless you have a really good reason not to.

I think at the end of the day, a talk with a Real Estate Attorney would be the best start, but I wanted to make sure that should be my first step and maybe some confirmation that this indeed could work before I start contacting RE Attorneys

Anyone?

OK,

So, I've been doing research in a community where I'm purchasing another property and I've found one condo that is suppose to be auctioned off in November as a foreclosure. I started doing some sleuthing around on the property and found that there was a lien placed on the property by the HOA in 2008 for about $900. There was an attempted Trustee Sale that was cancelled later that year.

Now I see in 2017 the HOA has filed a judgement against the property owner for about 4K.

I know she has a mortgage (1st) for $36,000 that she opened up in 2005. (in 12 years, assuming she was making most if not all payments, she should owe about 27K on the property). There is no second on the property that I'm aware of, and it looks like the only lien is through the HOA. Taxes are up to date.

This property I believe is now worth around 95K (Give or take 10K to either side).

I have very little experience in foreclosure proceedings, but I feel like this could be an absolute steal.  Title could get a little ugly here though.

With that being said, what is my best course of action?  

Contact the Trustee of the sale to verify that it is indeed going to foreclosure and verify the date of the auction?

Can I contact the HOA and take ownership through the judgement by buying the debt?

Or do I contact the owners and see if they'd be willing to sell for a steep discount?

I have a current mailing address for the owner of the property and could potentially send a letter to them.

Even if I had to pay 60K for the property + pay off HOA Judgement, this could potentially be a steal of a deal.

Again, not ever working through a foreclosure, what are ways that I can swoop in and get a deal before it goes to auction?

That is correct.  Assuming your mortgage is non-assumable, they bank has the option to call the loan due upon change of title.  Whether they do or not is entirely up to the bank.

As far as a loan to an LLC is concerned that is also true. Now depending on the bank, some may allow the loan to be personally backed. You will need to talk to your bank. Basically, I believe you personally back the loan, but it's written to the LLC. That way, the bank can come after you if you ever default. Not all lenders allow this, especially the big banks.

When I first started investing, I was worried about being sued or having something go wrong at my property as well. I had the LLC setup and was ready to go. And then... I didn't use it. I just have everything personally backed. Now that I have two properties, I'll be getting an Umbrella Insurance policy which should be able to cover me for 1M+ in liabilities. I think overall that's better than an LLC. Especially one where the veil could easily be pierced if I did something wrong and they'd come after me personally regardless.

Also, depending on the state, umbrella policy might even be cheaper...  It has the added benefit of covering literally everything else as well with extra insurance (Auto, Libel, Slander, Primary, Rental, ETC).

That looks about right for everything that could come up, but I think you missed a number somewhere in your calculations. With your numbers from above, I've calculated $11170 in expenses (Tax+Ins+Vac*12+CapEx+PM+Mtge). This gives you $19 a month in Cash Flow.

I personally think you're putting aside too much for CapEx and Maintenance, but that is just me. My goal is once I get to 8K I stop putting money aside. 8K is enough to cover if my AC/HVAC/Flooring/Appliances needs to be replaced all at the same time. Those are (probably) the worst things that can happen to a condo at any given time and that would be the perfect storm of holy crap.

Looking for recommendations for a HVAC contractor.  I have a 36 (you read that right) year old Package unit on a rental that will need to be replaced this year and want to start doing my research with contractors and getting estimates.

That's about right. Most of the statements you will get from the CC&R and meeting minutes. To get a mortgage for a condo, it is contingent on certain items from the HOA (namely finding out the reserves on hand). Other than that, you should be able to just call and ask a few questions if you have any concerns. I walk the pool if there is one on the property to see what the plaster/pebbletec looks like and the underside of the lip. I also check pool decking to see what the state is there. That usually gives you a basic understanding of how attentive the HOA is.

As far as assessments, they probably wont tell you if something major is coming up, but it depends on the HOA.

You should buy when you think it is the right time to buy.  As cliche as that sounds.

Just because one person is selling doom and gloom doesn't mean that it is actually happening.  If you can find a property that makes sense then I don't see why not.  In the short term, use the time to analyze a TON of deals.  Figure out what to look for from a listing.  Figure out what criteria you want to use to sort through options.  And if something meets your criteria, then pull the trigger.  If it doesn't then have patience.  But keep analyzing.  You never know when a deal will pop up that is the perfect opportunity.

It also depends a lot on what your plan is.  If it's a buy and hold, then you have much more leeway with when to buy.  If it's flipping, then market becomes much more important.

I'm a buy and hold investor, so even if the price of my unit goes down, I'm not looking for a quick exit.  I can handle market fluctuation because that just means more people looking to rent.

@Rachel N. Good point about the heat.  I live in Arizona, so it's the same thing.  115 degree summers, bleh.

I think it's pretty dependent on where you live and what opportunities present themselves. I know there are some places where SFR make much more sense than condos, but in my particular market, both are pretty accessible.