All Forum Posts by: Alexander Merritt

@Roy N. so are you for or against it?

Hello BP'ers,

This question is more for experience Commercial multifamily investors. Is it possible, or even preferred, to purchase or take over the existing Business Entity (LLC, Corporation, or whatever) when purchasing a medium to large size MultiFamily Apartment Building?

What are the benefits in doing so? I wouldn't have to form my own, I would think you would get all of the history associated with the LLC, such as length of existence, credit rating, name recognition, etc... I would think that existing agreements with PM would stay in place. I would also guess that buying the Entity rather than the property would not trigger the "Due on Sale" clause because if the property is in the Business name, then it isn't technically being transferred or sold right? Yes/No?

What are the negatives in doing so? Would I have to pay more? If the entity had bad credit or lots of debt that would be a negative. If the Entity had any negative judgments or lawsuits against it.... what else?

Thanks in advance!

 @Shawn McCarty
I too have heard that Pig Town is getting some buzz and could be up and coming. It's actually in a pretty good geographical location: next to Camden Yards (Orioles baseball), M&T Stadium (Ravens football), and now Horseshoe Casino. Not to mention close to the inner harbor. @Ned Carey @J Scott @Christina R. wondering what your thoughts on that are?

OK thatas what I thought. Thanks

@Brandon Hicks 

Congrat's on your deal. I'm curious....Can you explain why you wanted to do this deal when your profit is 16K per year? That's $1333 per unit ($111 per unit per month). Is that worth it? Is it because you only had to put in $1500 out of pocket? Just trying to undersand your rationale. Thanks in advance.

Excellent work @Arlan Potter . This really encouragning news!

@Kyle J. nailed it.

@Jordan Burke I personally would not take this deal and here's why (figures per year):
Purchase Price: $160,085.70
20% Down Payment: $32,017.14
APR: 5%
Revenues
Rental Income: $19,200.00
10% Vacancy: -$1,920.00
Gross Income: $17,280.00
Expenses
Property Taxes: -$853.00
Insurance: -$500.00 (guess)
10% Maintenance & Repairs: -$1,920.00
10% Capital Expenditure: -$1,920.00
10% Property Mgmt: -$1,920.00
Total Expenses: -$7,113.00
NOI: $10,167.00
Mortgage (P&I only): $8,250.00
Cashflow: $1,917.00
Cash on Cash Return: 4.79%
Cashflow  per door per month: $80

You're only making ~1900 a year for a Cash return of 5%. You could probably sink your down payment into the stock market and do just as well or slightly better. This is not a horrible deal but I think you can do better.

Totally agree with what @Elizabeth Colegrove said. You are more concerned with the price someone will actually buy it for, not what the city/county has assessed it for. Here in Maryland most property tax assessments are lower than FMV. It's my understanding (I don't know for sure) that there is usually some formula they use to determine the value and then based on that value they use the property tax rate to calculate the taxes.

Keep in mind that tax assessments are done infrequently. For example a property could be bought, rehabbed, and sold and the new owner would be looking at the same tax assessment as before the rehab until the city/county does another assessment. I think they are done between 1-3 years.

Can someone please explain how attorney's pierce the "corporate veil" of the LLC? I understand that they will look for any discrepency in your paper work and how you run the LLC (separate bank accounts, reimbursements, etc) but if everything is in order and you're running it properly, shouldn't the LLC do what it was intended to do and protect you personally? The whole point is to shield your personal assets, right? Not your assets or insurance policies owned by the LLC.