All Forum Posts by: Randy Thomason

@Beau Fannon you need to read closer and understand politics and legislation.  As one example of many issues within this Bill, What is the legal definition of "reasonably safe"?  Who gets to decide this, the tenant, the landlord, a prosecutor, a tenants rights advocate or free legal aid lawyer or the hundreds of different judges across the state with different political agendas?  This is why legislation like this is so dangerous.  On the surface it seems benign, but that is always the way things start.  Gray areas that later get to be black and white thru the courts and you usually don't like the results.

Better be careful if ever audited. According to my CPA if you QC it to your LLC you will be doing one of two things. 1- You are making a capital contribution if you don't get paid for it or 2- you do a note from the LLC to you. An asset cannot just magically appear in your LLC. Assets are purchased for somewhat of fair value. Anything not purchased or a loan made to the LLC is a contribution.

Most will never have a problem but if you get an audit, the IRS will almost always catch you and make you account for it appropriately and that will bite you in the Butt!

and since it is a multi person LLC that makes it even more important that you account for it right or your "contribution" could be split multiple ways and you lose.

I use this as an additional screening method.  My potential tenant MUST have a bank account and allow an ACH from my bank.  If they don't have a bank account they don;t qualify.  Why?  Because 1- I don't chase money.  2- If they don;t have a bank account it is almost always because they bounced checks and haven't paid the bank back yet.  3- If they don't have a bank account they probably are more transient and leave in the middle of the night.  

Screen well, then you don;t have to worry about evictions. I'm am doing only my second eviction in 18 years of someone I put into  my houses.  Yes I have evicted several tenants that I inherited when buying a property but I knew that going in and accounted for that in the price.

Most landlords chase money all the time and don;t value the cost of their time.   I tell my tenants that if they bounce the ACH they have 48 hours to track me down and get me a cashier check or the eviction letter goes out and then there is n turning back.  I don;t chase them.  I tell them I don;t pay people to live in my properties so I am the fist bill they should pay before cars, utilities, etc.  Or they won't have to worry about it because they will be living in their car.  Just business.  If they believe your they don;t test you!  Just like your kids but you better be willing to make an example out of one to prove to the others.  It only took me once and I use that story with each new renter as they sign their doc's.

Join local REIA group and network. You will meet rehabbers, private lenders, contractors, landlords, attorneys, realtors, title companies, etc. All in one room. Take 100 business cards with you also.

Acting as a real estate Licensee without a license.

@Ned Carey, That's right. Jeff did a fantastic job on that education interview piece and I am trying to get the Arkansas Commission to do something similar.  The lead investigator here and Jeff know each other and we discussed doing something in the near future, Maybe, if it can get approved up the chain.  I am going to ask Jeff's help next month when I see him and he will be with our investigator in April at a meeting, so hopefully we can push that forward.

The biggest thing about this meeting was it happened, and they discussed the issue.  I have been trying to get this done for 18 months so I guess I wore them down.  

I must say that in the beginning the Commissioners were closed off but as we discussed things they relaxed some and realized I was there to truthfully get info and not any "gotcha" moments.  We agreed to have further discussions in the future to see how we can work together to make the industry better in the state.   We shall see how that goes, and if it goes as time goes by.

@Seth Dettenmaier

Little Rock is a good market( Central Arkansas).  Like everywhere, inventory is a little lower than in the past few years but there are deals out there.  My group has deals every month that we sell for rehabbers and landlords.  Send me an email and I will add you to my short list of real buyers.  

Things to be careful of here- a few areas have foundations issues and other will not say anything about them if you don't ask, gang areas are few but they do exist. Build a relationship with a few of us and you can get some great deals. I preach always to leave meat on the bone for the rehabber so they keep wanting more. I run the REIA here as well as invest so I know most people in the area.

Email me if you want some specific info.  Always love talking real estate.

Happy Hunting!

I am not a CPA but here is my opinion based on years of experience. 

Even if you hold title but you sell on an installment then the Buyer gets the tax benefits. You are acting just like the bank. You will need to give them a 1098 int at year end and they will get to write off the taxes if they are paying them, even if that is thru you.  

Talk with your CPA not your loan officer.  Bankers should not be trying to practice accounting or law.   

Thanks @Mark Rogers for that overview but that was not all that was conveyed in the meeting I interviewed the Commissioners in.  Here is the additional info for everyone.  

They hate the term "Wholesaling" and would prefer that we use a different term for what we are doing.  

They do not believe wholesaling is illegal in and of itself, but unfortunately a lot people are doing it illegally in this state. Understand that the people they see usually are the worst of the worst offenders and not the run of the mill assigner that we are mostly familiar with.

When I described my personal business model to the Commissioners, as I buy rentals, I buy rehabs, I buy flips where I double close, and I assign some, they said that is what they wished everyone was doing.  The Commission does NOT have a problem with assignments IF and I say IF again, that is not your whole business model.  If you are doing 100% assignments then they believe that is a blatant attempt to circumvent licensee law and you should have a real estate license to do that.

There was a lot more discussed after my discussion ended with the full Commission. The Executive Director and I had some off record conversations immediately after to clarify several things.  For example, You Can place a lien on a property to secure your contract or option agreement, but when your contract expires and you didn't close or is cancelled by both parties agreement then the lien should be extinguished also. 

Here is the bottom line: 

Standard contract law states you must have capacity and intent to have a valid contract.  If  you don't have the money somehow, i.e. private lender, bank line of credit, partner, etc., then you don't have capacity. If you never plan to close a deal, then you don't have intent.  If you have "weasel clauses" to cancel the contract up till day of closing, then the red flag goes up for intent.

And for those who think that because you are out of state and never setting foot here that the Commission doesn't or can't punish you, you are wrong.  Class D Felony. The State's Attorney General's Office is the prosecutor.  If they get the verdict then they notify your states law enforcement.  If it is a fine then they garnish.  If a jail sentence then you get extradited if you don't surrender on your own.

Here is the KICKER:  If you have a Felony record you can't own a gun, you can't hunt, you can't vote, you can't get a passport to travel out of the country, you can't get a real estate license, you might not be able to be a teacher or child care worker.  Lots of restrictions on your life from that point forward.  

Do things right and you don't have to worry.

Forget the politics of everything and look at things from a business standpoint if you are looking to make this a rental in a year or so. Pine Bluff is a hard sale and depressed prices. Population has fallen almost 18% in the last 20 years. 

I have sold a few houses there that went for less than half of value than if the same house was in different city. There is money to be made there once you learn the area and how cheap things are sold there and how long it can take to sell. There are several members from Pine Bluff, Sheridan and Redfield you can network with at the REIA in Little Rock.