All Forum Posts by: Crystal Smith

@Craig Brouillette  We find it takes multiple touches.  1st touch is your letter.  If they respond to your letter, then you have a 2nd touch- finding out what they need & making an offer.  If they don't like your offer their progress & keep in touch w/o being a pest.   Give it 30 days for your 3rd touch.  It can be a phone call or another letter.  Keep in touch until you see the ownership of the property change.  You just have to find a way to do it w/o being obnoxious.  One way to do this is to make sure that the follow up touches are not form letters but letters where you capture what you learned from talking to them about what their real needs are.  

@Josh C. 1st off congrats on your 1st flip.  1st thing you do is get w/ your accountant/tax man & figure out how much $ to set aside to pay the man.  2nd thing- Look @ your currently debt.  If you have a debt in the low thousands that can be paid off, consider paying it off.  While your considering it look for your next flip.  After the 2nd flip go look for a buy and hold.

@Jamaal McDonald  There are different schools of thought on retail value but here's the bottom line- Just because a property is sold as a foreclosure doesn't mean it should be excluded from comps.  Many foreclosed homes are move in ready, updated,  require little to no renovation & appraisers may include them as part of the comparables even if it was sold @ a discount.   We consider this for every deal that's bought to us to consider because we don't want to get stuck w/ a low appraisal after we've done the work & are trying to sell the home.   

@Christopher Yates  we've never participated in a court house auction but we have participated in an on site auction.com auction (on site meaning we were in a California hotel ballroom participating while other people were on line.)  We also purchased a few properties from a gentleman in Florida who was always buying from auctions.  He told us something once that was quite a surprise & I don't know how it may apply to court house auctions.  

He personally did not attend the auctions- He had a few people working for him that attended & there were times his people would bid up a property to keep it away from competitors, i.e. take it off the market.  Then somehow they wouldn't pay for it @ the end of the auction.  They may be kicked out unable to bid on anything that day again, but they had accomplished their task for him.  & he had others in the auction who continued to bid on other properties.  This may have been a story & he was just showing off, but the message- See if you can figure out who may be working together & avoid getting caught up in their crosshairs.

@Rob Beland the gentleman who started the post didn't ask if he needed an LLC. He asked "how difficult would it be to transfer the ownership of a property from myself to an LLC after the fact? Is it something that could be easily done, or should I search out another source of financing?"  I responded to his question regarding difficulty of transfer & being mindful of the due on sale clause.

Now to your question- what makes you think you need an LLC? Our reasons for the LLC(s) we have are as follows:

• Tax treatment- We have S-Corps for the properties we intended to hold for less than one year (short term capital gain) & a regular LLC for properties we hold for more than one year. We do it this way because of the different/preferential tax treatments. These laws are always changing & we'll adjust as needed
• Borrowing - Our business has multiple streams of income.  One of those streams occasionally requires us to borrow from sources that will only lend to businesses.  There's still a personal guarantee but the loan must be to a business
• Asset Protection- We take protecting ourselves seriously so we have multiple levels of protection. The LLC is just one. I won't argue whether its a strong protection or not, but this isn't a hobby for us so we use it.

To your question of how does any of this put more $ in our pocket.  

• Taxes- Less money to uncle sam
• Borrowing- We wouldn't have access to these funds that essentially produce income if we didn't have an LLC
• Asset Protection- Hopefully we never have to use it but why make it easy on anyone that wants to go after our assets 

@Christopher Smith  An approach you may want to consider.  Most of the offers we submit on properties for ourselves or for clients will say cash or finance but the offer is not contingent on finance.  Depending on the size of the deal the cash portion of the Proof of Funds will be large enough to close but we want the option to leverage.  We request our lenders and/or private money folks provide us w/ letters that support a cash offer.  If it's a bank deal sometimes we'll get a silly asset manager or realtor that will counter & scratch out the finance section.  But that tells us they are interested in our offer & we'll put it right back in & point out that the deal's not contingent on finance & we need it in the contract for our lender.  It's amazing how often this works.  Granted- sometimes it doesn't work. 

Most of the clients we work w/ buying residential or commercial properties aren't using their own cash but the offers are cash.  Bottom line:  Work w/ your lenders and/or private $ folks to structure the money their lending you or at least the letters they are providing you so you can submit cash offers.  This means spending more time upfront identifying funding partners.

W/ all of that said- We also have a ton of pre-approved clients who submit offers contingent on financing & they just keep plugging away because all they need is one deal.  They get the one & they plug away again.  It's a marathon not a sprint.

 I can't speak for how others conduct business but when we sign a contract with someone, whether we intend to keep the property for our own portfolio or assign the contract, it's our responsibility to put up earnest money.  My opinion- Its's your contract- your responsibility.  What can you do to protect yourself- Include language indicating you can cancel the contract in X days if.....  X occurs.  Normally there's language in contracts about cancelling the contract before the end of the inspection period.  For you that could be the period you're looking for a buyer.  

@Don Nelson  my only comment:  Work w/ bank(s) and/or mortgage brokers now rathar than later to ensure you understand all of their underwriting requirements & how they would value the property.  The goal:  Not to be surprised by the bank/mortgage broker when you exercise your plan.