All Forum Posts by: Srini Murthy

Quote from @Jennifer Cramer:

I'm a new member and this is my first post so please go easy on me!  I'm interested in investing in my first LTR or MTR.  I have a full-time job in NYC and travel excessively for work so I will need a property manager.  My goal is geared towards long-term wealth and eventually reaching a point where I don't have to work as hard because I'll have passive income to offset some of the income I will lose when I "take my foot off the gas".  I am not interested in house hacking as my plan is more centered around Buying and Holding.

The idea is to start in one area, build my team and then purchase my first property.  Eventually, I hope to build my rental property portfolio in the area I choose.  Initial budget is small, up to 300K with 25% down for the first property. Looking for Class A/B areas.    I don't really care about making a profit off the monthly rent in the short-term (though it will be nice!), I just want to build equity and not "lose" money.  Right now, I can't even narrow it down by state, much less city!!!  Here are my options:

1) Georgia - my old company was headquartered in ATL so I know the area well and have friends in the surrounding areas. Hower, it seems really over saturated so not sure if I should still look there

2) NC -  I'm drawn to this state but am not as familiar with the cities.  Looked at the Wilmington area but open to any suggestions

3) NY - upstate, NYC or even far out in LI (mastic Beach?).  It's my home state but property and taxes are so expensive outside of the city and in NYC you're dealing with maintenance fees, boards etc. I just think my money will go further elsewhere

3) Maine - I'm drawn here because eventually I want a second home in this state but this is my heart talking, not my brain

My question is, how did you go about deciding where you to invest? What resources did you use? Who did you talk to initially?  Does anyone have feedback on any of the areas I listed above? Are there other areas I should consider?  I realize this is incredibly broad, so I apologize but I'm feeling a bit overwhelmed.  Once I narrow it down, I feel like I will move but right now I'm stuck. Thanks in advance for your help. Looking forward to learning from all of you.

 Try Greater Cincinnati! If you like, we can just schedule a call and talk about what is your. 300k is more than enough to get a good 2-4 unit in a good area, that is (on paper) going to cash flow! And not just Cincinnati, Northern Ky as well. Growing area, more jobs, growing community, a few colleges, and good sports teams. Let me know, we can hop on a call and talk about what this area has to offer!

@Matt Devincenzo isn’t there penalties for taking out of your 401k early, though?

Investment Info:

Small multi-family (2-4 units) buy & hold investment.

Purchase price: $335,000
Cash invested: $92,000

Four-plex, nice neighborhood

What made you interested in investing in this type of deal?

I like small multi family. Minimizes vacancy losses since you have the other units still occupied. You experience more vacancies, but you’re just more insulated since you have 3 other doors in the same property. We’ll see!

How did you find this deal and how did you negotiate it?

Through Rent To Retirement. Easy, smooth, 1 stop shop. Property was totally rehabbed and seller in Cleveland was absolutely fantastic to work with.

How did you finance this deal?

Conventional 30 year mortgage, 25% down, 6% interest rate.

How did you add value to the deal?

None. Just buy and watch the bank account go up. Property management is great as well.

What was the outcome?

So far so good.

Lessons learned? Challenges?

Trust the numbers you’re given but verify them. Go to the county tax assessors website and check the actual property taxes. Get with a great insurance provider and and know what you’ll actually be paying. Always be in contact with your lender so you understand how rates are moving.

Did you work with any real estate professionals (agents, lenders, etc.) that you'd recommend to others?

-Rent to Retirement for a super smooth transaction and high quality inventory.
-Bill Brewer with Shelter Insurance. Based in Memphis, but does insurance in quite a few states. He’s amazing.
-SecurityNational Mortgage Co (Aaron Chapman’s group). They’re the best there is.

Quote from @Gene Livingston:

I am in the Texas market. I would never buy a house the way you're doing it. If its a multiple offer situation, the "winner" is the loser. Always. Always. 

In this market, I'm the seller, not the buyer. In fact I just sold my primary. The way Donald Trump did it in the 1970's was that he played the real estate cycle. That's what I do as well. Interest rates on a 30-yr fixed have almost DOUBLED off the low. That WILL create demand destruction. And the geniuses at the Federal Reserve are about to raise the fed funds rate (short end of the curve) 50 basis points....while the economy is quickly cooling off. My play: I'm on vacation until this winter. Now, that said, I DO see potential deals every day, but I'm not interested in even the "good" ones, because I think that I deserve GREAT ones. And those are coming. It's all a cycle. And you have to know where you are in that cycle....just like Trump did.
 Interesting statements, but the 70s never had this tech boom and whole remote work thing which I feel is contributing to insane prices. Are you expecting prices to cool off come winter? If so the rates will still be high? How will you compensate for that?

@Srinivasa Murthy

I will go against the previous posters thoughts and will argue that you should get an LLC per property. Spending $100 a year to get liability and asset protection is a cheap insurance.

Will an LLC protect you against act where you are personally responsible? Of course not.

But will an LLC protect your personal assets against a major lawsuit arising from a tenant claim? Yes

Are there cases of piercing the veil of the company? They are extremely rare and results from gross mismanagement of the member/owner that can be easily avoided.

Now, if you have a personal liability attack against you (your kid is involved in a vehicle homicide for instance), an LLC in a charging order state will protect your real estate from being taken away from you.

Last if you use anonymity protection with an LLC, you will avoid a lot of possible nightmare stories of harassment, threats, vandalism, libel to your home, work and social media by a disgruntled tenant.

It may also protect you from frivolous lawsuits as an asset search by ambulance chaser lawyers will return nothing.

To answer your questions:

Yes if your LLC is disregarded for tax purpose, there will be no change to your tax return. Your LLC will collect the rent and then turn it back to you.

I would suggest that you watch Clint Coons YouTube channel that goes in depth in asset protection for real estate investor and the proper use of LLC.