All Forum Posts by: Steve Hall

@Adrian Vega 

A DBA will not help you for tax purposes, for legal purposes, or for liability protection. Sounds like you know that you are supposed to have your properties titled in LLC's but law suits are something that happen to other landlords, right?

BTW - you have 3 years to sell your SFH or you are going to lose your 121 exclusion.

@Vlad Denisov

In the future, please use the search feature.  Your question has already been answered:

https://www.biggerpockets.com/forums/311/topics/544189-what-exactly-is-a-portfolio

@Ashley Cast 

Your desire to help is admirable. My advice: stay out of it, and learn from their nightmare. Make sure your own family has LLCs and Trusts set up so you don't have to get involved in probate when their time comes. (And don't forget about living trusts!)

Failure to plan = planning for failure.

So Adam, the reason I asked why you want to buy a primary residence and a 5+ unit in the same year is because you have a history of inaction (and your goal is far more ambitious than your previous attempts at investing):

2 years ago you posted: "I live in California and I am looking to buy my first buy and hold multi family. I'm thinking about a duplex or four plex. Prices here are very high. What are your thoughts about buying out of state or in another, less expensive market? I understand I don't know as much about the market, I just don't want to spend $550,000 for a four plex. Especially with rents of about $1,000 a unit."

1 year ago you posted: "I am looking at a property that is 650k. I am purchasing with a partner. Is it a problem having part of my half of the down payment coming from a signature loan from a family member?"

I recommend that you concentrate on providing for your family, and think about real estate investing when you've saved up some money and don't need to rely on family members for the down payment. If you really make $350k a year, it shouldn't take you long to save up some money.

Best of luck...

@Adam Lawrence 

There is a lot you are not telling us... And you're not even asking the right questions.

Are you W-2 or self employed? How much do you make? What is your debt? What is the price (range) of your new home? Do you have a 401(k) and/or IRA? How much do you have saved up? Where do you and your family live now? Why are you trying to buy a home and a 5+ unit MF in the same year? Have you spoken with an attorney yet? How about an accountant?

Maybe you should just buy a 6 unit multi family, and you and your wife live in one unit, and give each of the kids their own unit. ;)

@Jose Torres You're the seller? Why would you want out of a contract for sale? Why did you list it for sale? Why did you accept the buyers offer?  

Without offering legal advice, I would say the buyers have a valid claim and you could very well lose. Best bet is to wait until after inspection and they want to re-negotiate and say "no". Or wait until they need to extend closing and then deny the extension. Or wait until they can't get a mortgage and then they just go away. If it makes it all the way through to closing, on time, then take this as a lesson that you should not list a property you don't want to sell, and you should not accept a contract when you don't want to sell a property!

I would also like to point something out in the contract language: "...if written mortgage commitment is received after the Commitment Date and prior to any such written notice of termination, then this Agreement shall remain in full force and effect, and Seller’s right to void this Agreement for failure to meet the Commitment Date shall be deemed waived. If Seller elects to terminate as set forth in this paragraph, and Buyer is not then otherwise in default of the terms of this Agreement, all deposit money shall be returned to Buyer in accordance with the terms of this Agreement."

Given that you had not received a commitment, on April 13th you should have provided written notification of termination for breach, AND returned the deposit (at the same time). Since you failed to do that, per your own contract, it is my opinion that have waived your right to void the agreement (for this action.) This is why all the experts here on BP tell novice investors to consult an attorney before making offers! 

If this property is owned in your own personal name, you are now personally liable! This is also why all the experts on BP tell novice investors to purchase properties in an LLC.

@Mike LeeAlthough I agree with @Tim Simmons that it is to early to think about a name, it is NOT too early to think about your business structure. You will need an LLC, and each of you should have your own holding LLC or Trust which owns the operating LLC. You guys obviously need and attorney and a CPA since you have no idea what you are doing. I am sure some lenders will chime in below pointing out how Tim is incorrect about not being able to "buy in the name of the LLC".

I would seriously rethink going into business with your friend for 4 reasons:

1) I can tell already that he will not make a good business partner.

2) I'm guessing you are just going into business with him because he is your friend, not because he is bringing any experience or expertise to the table.

3) This will likely ruin your friendship.

4) It doesn't seem like you have thought this all the way through.

@Shiloh Lundahl What your doing is admirable, but I agree with Mike. You have to set boundaries. I like to create a "barrier to entry". Normally you'd think that would require charging them a fee, but really it just takes asking them to do something (like fill out a lengthy web form perhaps). I've even told people: "book a flight to Florida and I'll help you out". Tire kickers are weeded out, and the serious will jump thru the hoop, and you know they are serious!

I've found that Pro members are far more likely to be serious, so I will help a Pro member before I will help a free member or Plus member. You could also ask if they are accredited. In my experience, accredited investors are not time wasters. If you want to make sure they're genuine, you could ask them to go to Verify Investor and get verified. (If they are not already.)

Another thing I have found is the self-employed/business owners are much more likely to succeed with the advice you give them. Since real estate investing is a business (with risk) entrepreneurs are far more likely to take action. They already understand P&Ls, balance sheets, business structure, and usually have a CPA and maybe even an attorney.

I originally posted my email and phone number in my signature. I have since removed it, and do not have a signature. I see you are still advertising your phone number and your podcast# in your signature. It might be time to rethink posting all of that info on every post. Posting your phone # and podcast # to your bio will reduce the tire kickers since they don't read your bio, but I would still recommend removing it completely.

I recently put in my bio, that if you send me a colleague request without a message, I will delete it... (More than 75% of the requests still don't have a message.)

Lastly, when someone asks me for help (or even for a colleague request), I go to their profile, and click on ALL POSTS. I look thru their posts, choose a few topics and read what they wrote. I will research someone for 2-3 minutes before I add them to my colleagues list. If they have a LinkedIn, I read that too.

@Carter Thomas

Let's look at your "Options" one at a time:

A. Keep them and enjoy the $950/mo cash flow and let them appreciate in the awesome market of Portland/Vancouver.

Appreciation is never guaranteed. (It's a risk.) What if the properties depreciate? And remember: appreciation is never realized until you sell. So you need a plan, and you need to stick to it. 

B. Sell them, take our $250k and use it as 20% down on $1.25M worth of SFH, Duplexes and triplexes in a cash flow market in the Midwest or South.

You're thinking small. Why would you buy $1.25m worth of SFH? Instead, buy a large complex with fewer roofs, fewer walls, consolidated bills, and centralized management. Did you do the math on this option? You are making $950 per month now. If you sold your current properties and put down $250k on a $1.25m complex, could you cash flow more than $950 per month? 

C. Refinance the 1st house and use another $60-70k to buy another house in my back yard?

It is always a good idea to use leverage, but what would your LTV be after the refi? And what happens in the market cools? Also, never limit yourself to your "back yard" unless you plan on self-managing. The best deals are never in your back yard. This is a common mistake made by small investors.

D. Find a partner to join with and buy a bigger apartment building.

Partnering is always a great idea (if structured properly). You are already in a partnership with your girlfriend. If you both sold the properties and you each threw in your combined 250k, and you found another partner to put in $250k - you could now buy a $2.5m complex which could support it's own full time property manager!

______________________________________________________________________________________

Other things to consider:

Your rentals are probably in your personal names. This is bad. You should never own anything in your name. Given that you can utilize section 121 and not have to pay capital gains, I would recommend that you both sell your properties before you lose that benefit. When you purchase your new apartment complex, you will each form an LLC, and then each of your LLC's will become partners in the new property.

The 1st house cash flows $700/mo and has $150k in equity. The 2nd house cash flows $250/mo and has $100k in equity.

Welcome to BP @Austin Ure

Please use the search feature in the future before posting a question to see if it has already been answered.