All Forum Posts by: Jeff Takle

Here's some boring, practical advice...put some of it away so that you don't end up being stupid and losing it all.

A lot of pro athletes and others who end up with a lot of money at a relatively early age don't do proper planning. As Warren Buffet says: stocks, bonds, cash, and real estate. Have a little of each. Put some away for 10 years from now, some for 20, and some for 30+. Once you have that network taken care of you might consider:

-taking care of any family members who need help. Not handouts, but intelligent, collaborative deals that empower them to move forward in life

-creating a scholarship fund to help kids get to college

-funding a local civic center, cancer research institute, Walk for Hunger, or whatever tickles your fancy

-tithing to your church

Life has been good to me, too, and I certainly spent a lot of time pursuing skydiving and such. I've hiked the Himalayas and dove the Great Barrier Reef and a lot of great stuff in between so I understand how you feel. I felt the same way. But after the dust settled, I found that I got the most satisfaction out of using my resources and energy helping others to achieve similar or greater heights in their lives.

Just a thought.
Jeff :D

If giving a home warranty in a sale makes the buyer feel safe, comfortable and willing to move forward to closing, then the answer is YES, home warranties are worth it.

I once had a furnace problem that was covered by an AHS warranty. There was a little hassle with settlement, but it worked out okay. They're certainly making a killer margin on the product though.

-Jeff

Some other ideas for generating revenues:

-Lease to own, aka option to buy
-Refer them renter's insurance
-partner with moving company for discounts for tenants + % to you
-resell internet access (getting harder with more competition and cheaper rates)
-pool monthly cash flows into sweeps account, i.e. play wth the "float" on the money
-allow tenants to customize rental prior to move in; 52" flat screen TV = $39/month, additional ceiling fan - $5/month, new paint color = $79/month...
-security "fee" instead of deposit for renter's with excellent credit and references, e.g. if they check out fine, then give option to pay $100 fee instead of the security deposit. You still retain rights to collect for damages and they lower their move-in cost.

Amazingly, there is very little literature or centralized resources for answering your question. Contemplating a new book deal...

You can also elect to have the IRS treat your LLC as an S-Corp for tax purposes, so I guess maybe that makes the third LLC "type".

Personally, I think $50/month for a SFH is wayyy too low. $600 a year? Is the house made of cardboard?

House WILL need a new roof, new windows, refrigerator, washer/dryer, lawn mower, water heater... We can't pretend these things don't exist and don't cost money to repair or replace. A lot of people use 10% of revenues as a budget number. I think that may be good for a condo but that's too low for a SFH. $50/mo = $3,000 every 5 years. That doesn't even cover repainting, small repairs, advertising, etc. With SFH you should plan to maintain the home, not run it down to shambles through lack of maintenance.

My goal is to shoot for 3-6 months of cash reserve. What normally happens is this: I've got 4..then 5 months..then something happens and I'm back to 1 month...then 2...then 3...then something else happens...

Nationwide vacancy rates right now for SFH are around 9-12%. That equals more than one month each year on average. While I'm sure you're much better than average, 10% vacancy could be a good planning number. 18 days or less, IMHO, is what you shoot for but not what you budget for.
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It is a terrible shame for a landlord to fail to plan and be forced to sell/foreclose because they ran out of money. [/b]

Finally, especially if your goal is to continue buying and renting properties, you must have healthy cash reserves or liquidity you can tap (home equity line of credit, investments, something). Otherwise, you'll be lucky for 5 years and have nothing major happen...you'll buy a dozen properties and feel like you're a genius. Then you'll have a hurricane hit Virginia and a huge tree will crash through the roof of your nicest home, destroying the roof and most of the 2nd floor, and the insurance company will claim it was a mudslide, not a hurricane and you're not covered. Awesome! Can you say "I'm screwed?"

-jeff

If you're really interested in knowing what your property is worth, and you believe, after comparing nearby properties with similar specific amenities (beyond just sq ft and proximity), then learn more about the person who sold it to you.

If investigation show they had some crazy circumstance (massive ignorance, pressing need to sell immediately, spouse's death, pending foreclosure...) then maybe your property is worth a lot more than you paid for it.

BUT, if you learn that the seller was educated and had no pressing needs--wasn't a HIGHLY motivated seller--then start asking local realtors questions. There is probaby something you are overlooking...environmental waste issues with the property...city plans to take the house under eminent domain...something. Have a couple local realtors do comps for your house now -- don't tell them what you think. Just say that you're thinking about selling and want to know, ballpark, what they think it might be worth. And don't talk too much and taint their assessments.

The comment above has merit when they say that it's incredibly hard to find a deal that much below market (if your assessment is right) without being incredibly lucky, which does happen.

-Jeff

I have several in the Atlanta area, which isn't that close, but what do you need?

Setting up an LLC is incredibly easy. You don't need a company to do that for you. IMHO that's wasting money. Nolo has a series of books that are completely adequate to show you the pieces that need to be in place. Go to your library and get the Nolo book or have them borrow or order it for $40 on your own. Should take 30 minutes to skim through and you're all set.

Every state has different fees, etc. You can set up an LLC in any state, but you'll need a designated agent in whatever state you set up in case you're ever sued--they want a physical address to deliver notices to, taxes, etc. Again, the easiest solution is to ask a friend/family who live in the state you're starting the LLC (if it isn't your home state) to act as your agent. They'll probably never get any paperwork from the state.

There aren't three different kinds of LLCs as you mentioned; not that I know of. Just single-member LLCs and partnership LLCs. Some states don't allow single member LLCs and most have restrictions on the maximum number of partners. You will want to decide if you'll have partners or not. A single-member LLC (just you alone) is really easy to file tax-wise. It's just a Schedule C which any TurboTax program can do for you. If you have 2 or more members, then you'll have to file a partnership returns and generate K-1s for each member. TurboTax doesn't do those well and you'll probably end up getting an accountant ($$$) to file that for you. More paperwork.

If it's just for investing, my advice is to keep it as a single-member LLC, file with your state (takes 10 minutes) to set up the LLC, pay the fees, get an Employee Identification Number (EIN) from the IRS website, set up a solo-401(k) through your new LLC to tax-defer income into your retirement accounts, and you're off and running.

Your taxes can vary widely so it pays to look at each state's annual fees, as well as your county taxes for business license, gross sales receipts tax, etc. Nolo has a nice index in the back of the book to help you compare all states. You'll have to research counties yourself.

[b]Starting an LLC is very easy. Running it correctly, paying all the right taxes at the right times, and making it function like a business is...well, a business.
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Good luck.
Jeff

Right, I guess that was my point. He didn't bother learning how the job gets done right; he just wanted into investing and lept in with no hard skills and a weak moral compass. And, no mentor or "trusted resource."

Yet another reason it pays to align yourself with a respectable investor when you're starting out...so you don't start making very bad judgment calls that will follow you for the rest of your life!

-Jeff

1. Your best approach is to have a written tenant screening process. Feel free to download this one as a sample: http://www.rentingyourhome.com/forms/Tenant%20Screening%20Policy.doc

2. I wouldn't tell them you "don't think you could rent to them..." Don't ever make it sound like you're on the fence or that you have anything other than an absolute concrete decision on your hands. "I'm sorry; we don't rent to anyone with an eviction in the past 5 years. If you'd like, I can find you a real estate agent who might be able to help find you a rental though..."

Good luck
Jeff