All Forum Posts by: Jeff Takle

An LLC is ABSOLUTELY NOT always the best decision. It depends HUGELY on what each founder's financial and tax situation looks like now, what it will look like in the future, what your company exit strategy is (manage for life, sell to strategic or financial buyer, hand to your kids, etc.), how quickly and in what fashion you want to receive cash, whether you'll ever take on new partners or investors, and about twenty other important questions.

Any organization that always advocates one company model over another almost certainly only really understands that first company model. I've started three LLCs but chose LLC as the structure for specific reasons.

Nolo has some excellent books to help you get started, and I love them, but only use those if you intend for this company to remain small; less than $10 million in revenues or assets. If you're thinking bigger (and even if you're not):

1. EACH FOUNDER SHOULD EXPLICITLY SET & STATE THEIR GOALS. What do you want to get out of this? How much money? When? How long do you want to do this? How much time and effort will you put in? Is this a part time or full time gig? What specific things do you bring to the table? What will happen in 3 years if one of the founders wants out but the others want to keep going?

2. Then, go see an attorney. Without clear goals, they can only give you crap for advice.

Good luck!

I've been curious about this for several years myself. I saw the clearest presentation of the concept in Jeffrey Taylor's book, Landlord's Toolkit, which I think was clearly a notch well above the other rental property books out there for tips and tricks and mindset. His book even has a worksheet.

I like to test my sources though, so took it to my tax attorney just this week (hadn't seen this post yet). His answer reflects Andrews -- you can do it but, basically the real money you'll "save" is only a couple hundred dollars, money that would be offset right now by the increased tax preparation costs. Or do it yourself for maybe 8 hours of research / preparation.

BUT, the kicker is that you don't "make" the additional money in tax benefit, you just borrow it temporarily, because you will have to effectively pay it back through recaptured depreciation when you sell so the real calculation is:

[b]Additional current year (CY) deductions x CY income tax rate = CY cash "savings"

&

CY cash "savings" x interest rate x # of years between when you claim the accelerated deduction and when you sell = real net benefit.[/b]

OR, increasing deductions by $4,000 probably "nets" you $1,000 in current year cash benefit...but you'll have to pay that $1,000 back to Uncle Sam when you sell. So the only real net benefit you gain is any interest you can gain on the $1,000 between now and when you sell. At best, let's call it $100 per year in benefit. Most likely it isn't worth the increased tax preparation costs--in time OR money.

Sounds good. If it's your first time trying to collect, it might be well worth the $250 to spend an hour (or half hour) with an attorney to double check your limits, rights, and obligations first. Or, spend 8 hours reading. All good alternatives.

I don't think that employing a professional debt collection company in any way precludes the landlord from also pursuing collection directly either. There's no penalty for being double annoying in chasing that money down!

The National Multi Housing council released the results of a survey last week of 1,000 renters and their preferences. Findings of NMHC’s Apartment Renter Technology Survey include:

* Lower-income renters are just as involved with technology and desire it just as much as upper-income residents. Service penetration rates and rankings of importance are almost identical no matter the income range.

* Residents want wireless access; 69 percent would like communities to offer wireless hotspots.

* While 94 percent say that they didn’t choose their current apartment home because of the technology amenities it offered, they report that high-speed Internet, good cell phone reception and a choice of service providers might be important factors in choosing where to live next.

Are you surprised at those numbers? What can we be doing as landlords to utilize this information, i.e. how does it impact what we should be doing? Are free prepaid cell phones a new renter incentive???

-Jeff

I have to disagree with kaosproperties' statement:

It is NOT legal, at least not in all states, to raise the security deposit mid-lease. In Massachusetts, the law is clear. Here, you can charge an equivalent of one month's rent only as security deposit and the court has subsequently ruled that the "one month's rent" it is equivalent to is the very first month's rent. So, if you started renting for $500 / mo and you could up it to $600 / mo in month 8, your total security deposit still cannot exceed $500 / mo.

However, if the tenant is on month-to-month, you can give them 30-day notice and increase the rent and deposit. OR, if a lease is coming up for renewal, you can increase the deposit within limits of your state. BUT, if they are under a current written lease (not month to month) then that lease must generally expire before you can increase the deposit. UNLESS, it is a pet deposit and you are just now allowing pets, and your state allows you to charge pet deposits. Lots of rules...
:beer:
Each state has different, and very specific, laws about what can be done with security deposits and there is no cookie cutter answer. I have IREM's list of all state's security deposit laws if you are interested: RentingYourHome.com/forms/State Security Deposit Laws.pdf

Cheers,
Jeff

Another option: Google "your town name + 'tenant advocacy'"

If the town is too small, use the state name. Every state has a tenant advocacy or tenants' rights organization(s). They'll have a ton of free assistance, sometimes including free legal help. If nothing else, they can send a letter on your behalf to the PM and owner.

Nothing scares the crap out of a landlord (I am one) like a letter from the local tenant advocacy group!

You can find a debt collection agency that will chase them down for the overdue money (separate from any court judgment, which you should also seek). They will simultaneously report to all three credit bureaus on the overdue amounts. This can be done at no cost to you in one of two ways:

1) Find a company that will collect their fee (usually 30%-35% for single tenant's overdue rent) from the tenant upon collection, e.g. if they owed you $1,000, the collection agency would collect $1,300 and pass along the $1,000 back to you. Nothing out of your pocket and they don't get money unless they collect. PDLG is one such company. How they get the tenant to pay the extra is beyond me, but it's their business model, not mine!

2) Find a company that will collect and take the fee out of the collected amount -- essentially you pay the fee only if collected, but in this model, the $1,000 debt - $300 = only $700 in your pocket at the end of the day. There are a LOT of debt collection companies that will do this for you. Just Google.

In both, they'll report to the credit agencies. Also, whoever you use for tenant screening can likely post to the eviction databases as well.

My main recommendations would be to let a professional do the debt collection (don't do it yourself), and have a debt collector pursue a tenant in conjunction with whatever eviction or court judgments you seek.

I manage properties in several states. Not a problem. Especially with the Internet and equipped with my trusty BlackBerry (actually, T-mobile MDA now) I'm better connected than most landlords down the street.

Most problems can be solved by phone, email, and UPS.

In terms of the investing part, I plan a 1-2 week road trip periodically, to spend time in 2-3 cities, meet with the chamber of commerce, talk with local business people and everyone around town, and meet with one or two good realtors. My intent is to find out what both people and companies think about the town -- is it growing? Why? Is there enough housing? Is it crappy or all new construction? What school districts are hideous? Is traffic terrible? How about unemployment and who are the big companies in town? Who's hiring and who's laying off?

Try and track down some of the major macro trends before deciding to dig deeper: are there plenty of jobs, a shortage of housing, improving economic prospects, and sufficient infrastructure (traffic not bad, plenty of amenities..)? If a city looks promising at this level, then I start digging deeper and forging a specific team (agent, maintenance folks, inspector...). A 1-week road trip can flush out 2 cities and help narrow your search.

The best thing to do is find the local sherrif or constable and have them deliver the notice. Normally costs about $20 but you cannot underestimate the benefits of having a uniformed officer deliver the notice. Many folks just get spooked and pay up. Plus, savvy tenants will refuse to sign for any mail (certified or otherwise) if they suspect they're being evicted. Then, you have no proof.

Also, whoever fills out your notice should provide you with a "Declaration of Service of Notice" or similar document in which they certify that they delivered the notice and all the methods they used. If you go to court, tenants will plea that they never received the notice; in tenant-friendly states, that's enough to start the whole eviction process over again...and gains the tenant a few free months. With a deputy's certified oath on the declaration notice, the tenant has no leeway with a judge on that matter.

In addition, most deputies know the drill and will talk to tenants, informing them of the process and likely outcome. Again, this works to your advantage. Don't deliver in person -- you invite personal conflict and emotions running high. Anything (stupid) that you say WILL be used against you in court later.
:crazed:

Last, but certainly not least, if you are starting the eviction process and have never done it before, SEE A LAWYER. States are very particular about the process and you're asking to have your case kicked out b/c of improper procedure on your part. Pay the $500 and call it "professional education" and have an attorney familiar with evictions do it for you and explain what they're doing. Being cheap on your first eviction will just cost you $2,000 in more lost rent and damages...

Shirley,

No you don't have to be in the same city...or state. I've even been overseas for months and managed all of my own properties. The key is either to leverage a good system, or develop a network you can count on.

For systems, there are a few companies out there that cater to individual landlords who want to manage properties themselves, helping to find and screen tenants, collect the rents, and manage maintenance. Most of these companies have existing maintenance relationships to help solve the problem for you. In short, you leverage the company's relationships at a fraction of the price of traditional property management. My company is one of five good ones that I know of who cater to landlords and deliver what they promise.

For networks, you can find a plumber, electrician, handyman, and HVAC person directly and talk with them on the phone. Give each a key or standing rules about doing repairs and then provide your phone, email, etc. Get recommendations from other landlords or social networking sites (www.AngiesList.com is fantastic for this). In other words, go build your own network.

For any solution, the key to good management is communication between you and the tenant and clear rules. You can have the tenant do all the maintenance, you can do it all, or a mix. Each method has its risks and costs but they're all viable.

Does this help?
-Jeff