All Forum Posts by: Jeff Takle

IMHO yes the paperwork hassle far outweighs the benefits. I assume the purpose of hiding who owns the properties is to limit your liability in a lawsuit. What you describe might work, but here are some thoughts:

-attorney/client privelege isn't all-encompassing and only covers SOME of your conversations with an attorney, under SOME conditions. I did ask these questions of a lawyer and was surprised to find that it doesn't cover many circumstances. Also, I'm very leery of signing over anyone I don't know and trust personally, who I have a longstanding relationship with, when it comes to my major assets. Trusting a "new" attorney to be the trustee for everything you own could be risky.

-You can get just as much liability coverage as you want for a MUCH cheaper price by purchasing an umbrella insurance policy for your properties. It's cheaper in dollar terms, requires almost no paperwork, no taxes (each of these entities you mention will have to file tax paperwork to stay "legal" and actually provide liability protection). If you're talking 100 units then maybe it's worth it to cover them under a sophisticated umbrella. But with 25 or fewer I would go with a quick insurance policy. There was a good article on this today in the Inman News @ http://www.inman.com/hstory.aspx?ID=59322

There are a lot of folks out there that sell "how to hide your asset" seminars, books, and tools. I'm sure they work but the true cost in terms of time and money are high and well beyond what most property owners need. It can be fun to set up but be clear with yourself on why you want to set it up. If it's for fun and to learn how to do it, then make sure it's worth the $10,000 / year in LLC fees, and $10,000 / year in additional accountant fees for filing taxes on all these entities.

Sam,

I agree that you should contact your state's real estate board and file a complaint. This is a BAD thing fo the property manager and at least puts everything into a formal arbitration arena where you might get a binding result w/o having to fork out legal fees.

I highly doubt you would get any money for "lost rent" since an agreement to attempt to rent your place is not a contractual obligation to rent it to someone. It's an agreement to try. I don't see how to prove someone didn't try.

As for all you naysayers who preach never to buy/manage property in another state -- I say FIDDLESTICKS! PM costs for a single property average $1,100 a year, per unit. That typically doesn't include any listing help, showing the property, taking applications, etc. I can do a lot for $1,100...better if you have 3-4+ properties in each area. To rent out of state: 0) get all your co-located properties on the same rental schedule - say September 1st; 1) find a listing agent (to do the showings PM companies are the cheapest), 2) advertise it yourself on Internet and other venues, 3) Once a tenant is approved, schedule 2 trips to the properties--1 on move in day, and 1 on move out day. Supervise and meet the people. When one month's vacancy equals -$100/mo in rent, it pays to price units just below market value if they're not renting quick. Vacancy kills. Certainty is good.

For full time investors, time is king. If the good, easy deals are three states away, don't spend 10x the time searching for deals within 15 minutes of your house. Go where the money is and take a few day trips. You save tens of THOUSANDS each year on management fees and it's entirely managable. I've done it for the past several years with few problems. Properties that cash flow are worth pursuing. I live in Boston so have to travel for the easy cash flow deals. Entirely acceptable to me.

Just my 2 cents

You may want to check your state's law regarding onsite property managers. Some states require a PM who lives on the premises for 10 or more units, for example.

If you have a physical office that's maintained as the complex's "Management" then you should be prepared to receive tenants and prospective tenants in that office during normal business hours. If neither you nor your husband will be around, I'd recommend either staffing it with an admin person (who can also do books on your other properties, management maintenance and complaints, collect rents, etc.). Or, don't have a physical office. Tenant happiness is guided by expectation setting. If they see an office they expect someone to be in it, and expect to find someone eager to help them with their problem. If the office is always closed then they'll start thinking it's cruddy management. If you decide to go without an office, I would get a PO Box somewhere offsite for rent checks, inquiries, etc. and then set up a good website. Don't let them expect you to be physically present but not be completely responsive.

Also, third party vendors are getting more comfortable working with larger landlords who operate a home office so it shouldn't impede you from doing credit checks and the other business things you'll need to do.

Congrats on the new purchase and good luck! -Jeff

This is the best post I've seen on BiggerPockets. You know why? It shows a few things.

1. There is no such thing as "risk free"
2. There is no such thing as "guaranteed money"
3. If it sounds too good to be true, it is. It's really that simple.

Even when you look at people who have made a ton of money in real estate, you will not find one, not a SINGLE person who did not assume a large amount of risk. A quarter-million dollar liability IS risk...that's what it is. Otherwise, people wouldn't charge interest on mortgages, there wouldn't be huge industries surrounding the purchase, rehab, sale, and marketing of property.

Instead of chasing rainbows, pick one, two or three good -- proven -- strategies and get in the trenches. Learn. Take risk. Learn. Take the good, dump the bad.

Last piece of advice nobody asked for: if you see everybody running one direction, turn around and go the other way. This post started out spinning up a whirlwind of excitement. If you've been in this business a while and you have a great deal on your hands, you're not going to be randomly posting it out to the free internet for kicks to deal with all the calls, emails, and pestering. I'd rather deal with my trusted network. If the deals were that good, I'd have NO problem getting the money to fund them.

Every once in a while, justice rides into town.

mach,

Texas has high property tax because they don't have a state tax. Something to consider if you're not a Texas resident. You don't get the benefits of the personal income state tax but you will pay their higher personal property tax if you own rental property there. Though it varies across the state, Texas in general will have high rates. It's just a consideration and if the cash flows work, they work.

I like Texas and I think there are very good places to invest there.

Jeff

Best advice I could give echos DCG's: make sure you always exceed their expectations. Price something in an estimate and do the work for less. Tell someone it takes 3 days to finish and do it in 2. Tell someone you'll get back to them by the weekend and call earlier.

The best way to grow your business is to be good at what you do. Then ask people to recommend your services to others. If you don't ask, they won't think about it. This can be done without being sleazy.

Some companies are positioning themselves in the handyman market in interesting ways. Some are "the cheapest available". I just talked with Mr. Handyman yesterday and they are repositioning themselves as a premier service -- it costs a little more but they are reliable, do top quality work, are fully insured and bonded, etc. Time will tell how successful that strategy is but people are definitely trying to carve out niches. BTW, they're big on franchising out so if you struggle on your own and think a franchise might be a good way to gain instant recognition, you may want to check them out.

Good luck.

Here is the best explanation I've got about why small landlords will probably not get an option to do surety bonds through an insurance provider option:

I see no reason you couldn't do this on your own without an insurance company. Advertise "No security deposit for good credit" and offer them an alternative (not insurance) to pay $300 non-refundable fee instead of a security deposit. Oh well, on to something else...

J

[size=18]Cheap, easy, good. In any solution you can only have 2 of the 3.[/size]

Paypal is easy and good quality. However, the rate is not the best. Expect to pay 2.99%. Still well worth it in my opinion if you only have a couple rentals but is the most expensive out of the box solution. You can be up and running in about 5 minutes. This is a Easy, Good, but not Cheap.

Another option: I set it up through my company and we negotiated directly with a number of banks. I'm not going to lie: this is difficult b/c banks aren't used to credit card processing huge dollar amounts (10 properties @ $1,500 = $15,000 in and $15,000 out to owners each month) being distributed across numerous property owners' accounts. You need to be underwritten, have past financial statements, etc. It's a bear. But, the discount rate is much better. You should be able to get down to 2.2%+ for an internet transaction. This falls into the Cheap, Good (best), but not Easy category.

You can get lower rates if you accept credit cards only at point of sale (a leasing office or your house) where you can do positive ID verification, but real estate transactions are rated "high risk" by the credit card processing industry b/c rents are defaulted at a much higher rate than other purchases. Normally 2.85% minimum. American Express has the best, non-negotiated rates for the multi-family housing business @ just over 2%. Your other option to get lower rates is to lie about what you're doing (collecting rents) to the banks--not the recommended path.

Other than my company's solution, I am aware only of e-check solutions like CheckNow and PayRents.com. Both charge a premium for their service but are simple to set up and are geared specifically towards rent collection.

Want more?

just looking for alternatives and solutions. Also considered this:

Instead of paying a $1,200 security deposit all at once, pay deposit as add'l $150 per month.

These things might not be as important in central Ohio or Texas where rents are lower, but in NYC you may pay 2x month's rents as broker fee, plus first, last, and security deposit. Move in expenses can exceed $8,000-$10,000. Any way to cut them helps increase the pool of tenants.

You know, that's really interesting. I've always set my late fees extremely high: Usually a $250 one-time late fee + $100/day. (Except in Massachusetts, which doesn't allow you to collect a late fee unless they are 30 days or more delinquent. All you can do is send an eviction notice. Gotta love a tenant-loving state like MA!)

The results were a lot of fussing and some really angry tenants when they were late. It took a LOT of energy to get them to pay the steep fees and they weren't late afterwards but were certainly resentful for the remainder. Maybe yours is a better way to go--keep the fees low and think of them as income generation, not as much rent insurance. After all, you retain all the same rights to sue for delinquent rent regardless of the size of your late fees.

Good advice; I think I may change my model on that!