All Forum Posts by: Tom Meade

We're really talking about two things: protecting yourself personally, and protecting each asset from each other.

The most basic question is: is it safer to own investment properties in entities rather than in your personal name. The answer has to be yes. Of course there are cases where the "corporate veil" can be pierced, but if you set everything up correctly, then *operate it* correctly, the use of entities can and will save you a lot of headaches.

As to how many properties can be put in each entity, think of the most basic example. I own two duplexes in one entity. Someone takes a slip and fall out front of one of my duplexes and I'm liable because I didn't properly clear the snow or whatever. I've exposed the other "innocent" asset to any judgements issued for the plaintiff. It doesn't matter what the quality or the limit of your umbrella policy is, why would you ever expose multiple assets to each other like that?

I'm a commercial lender and I can tell you the number that gets tweaked the most is Cap Rate. As others have alluded to, the cash flow and DSC numbers are pretty straightforward calculations. Although I've seen some pretty questionable operating statements/pro forma NOI assumptions. Also, you have to be really careful about generalizing on Cap Rates. We've seen institutional quality assets in the best markets trade in sub-5% cap rate range. With interest rates at historic lows, you have a lot of money chasing yield, and institutional money (eg pension funds, insurance co's, private equity) has been pouring into real estate. And in this lower rate environment, investors can afford to pay higher valuations (lower cap rates).

I'm not an attorney, and I'm definitely not familiar with laws and regulations in Mississippi, but here's my two cents (here *are* my two cents?)...I would own everything in its own entity. I know it can be expensive and time consuming, but not as expensive as exposing all your assets to litigation on one property.

You can find the cheapest entity and use that for the property level entities. Lets say for example that's a real estate trust. Then create a single operating entity that will be the trustee of each of the lower level entities, then you're the GP or Managing Member or President/CEO of that operating entity. This is very common in the CRE world (usually using Limited Partnerships), and Single Asset Entities or Single Purpose Entities (you'll see SAE or SPE thrown around a lot) are the only way to insulate your deals from each other.

Depending on what type of deals you do (flips or buy/hold/rent) you may be able to have the actual dollars flow through the operating company, just creating a paper P&L for the asset level entity.

Again, I'm not an attorney, but have seen this done in the CRE world, and its the rough outline I follow for my investments.

Andrew Boimila - yea I'm a born and bred quincy guy...quincy and South Shore will be my focus. Def Quincy for my buy and hold rental units.

Thanks all for the welcoming comments. Just downloaded the BP app, hopefully this reply posts properly...definitely looking forward to learning as much as contributing! There's a ton of great content on here! I have been to a couple of local networking events recently, including Black Diamond and BAREIA - great turnouts and programs at both! @justin silverio hosted an unofficial Bigger Pockets event last week but I couldn't make it. Thanks again and happy investing!

Hi all,

I'm new to BiggerPockets and wanted to post an intro. My day job is with a National CRE lender, and hunting elephants is fun ($2MM minimum loan size) but my real passion is chasing local real estate deals. I'm a licensed contractor and real estate salesperson in Mass, and I've personally done a couple of rehabs, a tear down (for my now-primary residence) and had some success investing in non-performing notes (@NPN) during the height of the financial crisis.

I'm back in the game after a couple years on the sidelines. Have been lurking around the site for a few weeks and finally decided to go all-in! I have a multifamily rehab deal under agreement, going hard on a deposit tomorrow!

Look forward to connecting and sharing with members on this site - its obviously a great resource and I love the emphasis on free information sharing and giving back!

All the best,

Tom Meade

Quincy, Massachusetts