All Forum Posts by: Troy P.

It's not impossible, but it's also not very cheap, convenient, or ideal.

If you ask, you could receive written permission to do so.  Most people don't ask for permission and have no issues.  I wouldn't do that personally.

You are correct. Everyone talks like it's so easy to buy rental property with an LLC when, if done without breaching a contract, it's not very easy. I would seek written approval from the current lender. If they deny, be prepared to refi with a commercial loan.

Typically, you can have whomever you want on the deed, but if the loan is in the 3rd partner's name only, this is the only person financially responsible for making the payments.  As long as you have an agreement in place and everyone is on the same page, this should be fairly common scenario.

Quote from @Brittany Guimond:

What an informative thread this! I own all of my properties in my own name, and have each property financials flow through individual LLC checking/saving accounts. I use 1 credit card for everything (biz + personal), and keep track of all expenses for each property. If I have a property expense, I pay for the expense with my CC and then pay my CC bill out of the property account. I think as long as you have a system in place, you can make anything work, as long as you're not co-mingling funds between properties.

On the separate LLC discussion, my CPA advised me to keep properties in my own name (not LLC) and to consider an umbrella policy with my insurance provider for added liability protection.

It sounds like you have an individual Property Management LLC for each property? I'm curious of your reasoning behind this and what advantages it offers.

Quote from @Nicholas Spinazze:

Quote from @Andrew Postell:

@Nicholas Spinazze is that a single family home? The main reason that won't be a good BRRRR property is because you have to rent it. And in no market will a $1million home be a good rental. We target 3br 2ba homes BELOW the median house price point of each market. To clarify, if you purchased 5 $200,000 homes they will rent better and with more profit than one $1million home. If you do create that much equity, just sell it and go build 2 more of those homes....or buy 6 rentals...or whatever. Those are terrific numbers for a property so don't think that I'm saying it's not a good deal - that's exceptional! At that price point we flip...but not to keep for rentals unless they have many units attached to it.

Hope all of that makes sense.

Hey Andrew thanks so much for the prompt reply! It's not one single family but rather 2 single families each with an accessory dwelling unit (ADU) or mother in law suite. We believe based because we are walking distance from the university that we should be able to rent each single family for 2400 per month (800-900 per bedroom seems to be the going rate in the area). We then plan to use the ADUs as short term rentals. Given the proximity to the baseball and football stadiums we are reasonably confident that we should be able to generate 2500-3000 per month in revenue per ADU and if that doesn't work out we should be able to make them long term rentals as well. So we expect our total monthly revenue to be approximately 9800-10800. Given that does it still make sense to sell and if not would you say its BRRRable?

I like the numbers. I like that you have a backup plan, and it sounds like you've done your homework. If your numbers are conservative for market fluctuation, I would do the same. The only difference is, it's not really a BRRRR. You're not rehabbing and you're not refinancing. But this sounds like a great investment.

Quote from @Jeff Copeland:

Should you fight back over a $50 rent increase? Probably not. Your lease at the old rate is expiring. That is what you agreed to, and the landlord honored it. Chances are all of his costs (from insurance to taxes to repairs) have gone up considerably, and the fact that you are a great tenant is the reason it's only a $50 increase. 

 It's actually $150, which is more than 10%, which is probably more on the unreasonable side.  But I'm with the others.. maybe he gave you a deal to get you to move in and is now adjusting for market rate.  You may not have a better place to go for the price.  Let's be real, $1200 for a 3 bedroom home is not a bad deal.  If you need a roommate to help pitch in, that is still something to consider.  If you need to downsize since it's just the two of you, you may be able to find a 2 bedroom for less.  Just weigh all of your options...

I have only done this a couple of times, but in my experience, getting the contract correct and accurate is the hardest part.  You can probably get a copy of the state-specific contract from different sites via Google.  Once that is signed by both buyer and seller, I would submit to the mortgage company as well as title company with any earnest money deposits.  The mortgage lender will order the appraisal and you would do your inspections based on the timeline in the contract.  After everyone is happy, the title company will schedule your closing.  It's pretty simple but a very drawn out process with all of the information both the lender and title company may need.

Quote from @Rachel Mazzanti:

Quote from @Troy P.:

Quote from @Chris Seveney:

@Ponni Carlin

Step back for a second and I am curious why you have multiple LLC's

 This seems like the ultimate strategy for asset protection so this is what a lot of CPAs and attorneys will recommend.  They fail to mention that you need to be a part-time trained accountant in order to maintain the requirements of legal separation. My CPA told me the same thing. Just make an LLC per property. You'll find a lot of people on BP that do this, and a lot of people that think it's nonsense. There is no right answer. You just need to decide how much time you want to spend maintaining a business vs. having enough insurance to allow you to sleep at night. If you have a significant net worth, by all means get more protections in place. At that point though, I would be hiring someone to handle all of that for me.

To answer your question, Ponni, I would do it all at once.  Take the hit once instead of spreading it out over time.

Hello,

Can you elaborate on the bold part? Thanks. 

Sure. That is how I felt after speaking to a CPA and two attorneys, and one recommended an LLC per property. I'm neither a CPA nor an attorney so this is definitely not legal advice, just what I have come to understand. Creating an LLC and paying your Secretary of State does not give you magical legal separation. Your property has to be OWNED by the LLC. This means you have to get business insurance, keep business accounts separate, separate business bookkeeping, and not touch that money for personal reasons unless you do it a very specific way.

If you already own the property personally, you have to transfer/donate/sell it to your LLC.  That could trigger a due on sale clause with your current mortgage and the bank could force you into refinancing into a commercial loan with higher rates and shorter term (all I hear is less cash flow).  Everyone says they've never heard of this happening, but why knowingly breach a contract??

If you're purchasing a new home, you must do it with some type of commercial loan from the beginning like mentioned above.  I hear some people actually purchase in their personal name for better terms then transfer to their LLC after closing.  This seems risky becuase you have no clue who will own that note the day after closing and how wiling they will be to allow this donation.

The happy median I've found, and the only way I would use LLCs in the future is with a holding LLC for each property and a single Property Management LLC that runs the business, manages the properties, records income/expenses/debts for all properties, and pays the "owners" of all properties involved.  This seems like the simplest way of keeping everything legit in case you end up in a courtroom, but still does not seem very simple at all.  How do you pay all of the "owners" of each property?  You would still need to maintain a large number of separate books for those entities, as well as annual/quartly meetings, filings, etc. for each entity.  The accounting may be easier, but far from simple.  That is why I dropped the idea and will leave it up to a professional when/if that day ever comes.

Browse the forums a little more.  You'll see lots of veteran investors who do not recommend any LLCs unless you have large multifamily/commercial property or significant net worth.  A large sum of insurance has been perfectly fine for investors over the years, and I would love to hear a story where that proved otherwise.

Someone once said "marry the property, not the rate".  You can always find ways to improve cash flow later if the right property comes along and the numbers are good enough.  Don't get caught up in the rate.  I'm looking for another one myself.  The way I see it is, if they come back down, I can refinance.  If they stay here or go higher, then I bought at a great time.  Win-Win.

Quote from @Chris Seveney:

@Ponni Carlin

Step back for a second and I am curious why you have multiple LLC's

This seems like the ultimate strategy for asset protection so this is what a lot of CPAs and attorneys will recommend. They fail to mention that you need to be a part-time trained accountant in order to maintain the requirements of legal separation. My CPA told me the same thing. Just make an LLC per property. You'll find a lot of people on BP that do this, and a lot of people that think it's nonsense. There is no right answer. You just need to decide how much time you want to spend maintaining a business vs. having enough insurance to allow you to sleep at night. If you have a significant net worth, by all means get more protections in place. At that point though, I would be hiring someone to handle all of that for me.

To answer your question, Ponni, I would do it all at once.  Take the hit once instead of spreading it out over time.

Also, a lot of people push PM companies, but unless you have 5+ properties, live in a different region, or simply don't have time, you can easily handle it yourself.  There are a few web based "landlording" services available.  I pay for a premium account on one of them for my 2 properties and could not be happier.  Shoot me a message if you want some recommendations on self-managing.