All Forum Posts by: V.G Jason

@V.G Jason I/O is a great strategy for maximizing return on equity. It's no different than the refi till you die believers where you keep stripping equity to buy more assets, except you avoid the inefficiencies of constantly refinancing.

It also works for high appreciation markets where you don’t expect to hold the asset forever. It can also work for buy and hold investors in growth mode.

I know you don't want to hear it, but you are spending a lot of brain cells and time learning how to be a business owner when you have no business. No brand-new investor needs an LLC and you certainly don't need a Holding Company. You want to set up protections for assets you don't have. You want to structure protections for a PM business that is non-existent.

Do you want to protect yourself? Obey the law and treat people fairly. But properties and build a business before worrying about how to protect that business. 

 See my thing is I'd expect interest rates to continue to increase at smaller percentages...this is what powell basically said they were going to do. The thing is, we still have persistent high inflation, so maybe lower rate hikes over a longer period of time. Layoffs are just starting to tick up, but there will be more to come...all this takes time to play out. 

The "waiting for rates" thing makes no sense. Rates will go up then they will come back down slightly and stay there, they're not going to be back at sub 3% - we already saw what that did and rates this low have never happened in history either. So could it happen again...yes, but probably not. Rates have literally been decreasing since the 80s...makes you wonder if some of the appreciation the housing market saw over the last 40 years was due to that. 

I mean, all else equal, it's always better to buy at a higher rate & lower price vs higher price and lower rate. 

See thing kicker here is supply and demand - supply takes a long time to change and has remained relatively constant. Demand on the other hand can change rapidly (supply cannot keep up with demand) - when the govt drops rates demand ramps up quickly (and supply cannot keep up so we see an increase in prices). The interest rate is driving the demand...that's why now we are seeing the opposite a major drop in mortgage applications, asking prices etc due to interest rate hikes. The thing is...this takes time as well. Comps are driven from houses sold 6 months ago (but guess what interest rates have gone up significantly) so people are comparing their houses to those sold 6 months ago and wondering why they are not selling...priced too high! There will be many people in many areas that see a decrease in their home values. I mean something isn't going to go up 40-50% in a year and not come back down...

 Forgot to mention, lowering the rate and shortening the loan. 

Still missing the part where it cashflows...

The principle is cool of using private capital to fund the downpayment and yes the investor payments will decrease over time. This is savvy I'll give you that. 

The strategy now is to wait until interest rates come back down from what you said. We have never in history seen sub 3% rates, my bet is that won't happen for a very long time if ever...so what will happen and what is happening right now is that prices are coming down because demand is down due to interest rates. So MOST places are not going to appreciate for awhile, lots of places are going to be underwater by 10%, this is happening right now. Like I said, I think it's a cool strategy to get ownership using private capital, but these places will not cashflow nor appreciate for a very long time in my opinion.

The main benefit is the lower payment. At 8.65% on a P&I 30 yr fixed DSCR, the payment makes it harder to qualify for them. In some instances you have to reduce the LTV to make the deal work.

 In that case then it wouldn't make any sense. If your goal is to pay off the mortgage early, you would refinance to lower the rate and pay down the principal faster. If however, you plan on leveraging and using the property as a base to buy more, then it could make sense. 

Inside liability protection for LLC is the same in every state.

Outside liability protection for LLC depends from the state.

Some states have charging order protection as sole remedy for single and multi member LLC. WY is one of them.

Some states have charging order protection as sole remedy for multi-member LLC only, but not for single member. FL is one of them since Olmstead vs FTC.

So using your holding LLC in WY will give you outside liability protection for all the sub LLC owned by it in other states.

In my setup, I have one multi member holding LLC in WY. I also have one C-Corp acting as management company. This C-Corp is a 1% member of the WY holding LLC, so it is technically one of the owner of the properties titled in the sub LLC, and as such can manage them without needing a property manager license in some state.

Using a C-Corp for the property management let me get all the fringe benefits you can get with a Corp (health reimbursement plan, solo 401k, deduct all investment expense). I can choose how much active income my C-Corp makes to match its expenses. The C-Corp is public and I am the face of the corp. But for the tenants I am only the property manager, I can always blame the 'owner' for the rent increase. In Florida, the lease can be signed by the property manager and the owner does not have to be disclosed. In some states, the lease need to mention the name of the owner, but that would be an LLC where you can't track the beneficial owner as it points out to an anonymous WY holding.