All Forum Posts by: Wade Sikkink

I would be reluctant to bite off a 24 unit building as your first experience being a landlord. We worked our way up to the 14 unit building we own now. SFR, then 4 plex, then 14 unit building over the course of many years. Big multi's have unique issues like common area maintenance and a lot more tenants to deal with. Don't get me wrong, I am a big fan of larger multi's. I would really like to find a 24 unit to move up to next, but my recommendation would be to work your way up to it.

Good luck.

Bought myself a 2015 Dodge Challenger R/T Plus this year.  Love it.  Wife drives a Yukon Denali.

I don't drive the Challenger down to my apartment building, though.  I drive a beat up 2001 Dodge Ram when I'm going down there to work or meet a tenant for something.  Don't want them to think I'm making too much money :-)

There are a lot of different ways to determine "profit"

Short lesson here....Real estate makes money in 3 ways: cash flow, appreciation and mortgage paydown.  The potential profit you make depends on how you structure the deal and what your goals are.

For example, you could buy a SFR, and rent it out such that it doesn't produce any cash flow, but 2 years later you sell it and make a nice profit due to appreciation. In contrast, a multi-family property may have a good cash flow, but might not be likely to appreciate much if at all.

There are many different measures that people look at: cash flow, NOI, cash on cash, etc. A given property with a given NOI can have different cash flows and cash on cash returns based on how you structure the deal.

So really the answer is, it depends.  Clear as mud, right?  Sorry, if this makes it less clear, but how you measure profitability and what is an acceptable level depends heavily on what you are looking for and how the deal is structured.

Good luck.

The purpose of an LLC is to shield the owners from liability related to the operation of the business. Setting up an LLC is not the only way to do this. Insurance is also a factor. I personally have an LLC for our real estate business and good insurance. I think multiple LLC's for multiple properties is probably overkill for most people.

Just remember that if you do set up an LLC you need to properly maintain it (ie, don't comingle funds, etc.) or else it won't protect you.

Good luck.

I think the deal you have outlined is fair.  I disagree with some who suggest that you are not being compensated for your work in finding and managing the property.  You are getting 50% of the profit.  That seems to me to be adequate compensation.

Don't get greedy.  If you don't have enough money to invest on your own then without your partner there would be no investing, so take the 50% you guys have agreed to and get to work.

Good luck.

Very carefully.

I would recommend an LLC with clearly spelled out roles and responsibilities in the operating agreement. Don't assume anything. Everyone agrees to everything now, so this is a good time to put it all down in writing.

Most likely if the loan is made to the LLC you will all three have to provide a personal guarantee. The LLC by itself doesn't provide any real tax benefits, it simply passes the gains or loses through to the members personal taxes. What the LLC does is shield the members from liability related to the business.

Good luck.

Sorry @Debbie Plesz, but time for some tough love.  Timid people, or those afraid of confrontation should not be landlords. Period.  There are a million stories on BP of landlords being taken advantage of because they didn't push back on tenants.  Give them an inch and they will take a mile, as the old saying goes.

First of all, heed @Marcia Maynard's advice and never rent without a written agreement.  Furthermore, if the tenant doesn't adhere to the agreement, then immediately confront them and demand compliance.  If they don't comply, then they are gone. Period.  Don't allow yourself to be in a situation where you need the tenant more than they need you.

Good luck.

It really depends on where your current rents are relative to the market.  If they are meaningfully below, then you can raise them without much worry of people leaving.  How long has the seller owned the building?  If the seller has owned it a long time and is getting out of landlording then there is a good chance they haven't raised rents in a while and you may be able to.

Good luck.

@Luca Dal Molin Closing costs are not part of the cap rate calculation.  In your example the cap rate would be 10%.

Good luck.

Don't do it.  If you have to get rid of them for any reason it will be a lot harder if they have pre-paid a years worth of rent.

Why can't they just hold the money in a savings account and pay the rent when it's due?  If they are not responsible enough to pull that off then they probably wouldn't be a good tenant anyway.

Good luck.