All Forum Posts by: William Hochstedler

The service you subscribed to offers to act as your registered agent for the LLC which is merely the point of contact for the entity that is registered with the state.

In the articles packet they sent you, there should be some document naming member(s). That will be the person who has signing authority to bind the LLC and do things like transferring property.

It sounds like you've gotten to step one of creating a legal entity with a registered agent. But you still have to create the organizational structure for the LLC, how it's managed, who can sign, how it's taxed, etc. The operating agreement is where that all happens.

Here's a basic overview:  https://www.biggerpockets.com/blog/guide-starting-llc

The bottom line is that until you really understand all of the benefits and pitfalls (see @Jeff S.), it's probably best to get tailored advice from an experienced attorney.

I believe you said you closed on this in another thread.

There are still some questions that we might learn from:

  1. Did you or the sellers use a Realtor?

  2. If you didn't use a Realtor, where did you get the forms used in the transaction?  (Idaho Realtors' forms would have protected you from this).

  3. Idaho statute requires most sellers to make certain disclosures.  Did that happen?

  4. I'm not an attorney, but it's my understanding that pursuing a buyer for specific performance is highly unusually because closing funds are fungible and there is nothing unique about a specific buyer.  So the demand was most likely intimidation tactics.  Did you get informed guidance on this?

  5. Dispute resolution clauses typically give a damaged party the option of taking earnest money as liquidated damages OR pursuing legal action.  Your demand letter threatens both.  Was this considered?

Hopefully, you're okay dealing with the home you bought.  But if there are costly issues that you encounter, I would take some of the advice in this thread and still consult an attorney because you may still have options.

Sorry you experienced this.  Sounds like a gun-to-the-head purchase.

The good news is that over time, all properties generally get right side up if you turn them into lemonade.  So moving on is usually the best policy.

Start with BP's landlord resource hub:
https://www.biggerpockets.com/resources/categories/property-...

In Utah, we're lucky to have an excellent landlord association, Utah Rental Housing Association, that provides education, forms, and many other resources.  You'd be well served to join them and take a couple of their classes (while you meet some fellow landlords):

https://www.rhautah.org/

Welcome to BP!

BP has a lease package here: https://store.biggerpockets.com/products/landlord-forms-by-s...

Another good resource in most states is the state apartment association. These are landlord trade groups that help write the landlord tenant laws. So their leases are "the horse's mouth". They might have some good recommendations for setting up an LLC if no one else chime's in here.

https://www.iaahq.com/member-benefits.html

These two sources are going to be your best bet for forms by far.

Utah has been booming for the past decade by every metric.

The instruments needed for the transaction will be state specific which means you should have someone from California chime in with resources who can provide low cost documents (as these will be boiler plate).

@Bradley Buxton makes a very good point to make sure to do your due diligence as you won't be an owner occupant like your in-laws.

Last bit of advice: Because this is a friendly deal, you want to take your time to make sure you structure it in a way that maximizes tax and cashflow benefits for both parties.  Your father-in-law will want to minimize his tax liability on the capital gain and think about how the sale fits into his estate planning strategy. You will want a payment low enough that it makes sense for you.  Remember you can structure this any way you want to accomplish those goals.  (eg: installment payments over 50 years, having the balance balloon upon his passing, etc).  So it would be best for him to first understand how this would impact his taxes and estate planning then structure the sale based on that.

We're definitely feeling it.  We're getting nailed in auto insurance too.

Any ideas why these states? Is it because of state level controls?

I'd love to learn more about what's going on here.

Welcome to the wonderful world of real estate!

It sounds like you've absorbed a bunch of problems already and a new sewer line and the current basement situation will cost you way less than the $50K in fees to sell it.  You have a decent loan on the place that you won't be able to replace from a cashflow standpoint.

So keep at it.  In my estimation it takes 2-5 years before a rental is broken in and feels like a good investment.  Until then it can be really stressful.  Everyone who has done this for a while has had a property or two like this one. 

Write it up to an education, spend some time sharpening your support team (particularly in the trades) and start thinking about how you can do it again!

It may feel like a kick in the head, but you're on the right track.

This post is my official pivot on Ogden.  I've been a long-time Ogden bull with posts like these:

https://www.biggerpockets.com/forums/12/topics/882817-local-...

https://www.biggerpockets.com/forums/586/topics/785294-who-h...

But, like a January 2022 study determined, Ogden is overvalued.  The study from some Florida Atlantic University took historical price change data from Zillow and compared it to current trends.  It showed the upward trajectory in Ogden to be among the most deviated in the country from historic market data.

At the time, I thought this to be an interesting and coincidental statistic because Ogden's upward prices were a function of the entire Utah trend and the laws of conformity.  It had little to do with Ogden itself.  In my view, if there was a reason that it was overpriced, it was that the ancient inventory was not being fully upgraded when flipped to owner occupants.  If the rising values had reflected property improvements and upgrades (rather than massive profit taking) the rapid rise in prices would have been justified.  The methodology of the study would not have been able to capture that nuance.

Unfortunately, for the last few years, there has been a missed opportunity for Ogden to take advantage of the comparatively lower price points and really cater to smaller pocket books with energy to rehabilitate the old houses.  Now, big multifamily projects are going up everywhere (possibly entitled years ago).  But there is little evidence of small, conscientious operators.  So neighborhoods haven't improved noticeably since they were half the current price.  Ogden has done nothing to provide for mom-and-pop landlords who might have brought stability to neighborhoods where owner-occupants aren't quick to adopt.  

Right now, the ROI isn't terrific (I have a handful of properties which I could sell for $250K-350K that I struggle to rent for $1400/mo). And the market conditions are unwelcoming (physically distressed inventory, difficulties with Ogden City, and poor tenant pool). As a result, many investors (including myself) are either spending a very small premium for way fewer headaches in other markets or moving farther afield to more promising opportunities.

In other words, Ogden failed to ride the gentrification wave that buoyed the REI landscape everywhere around it. Now it's just expensive for what it is. (I guess that's what overpriced means).

Because of all this, I'm still holding my Ogden properties.  But don't see enough near-term or mid-term upside to keep them if something better comes along elsewhere that I can transfer into.  Right now I'm doing better with my return on equity elsewhere. 

Hope this helps and I'm very interested to hear what others are saying these days.

The BRRR method is not about "numbers working" in a given market. It's about finding a situation where you can force enough value to create a 20%+ equity position. This way you can refinance out all of your cash and hard money positions.

Whether or not it will "cashflow" has nothing to do with BRRRR (except for maybe "repeating"!). That being said, it's very difficult to get rents to even cover PITI payments at 80% loan-to-value in Utah these days. Utah is one of the most expensive states in the country.

Not only that, but there's a robust wholesale community here which makes finding distressed and discounted deals hyper competitive. I get a dozen post cards a week! Moreover, wholesalers have cultivated lists of retail cash buyers who don't need the type of value-add opportunity you would to BRRR.

Bottom line is that you can BRRR anywhere just like you can make money in real estate in any market. But you have to be very creative and understand that if you're seeing deals from industry professionals (rather than sourcing them yourself), there's probably not enough meat left on the bone for a good opportunity to create value.

Good luck!