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TouchyMcFeely posted:You make a good argument but our thinking is that a rental property with 18 years of equity (or more depending on timing) offers more opportunities than just handing him cash. If he's not interested he can always turn around and sell it. But if he hangs onto it he can live in it while going to school or if he doesn't go to school in the area or at all he'll at least start off with an income stream and a trade that he wouldn't have had otherwise. Think very carefully about what you're doing here. You're obligating him to some degree that cash would not. The real estate will constrain his choices. Cash will not. My parents didn't exactly give me rental properties, but as they've gotten older they've basically become mine...I would not give my daughter rental property and if she's younger than say 30 and my health is deteriorating, I will consider selling them so she inherits cash instead of real estate.
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Oct 31, 2017 15:34
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Thermopyle posted:Think very carefully about what you're doing here. You're obligating him to some degree that cash would not. I agree. At minimum I would include sufficient cash with the property to cover repairs, vacancies, and other contingencies for at least a year until they figure out what they’re doing and give them an out.
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Oct 31, 2017 15:38
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lol an 18 year old is going to spend any cash you give them on booze and [gender of preference] every single time Giving them a lot of money just means they'll buy better booze and [gender of preference]
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Oct 31, 2017 16:43
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Eric the Mauve posted:lol an 18 year old is going to spend any cash you give them on booze and [gender of preference] every single time Not if it’s structured correctly and for the purpose of the property. Anyway, see how complicated this is?
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Oct 31, 2017 17:09
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Eric the Mauve posted:lol an 18 year old is going to spend any cash you give them on booze and [gender of preference] every single time I don't think anyone would advocate handing most 18 year olds a briefcase full of cash. "Cash" is a standin for "more fluid than a piece of property".
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Oct 31, 2017 17:32
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Is this reasonable? $240k property, 25% down ($60k). 4 units at $900/mo giving NOI around $20k and ROI at 18% using fairly conservative numbers. I would supply $35k down, partner supplies $25k. Partner does most legwork, gets inspections/handles property management/etc. and they have been doing this for a while as I am just starting out and they are showing me how to arrange things and get some contacts. Equity and P/L split 50/50 going forward. Obviously, this hurts my cash on cash while juicing my partners. First year I'd be looking at ~16% while partner is at ~22%, with the gap closing as equity build evenly.
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Oct 31, 2017 23:09
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baquerd posted:Is this reasonable? Where the hell do you get a 4 plex for $240K that produces $3600/mo rent
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Nov 1, 2017 02:21
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So wait, just to make something completely clear for myself, I have five properties. Don't think it matters, but each is a condominium unit. I Inherited, not my choice. Each is owned by it's own LLC, and those 5 LLCs are owned by the Inc, of which i am the president/CEO/whatever. Each LLC/property has it's own separate insurance policy. Each LLC also has it's own bank account, into which rental income goes into. Once the rent check has cleared, that money is transferred to the Inc bank account, which is where all repairs and HOA fees come from. When i am able, I write myself (the person with a SSN) a check out of the Inc account. At no point are any of my bills paid directly from the Inc account. The only transfers between the Inc account and myself are the checks that I am able to write, WHEN I am able to write. I'm fairly certain that i'm free and clear on the comingling of funds (unless I should be paying the HOA fees directly from each LLC bank account, instead of all at once out of the Inc account?) I have things set up this way because my lawyer told me that this is the best way to do things. I have heard other people mention that having an umbrella insurance policy is the better, but also that having all the properties owned by one LLC/Inc is the better option as well, but those people have generally 10+ properties. A while back this topic was brought up (umbrella policy) and I arranged a free consultation with an accountant who reviewed things with me, and said that this is essentially how he would have set things up as well, if i had come to him initially. Not sure if it matters too much, but it's in Michigan.
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Nov 1, 2017 04:37
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BEHOLD: MY CAPE posted:Where the hell do you get a 4 plex for $240K that produces $3600/mo rent In a place where property taxes are 7.5k on a 240k house. Overall return seems solid but not crazy. There are other similarly priced properties on the market.
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Nov 1, 2017 10:31
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baquerd posted:In a place where property taxes are 7.5k on a 240k house. Overall return seems solid but not crazy. There are other similarly priced properties on the market. This. In some of the eastern Cleveland suburbs you can get $1500 a month rent for a $90k house because of a combination of property taxes and people out here having a lot of trouble getting mortgages for a variety of reasons. Several of the major lenders have basically redlined these areas by requiring a higher credit score and lower DTI before they’ll lend because of the number of foreclosures that happened back during the crisis. Google “Slavic village foreclosures”. Go into Cleveland proper or the southern suburbs and that same $90k house will rent for $800. In a demonstrably comparable neighborhood. Edit: the count (not fixing this typo  ) assessed my house at $249 for this year and my tax bill was about $11k 
Jealous Cow fucked around with this message at 12:37 on Nov 1, 2017 |
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Nov 1, 2017 12:32
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So what, thread thinks this deal is good?
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Nov 1, 2017 13:01
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baquerd posted:So what, thread thinks this deal is good? I guess it seems fine to me assuming no other serious issues like the property doesn't need a roof for the next couple years. Cash on cash turn key rental returns like that are difficult if not impossible where I live.
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Nov 1, 2017 14:03
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BEHOLD: MY CAPE posted:I guess it seems fine to me assuming no other serious issues like the property doesn't need a roof for the next couple years. Cash on cash turn key rental returns like that are difficult if not impossible where I live. Thanks, but yeah - it's turnkey, new roof and new appliances as of 2014. Will get a full inspection contingency too.
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Nov 1, 2017 14:05
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FlashBewin posted:So wait, just to make something completely clear for myself, Consult with a lawyer, but in general the smaller your operation the more likely a simple insurance policy will be fine for you. It also depends on what other assets you have. Also note that it's in a lawyers and accountants best interest to steer you in the direction that requires the most lawyering and accounting. Not that they're all trying to scam you, but everything looks like a nail... That's why it's important to get a thorough explanation of the why. Like a specific explanation of why this nested corporate structure is so much better than an insurance policy or two.
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Nov 1, 2017 14:05
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Thermopyle posted:Consult with a lawyer, but in general the smaller your operation the more likely a simple insurance policy will be fine for you. It also depends on what other assets you have. It’s funny... I have one property with a mortgage in my name that I’m renting out. I went to talk to an attorney about putting it into a land trust without my bank calling the loan and he said “ehhh that’s overly complicated. Just get good insurance and keep up on maintenance.” He then let me list him as my registered agent but never charged me lol?
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Nov 1, 2017 16:25
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You can get a million dollar umbrella policy for around 350 a year. The umbrella policy also kicks in if you are in a car accident or if something like a dog bite or slip in fall happens at your personal residence and it is over your regular policy limit. It sounds like you are covered now against liability for the rental units. How much does it cost in legal fees and state fees to maintain 6 LLC?
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Nov 1, 2017 16:52
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So here's a simple question: what do the returns on renting out real estate look like these days, compared to investing in an index fund? Assuming in either case that this is a long-term investment. The index fund is a whole heck of a lot less work, so I would assume that rentals pay better, but how much better for how much extra work is the rub, isn't it?
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Nov 1, 2017 16:56
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TooMuchAbstraction posted:So here's a simple question: what do the returns on renting out real estate look like these days, compared to investing in an index fund? Assuming in either case that this is a long-term investment. The index fund is a whole heck of a lot less work, so I would assume that rentals pay better, but how much better for how much extra work is the rub, isn't it? Depends on where you're at and the specifics of your financing and property.
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Nov 1, 2017 17:08
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lampey posted:You can get a million dollar umbrella policy for around 350 a year. The umbrella policy also kicks in if you are in a car accident or if something like a dog bite or slip in fall happens at your personal residence and it is over your regular policy limit. It sounds like you are covered now against liability for the rental units. How much does it cost in legal fees and state fees to maintain 6 LLC? I pay a lot less than that, but I guess it depends upon your state.
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Nov 1, 2017 18:04
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I couldn't *find* any companies who did umbrella policies, although to be fair I didn't look all that hard. The condos are all paid off (LLCs) as is my personal home(which is in my name,separate from the LLCs/Inc) My main concern, that no matter what happened at the rental properties, I would have minimal risk to my own personal residents/assets. As it was explained to me, if something happens to Property #1, they can't go after 2..5 because of the way this is structured. I think the fees for the LLCs are $45/year (each) and the lawyer charges me hourly as needed, whether it's for information/advice/evictions. Insurance for each LLC is about $250/year, roughly. Still, an umbrella policy (for the rentals) is something to look into i suppose. I don't allow pets (lets not get started on the ESA or disability pet issue...) So really, the only concern i have is if someone gets hurt, and even then, as my rentals are usually up to date on their city rental inspections, it all depends on *where* they get hurt as to whether or not it's my responsibility. HOA has a form lease-addendum that releases them of any reliability from injury on the common grounds, but i'm not entirely sure that would stand up against slip and falls (as it is the HOA's responsibility to do maintenance on the grounds). When I first got these properties, my main concern was someone doing something to make the property unsafe and then saying that it was like that when they moved in (good example of this is loosening the screws on the stairwell handrails) but since i take a million pictures before someone moves in....
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Nov 1, 2017 22:24
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I had my tenants sign a lease amendment to add her boyfriend to the lease. They filled out the paperwork with the condo association registering the tenants and their vehicles. The association president called me the next day to tell me that I have to evict my tenants because they have five people living there and the condo charter says maximum of four. I have no copy of this rule in the rulebook. He said its part of the charter from when the condo association was founded. He said he doesn't want to be involved with evicting people, and wont do anything if I just don't renew the lease after it expires, and if they don't get any more complains about the tenant's vehicles. I mean, its a two bedroom, its not ideal for two adults and three children. But they pay me and keep the place clean. I know for a fact that there are other units with five people in them. I don't want to open this can of worms and start ratting everyone out, as much as it would help me as the people upstairs spill insane amounts of water, like we get a new water spot on the ceiling about three or four times a year. But I think we are hosed here?
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Nov 2, 2017 16:57
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You are definitely responsible for abiding by the formally adopted bylaws of the condo association and a summarized handbookcould definitely contain an omission or typographical error that could end up being your responsibility. However, that being said, HOA rules that restrict occupancy by number are potentially very dicey and questionable to enforce, because they easily give the appearance of discriminating by family status. I guess it is really up to you to decide how serious you think this HOA might be by attempting to find or otherwise continue to bother you about occupancy of your rental unit as opposed to replacing good tenants with a new set that are lesser in number.
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Nov 2, 2017 18:31
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If it was me I'd just ignore them.
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Nov 2, 2017 18:36
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So I renew the lease next year and they move to evict on my behalf and charge me their costs?
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Nov 2, 2017 19:00
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FogHelmut posted:So I renew the lease next year and they move to evict on my behalf and charge me their costs? I mean it all depends on your specific HOA, but every one I've ever dealt with is incredibly disorganized and unprofessional. I would expect them to not even remember about it and if they did I'd expect them to back off when I pointed out all the other units with too many people in them.
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Nov 2, 2017 19:10
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I had an issue like this pop up. My tenant--the tenant I signed--was just her and her grandson. Then she moved in her boyfriend, who was soon her ex. Then she moved in her (ex?) boyfriends kid and his girlfriend, and their kid. So 6 people in a 2 bedroom condo. I called and asked the HOA if they had a limitation, they said no. I called and asked the city, surely the city has limits as to fire codes or something? No, nothing. Long story short, there wasn't really anything I could do. She was evicted for other reasons, but nobody had any rules on the books regarding this. In a different city, the city I live in, there is/was a 3br home that had several generations of people living in it. Rumor in the neighborhood said that there were 17 people living in it, and the fire department had something to say about that, but I either never heard about the end result, nothing ever happened, or it was all BS.
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Nov 3, 2017 01:51
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FlashBewin posted:I had an issue like this pop up. My tenant--the tenant I signed--was just her and her grandson. Then she moved in her boyfriend, who was soon her ex. Then she moved in her (ex?) boyfriends kid and his girlfriend, and their kid. So 6 people in a 2 bedroom condo. Your lease should definitely specify that only adults 18 or over on the lease are authorized to live in the home. You should make it clear that you will be checking in occasionally as well. The girlfriend signs a lease and then her boyfriend moves in is a classic professional bad tenant behavior and the reason is almost always that the boyfriend has some kind of criminal record or other serious problem and they know you would not rent to them otherwise.
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Nov 3, 2017 17:18
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Good to know. I'll be googling boiler plate leases to get the correct wording and add it to my lease for the next time someone signs/renews.
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Nov 3, 2017 23:30
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BEHOLD: MY CAPE posted:Your lease should definitely specify that only adults 18 or over on the lease are authorized to live in the home. Just to be clear, you're not saying "No kids allowed" are you? It's been awhile since my Good Landlording class but I'm pretty sure I remember that you're not allowed to deny based on age or whether a person has children.
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Nov 4, 2017 01:06
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TouchyMcFeely posted:Just to be clear, you're not saying "No kids allowed" are you? It's been awhile since my Good Landlording class but I'm pretty sure I remember that you're not allowed to deny based on age or whether a person has children. No, only adults on the lease are allowed to live at the unit, or in other words all adults living at the unit must be on the lease, with a corollary to the effect of no guests for longer than 14 days in a 6 month period or similar wording to prevent unauthorized tenants from living in your unit and to prevent guests from establishing tenancy in your unit (which becomes a legal problem for you once it occurs). Your state may have more specific definitions of tenancy that can guide your lease text or an attorney can draft a standard lease for you to use.
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Nov 4, 2017 02:13
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BEHOLD: MY CAPE posted:No, only adults on the lease are allowed to live at the unit, or in other words all adults living at the unit must be on the lease, with a corollary to the effect of no guests for longer than 14 days in a 6 month period or similar wording to prevent unauthorized tenants from living in your unit and to prevent guests from establishing tenancy in your unit (which becomes a legal problem for you once it occurs). Your state may have more specific definitions of tenancy that can guide your lease text or an attorney can draft a standard lease for you to use. Phew, ok. I was hoping that's what you meant. With the amount of tom-fuckery I've come across from lovely landlords I just wanted to make sure.
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Nov 4, 2017 12:49
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Would taking tenants out for lunch be tax deductible at 50%? Trying to create a direct positive relationship with them.
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Nov 18, 2017 16:28
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baquerd posted:Would taking tenants out for lunch be tax deductible at 50%? Trying to create a direct positive relationship with them. I dunno, but it seems like a bad idea to me. What do you hope to gain out of this endeavor?
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Nov 18, 2017 18:07
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baquerd posted:Would taking tenants out for lunch be tax deductible at 50%? Trying to create a direct positive relationship with them. Be a good landlord by being consistent and keeping up on maintenance. Don’t form a personal relationship. It opens you up to not just emotional manipulation, but potential civil litigation depending on your behavior and how clever your tenants/their attorney are.
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Nov 18, 2017 18:13
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Thermopyle posted:I dunno, but it seems like a bad idea to me. Create a direct relationship where they are better about letting me know when things are wrong and can think of a friendly person when it comes to how they take care of the place. Probably need new leases with all the tenants too, can explain things in person and avoid stress for everyone.
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Nov 18, 2017 18:16
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baquerd posted:Would taking tenants out for lunch be tax deductible at 50%? Trying to create a direct positive relationship with them. New tenant's pretty hot, huh?
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Nov 18, 2017 19:33
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Eric the Mauve posted:New tenant's pretty hot, huh? Married, but also no. Am I crazy thinking spending 20 bucks and some time can lead to better relationships?
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Nov 18, 2017 20:16
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baquerd posted:Married, but also no. Am I crazy thinking spending 20 bucks and some time can lead to better relationships? Yes, I think so, because thats not the type of relationship that makes for better tenants. What you want out of your tenants is someone who pays their rent on time and doesn't tear poo poo up. What your tenant should expect out of you is someone who is responsive to their legitimate needs. I cannot think of any way that your proposed course of action helps on average.
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Nov 18, 2017 21:25
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This is reminding me of the adage that you should never go into business with family or friends. I would say there's nothing wrong with dropping by, having a chat, maybe give them some cookies or something, and make it clear that you want them to let you know if there's anything wrong so you can get it fixed ASAP. Taking them out to a meal is a bit too familiar for my tastes though.
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Nov 18, 2017 21:41
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I agree with the other posters. I've thought of things to do for our tenants over the years, from christmas cookies to dinner invites, and always decided against it for the exact same reasons mentioned. What *has* formed a strong and valuable relationship is, again as the other posters put, being a good landlord: timely repairs, reasonable rent, we offer a 10% December discount, etc. You'd think this would be bog standard, but it's apparently such a rarity that they treat us like we walk on water.
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Nov 18, 2017 21:50
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