|
North Minneapolis Property Owners Workshop(1) No charge for owners with property in North Minneapolis! Where: 4th Precinct Community Room Time: 6pm to 8:30pm Dates: Thursday, June 17 (These are the same workshops, please RSVP for only one) Topics: Rental License Requirements of Owners Dealing with Criminal Activity – Luther Krueger, Crime Prevention Analyst Resources Available to Owners and Managers of Rental Property – Lisa Peilen, Minnesota Multihousing Association Networking with other owners Space is limited to maximum 40 seated, please RSVP by June 15th to me for the June 17th workshop, and July 13th for the July 15th RPOW–include a current list of your Minneapolis properties. We are limiting this inviation to north side owners only and due to the high demand citywide will be adding 4 more workshops to fill in the schedule for 2010. Luther Krueger, Crime Prevention Analyst |
|
Considering Hiring a Property Management Company?(1) When I meet with new investors, this is often a major part of the discussion. Who is going to manage the property? Are you going to collect rent, but have someone else do the maintenance. Alternatively, maybe you see this as a hobby and want to do all the maintenance. Other investors see this as a passive investment and are not interested in even knowing the names of their tenants. Chris Thorman wrote a long post of many things to think about when you are considering using a property management company. Go over and take a read at software advice. |
|
Broke My Own Rules(3) I am human. I make mistakes. Sometimes I don’t even take my own advice. This time I was desperate/frustrated/annoyed that I could not rent out a great 1 bedroom apartment that we just renovated with new windows, redone hardwood floors, new kitchen and bathroom. I was renting it for $725 per month and then dropped it to $695 per month with a couple showings, but no applicants. Finally a guy shows up with his pregnant girlfriend. Very well spoken. He is a contractor and made decent money. She had a full time job. Things were looking good. Until he tells me he has 2 pit bulls. I knew that I knew I should never take this guy. But it was coming to the end of the month and I was going to lose another month’s worth of rent, so after he convinced me they would be OK and not a problem, I agreed. That decision bit me in the ass, (figuratively). The dogs were very aggressive to anyone in the yard. They tore up the grass and even cornered a neighbor lady and wouldn’t let her move until the tenant called them off. The final straw is when the neighbor saw the tenant hit the dog with a shovel in the head when it was barking. Now I have animal control calling and wanting to get a warrant to break down the apartment door to take the dogs. Multiple trips to the apartment later, the dogs are mysteriously gone when animal control shows up. Repeat after me: never, never, never take aggressive dogs. No matter how sweet the owner says they are, these dogs were bread for their aggressiveness, it is tough to train this out. I have nothing against the dogs, but they are by their nature aggressive. This is no different than trying to teach a pet alligator not to bite. By the way, if a tenant ever says they have a American Staffordshire Terrier, that is simply another name for a pit bull. |
|
Should You Transfer the Title of Your Investment Property Into Your LLC?(0) In a perfect world, banks and/or lenders would lend money to new investment property LLC with no income or credit history, thus allowing you to purchase your investment property in the name of your LLC. Should you transfer the title of your investment property into your LLC? You could probably ask 10 different people for their position on this issue, and receive 10 different answers. My position is that I do not like to transfer title from the individual to the LLC – for a couple of reasons. First, transferring the title when the mortgage is still in your name triggers a due on sale clause within the mortgage/note. Second, if you ever go to refinance, you will have to transfer title back out of your LLC to you individually, creating a strange series of transactions for your lender and/or title company to sort through. My position rests on the assumption that you have properly formed your LLC, complying with all of the statutory corporate formalities including organizational minutes, bylaws, appointing the Board of Governors, Managers, Membership Units, etc. In addition, all of your business dealings are done in the name of the LLC – your lease with the tenant will be between the tenant and the LLC, the tenant should pay the LLC, and the LLC has a separate bank account and accounting records. From a legal standpoint, the tenant’s contract is with the LLC, not with the investor as an individual. If something goes wrong, they should sue the LLC, not the individual. That is not to say that someone couldn’t try suing the individual – it is not uncommon for a litigious person to throw everything against the wall to see what sticks. Even if your strategy was to transfer title from your personal name to the LLC in order to “tie” the property to the LLC, the mortgage would still be in your name anyway, thus leaving the same issue for that litigious person to throw against the wall. In addition, if you completed all of the other steps to adequately form and operate your LLC, the argument to be made is that it would be bad policy if a court ruled that in order to receive liability protection from your LLC, that you should have violated the due on sale clause in your mortgage/note. Again, every new business must start the ball rolling somewhere. Every new business is started with the capital or credit of the owner. Eventually when you have built your portfolio, built your LLC’s credit history and property equity, you will no longer need to purchase properties with your own credit and in your individual name. Your goal will be to get loans through the LLC and thus title in the name of the LLC. Remember, most banks do not make loans to brand new LLC’s, therefore you must start the ball rolling by purchasing your property personally. Perhaps the bank/lender will allow the LLC to purchase the property with the individual’s personal guarantee or co-signature on the note. If the bank will not accept the personal guarantee, there are several other options to consider. Some strategies could include the individual leasing the property to the LLC, which would then lease the property to the tenant. Alternatively, there could be a written agreement between the individual and his LLC whereby the individual pledges and confers upon the LLC the right to possession of the investment property. All of these alternatives should be documented through company minutes of the LLC that acknowledge and authorize the LLC’s use of the investment property. Having these added formalities can only strengthen the liability shield created by the LLC. Please feel free to contact me at the number below if you need assistance, have questions or concerns with respect to properly forming your LLC or incorporating additional investment property ownership strategies to strengthen the liability shield created by the LLC. Matt Engel The Engel Firm, PLLC Union Plaza 333 Washington Avenue North Suite 300 Minneapolis, MN 55401 W: 612-373-7060 F: 612-465-6211 C: 612-385-0554 |
|
Reminder: Investment Property 201-Getting Started with Quickbooks(1) This is a must attend for all landlords. Learn how to make your bill paying and record keeping much more organized. This free seminar will launch you down the path of watching your costs and income much closer. If you are new to Quickbooks, this will help you get started. This seminar is held in Burnsville at 6:30pm on January 26. Click here to register. |
|
Partnerships and Rent Collection(2) Partnerships in investment property is a fairly common practice. I was never one to want a partner initially, but after watching some successful investment property partnerships, I am convinced more than ever that there is at least one place they can be a huge benefit. This place is in rent collection. I am often amazed at how far a landlord will let a tenant go on paying their rent. I even fall into this siren song occasionally: “if I evict them today, I will get nothing, but if I wait just one more week (like the tenant says they need), I might get paid”. While it rarely works out that you get paid, it always seems like the smoother path to wait another week that go to through the ugly process of filing and eviction. Most individual landlords make this mistake. Call it Minnesota nice or just the fear of confrontation, I have not met many individual landlords that are really as hardcore at rent collection as they need to be. When watching several successful partnerships recently, I noticed that they seem to be much more business-like and unwavering at rent collection. It is due on the 5th, by the 6th they send letters and statements, by the 11th they are filing evictions. Maybe it is male ego or something, but it seems like one partner will not allow the other partner to deviate from the rental collection rules. I suspect that individually, they might make exceptions if they weren’t accountable to anyone else. Together the partners make a stronger team. Rent collection is necessary part of being a landlord, but also one of the least enjoyed or maintained. This is how you get paid, this is how you pay your bills. If you don’t have a partner in the business, be accountable to your spouse to collect all the rent and in a timely manner. |
Contacts and information
Copyright, Scott Ficek-2011 Re/Max Advantage Plus MN Real Estate Team 17850 Kenwood Trail Lakeville, Mn 55044 952-898-5800
|
Social networks |
Most popular categories |
