2 Questions
I have been reading through the information in this forum is great, thanks.
I am about to buy my first investment home and I have two main questions:
1) The property is about $125k and I am looking at closing costs of around $7500 out of pocket. I have read a few posts that suggest there are ways around using money out of your own pocket to pay these fees. Any sugestions? and
2) I plan on this purchase being the first of many as I want to make a career/living out of real estate investing. Rather than all of the affairs (lease payments, complaints, etc) being personally addressed to me as the landlord for my tenants should I create a sole proprietorship/corporation to serve as a conduit between myself and the tenants? I ask with the thought of tax consideration in mind, legal purposes (if I were sued they would sue the corp, not me) as well as I don't want my tenants directly contacting me. I would rather they contact a corporation.
Looking forward to the responses and I hope to be as knowledgable on this topic enough someday to help contribute to others' questions.
1) You can try to get the seller to pay for closing costs. I have done this and increased the price a bit so this is financed over long term (30 year loan). Sometimes the banks will limit the amount that a seller will pay for closing costs, however, they may be more favorable to 'carpet allowances' etc.
2) You will get a variety of opinions on this. I have my tenants mail my checks to my house and I try very hard to maintain good relations with them. I am looking into putting properties into corporations (particularly LLCs) and/or land trusts. I have run into some problems that need to be solved. My insurance agent told me that the two main insurers they deal with will not insure properties in either a corporation or a trust. Their solution is to have an umbrella policy and they claim that that is what most of their investor clients do. (What a surprise! If I went to a surgeon with an illness I am sure that the recommendation would be surgery.)
When you say you don't want your tenants contacting you, you must be planning on property management. If they need a repair and contact your corporation, who will respond?
These are just my thoughts and you will likely get opinions that run counter to mine.
Regards,
Ed
Great, thanks Ed
You should have no problem finding insurance under a corporation's name. My experience it is actually much easier!
I had a clerk at Farmers tell me that I could not buy ins as a Corp. I hung up and called back and get another clerk that said no problem. Never take no for an answer.
Good LUCK and Thank You
Hope this helps some
Ted Jr
Thanks, frogger and Ted
I suspect that I may be running into an uninformed clerk as well. One of the insurers I was referring to is Farmers. the reason I was given that they don't insure corporations is that corporations get sued more than individuals. I tried to explain that corporate structures might be set up to discourage law suits, but the response suggested I might be dealing with a monolithic bureaucracy.
It was the next day when I asked about trusts suggesting that trusts get sued rarely. I never got a reason why they might not insure properties in trusts.
I don't think I will have too much problem overcoming this, but I thank both of you for your inputs.
Regards,
Ed