Recent Articles
Above and Beyond Buyer Expectations
We all have our great listing marketing plans because it is easy to define which activities we should be doing to get a home sold but we don’t always understand it takes just as much marketing and strategy to support the needs of your buyers. Give your buyers the WOW factor by implementing the “House Wanted” marketing plan for every buyer you work with. This is how it works; you have a pre-qualified buyer (very important to pre-qualify) who is looking for a home in a specific area and you want …
Mobile Home Tenant Screening Guide
Ultimately whoever occupies your investment home is your decision. The choice of who will move-in, maintain and occupy your investment property should be carefully screened and cherry picked until you have the “perfect” tenant or tenant-buyer. Let’s get real, “In many areas of the country some landlords are fighting over the scarcity of renters in the market.”
After only a handful of year’s managing properties I have come to agree with the classic 80/20 rule. Eighty percent of the tenant problems that will arise are caused by only twenty percent of the residence. Therefore the worst part for me is knowing that most of these problems could have been avoided if I had spent five extra minutes qualifying each tenant before I allowed them access into my investment home.
So there is the dilemma; Do you rent/rent-to-own your home now to a less than qualified tenant with first and last months rent or do you wait (and continue paying holding costs) for Mr. & Mrs. Right?
Being a landlord isn’t always easy, you are responsible for making snap determinations for who can and cannot live in your home. Not only that but you have only a short period of time (days) and limited resources to qualify or disqualify these new applicants. Lets looks at the facts..
Screening Your Mobile Home Tenants
Verify Employment: Call the present and previous employers to see if the applicant still holds current employment, how secure his/her job is for future work, and if applicant has been reprimanded or suspended for any reason? If there is no response to your call, keep calling until you get through to a past employer. Employment shows the ability to pay your monthly rent or mortgage payment. A length of two or more years is nice to show stability.
Exception to Employment Length: Monthly income is necessary to insure your monthly bill is paid; however looking solely at the length of employment may not always be pertinent. Many hardworking employees have been downsized over the past 5 years due to no fault of their own, simply a negative economy.
Criminal history: DUIs, Armed Assaults, Robbery, Domestic Abuse, Misdemeanors vs. Felonies, Jaywalking, Parking violations, Etc. Whether renting mansions or mobile homes I am not comfortable with violent criminals or sexual offenders in my property. Make your own decision for this topic and stick to it!
Eviction History: You should not be surprised by a tenant leaving unexpectantly or not paying you on time if that tenant has had a track record of prior evictions. Typically recent past experiences will shed some light on how your newest tenant will behave towards you and the amount of respect they will show you and your property. If your tenant-applicant was evicted from his/her last place of residence or within the last 10 years than it should be no surprise when they stiff you for rent down the road.
Exception to Eviction History: The past is past. If a past eviction is over ten years old I will generally look the other way with no since rental blemishes. If a 30 something tenant-applicant just admits (before I run the background check) that in his late teenage years he was not as responsible as he could have been and got evicted I will generally overlook this blemish.
Sexual Predator: Check the nationwide database at http://www.nsopw.gov. This should have been disclosed by the applicant at the time of submitting the application. This may be a deal breaker for many of us!
Down Payment Ability: Let us be honest, price cures most past blemishes. If a tenant/tenant-buyer can put down a large down payment or deposit most of us have the tendency of looking some past credit or criminal hiccups. Ultimately if you are on the fence about letting your tenant-applicant live in your home simply increase the down payment or security deposit amount until you are happy to let the tenant rent your property
Honesty: I tell every applicant of mine, “We grade on honesty in addition to what we will find on your credit and background checks. Is there anything else we will find when we pull your background report?” If an applicant has had a criminal mishap in the past and admits/explains the situation to me prior to me finding it on his/her background it helps show honesty and I’ll allow the small infraction. If the applicant lies or forgets about his/her 2 felony convictions than I will have no alternative but to think he/she is lying and therefore they will be denied. Never rent to liars!
Credit: Credit is important; don’t let anyone tell you it is not. Credit is the barometer that landlords can use for a quick evaluation to see if the subject applicants may be a potential risk for rent or rent-to own.
Exception to Credit: Millions of Americans lost their homes and jobs during the housing crash in the late 2000’s. Many of these individuals had to foreclose or claim bankruptcy in order to save what little their families had left. It is for this reason ‘Credit’ should be looked at as guideline, not a rule.
In the beginning of my real estate career I was told to write down everything I looked for when screening my rental/rent-to-own tenant applicants. Write down what criteria I would accept and would not accept in a potential tenant/tenant-buyer. i urge you to do the same and write this list down, keep it in a safe spot (say the back of your filing cabinet). If anyone claims you choose another applicant over them simply refer to your qualifications guidelines sheet.
Happy, Safe and Profitable Investing,
- John
This Article is Copyright © 2004-2010 BiggerPockets, Inc. All Rights Reserved.
Mobile Home Tenant Screening Guide
This Article is Copyright © 2004-2010 BiggerPockets, Inc. All Rights Reserved.
Mobile Home Tenant Screening Guide
The Christmas Syndrome
Today’s employment numbers were disastrous. We are losing jobs when we should be gathering steam. Part of the problem is a general lack of confidence and part is a real systemic problem of having no job creation sector to lead us. The weak employment numbers suggest that real estate will have a long hard slog to get out of the slough it’s in. In variably, there will be calls for yet another homebuyer tax credit to stimulate the market. But should we have one?
I would argue that we’ve had enough …
Success Summit Drawing Winners: 2011 Swanepoel Trends Report
On behalf of Swanepoel team here at RealSure, Inc., we would like to congratulate all ten of the winners of the 2011 Swanepoel Trends Report Free Drawing at this year’s Tom Ferry Success Summit. This year’s winners include…
The SAFE Act: Most Confusing Legislation of 2010?
Today marks my 40th post for the BiggerPockets blog and yesterday I realized that up to this point I am yet to write a commentary. That changes today.
Pardon my rant, but I think the responses to this post will help a lot of people.
Ok, seriously? I can’t think of anything that has been more confusing as the Secure and Fair Enforcement Mortgage Licensing Act (aka SAFE Act) in the real estate investing community this year. The Act was first put in place in 2008, but recently there have been some updates made to the legislation (some of which won’t take effect until October 1). Depending on your strategy it may not mean anything at all to you, but as someone who leverages private money lenders and makes offers to homeowners that include owner/seller financing options, the SAFE Act has been a bit of a mind boggler.
I’ve spoken to real estate professionals and have also scoured the web for answers. A Google search on “S.A.F.E. Act and owner financing” or even a BiggerPockets forum search on “SAFE Act” will send your head spinning. So many different thoughts on the legislation.
I still have more questions than answers. For example,
1) How does it effect seller financing for properties my company wants to purchase? We make cash and terms offers all the time! If a homeowner wants to sell a property (one that is NOT his primary residence) to me and hold back a mortgage, does he need a license?
I believe that my fellow BiggerPockets blogger Clint Coons has addressed this in his recent post “Are You Safe to Sell Under the SAFE Act?” and my take from that post is that the sellers I’m making offers to do not need to have a mortgage license in order to provide seller financing to me as a buyer. I think we’re relatively clear on this issue. However, I’m much less certain about the following:
2) How does it impact how my company works with private money lenders? Do they now need to have a mortgage brokers license to lend my company funds to purchase properties for long term hold? If so, is there a reasonable workaround?
3) Does each state have its own separate version of how this works and how it will be regulated?
I’m also unsure of how the federal and state governments will enforce all of this. There seems to even be confusion among attorneys at the title companies regarding what’s ok and what’s not. Thanks in advance to anyone who can shed some light here on what may be very well be the most confusing legislation impacting real estate investors in 2010.
So? Your Thoughts?
This Article is Copyright © 2004-2010 BiggerPockets, Inc. All Rights Reserved.
The SAFE Act: Most Confusing Legislation of 2010?
This Article is Copyright © 2004-2010 BiggerPockets, Inc. All Rights Reserved.
The SAFE Act: Most Confusing Legislation of 2010?
Introduction to Internal Rate of Return (IRR)
Today’s Quiz:
What is my return on the following investment:
I bought my first investment property back in August 2008. I paid $63,500 for the house using my own cash. I spent the next two months rehabbing it with $34,000 of my own cash. It sat for about 5 months before I lease-optioned it for $1000/month in rent, starting May 2009. In August 2010, I refinanced and pulled out $66,320 in cash. It cost me about $2300 to do that refinance. I spent $1400 on property taxes in August 2009 and another $1200 in property taxes in August 2010. I’m expecting the tenants will be able to purchase the property for $120,000 in July 2011, and I’ll end up netting about $50,000 after all fees, commissions and loan payoff.
If you don’t know how to calculate the correct answer to that question – and as a real estate investor you SHOULD know – I highly recommend you keep reading…
Anyone who reads my BP blog posts or my blog probably knows that I’m a hard-core numbers guy. While I don’t discount “gut feel” when it comes to investing, if the numbers don’t work, it doesn’t matter how excited my gut might be. I like to examine the financial aspects of a deal before I buy, while I’m holding and then after it’s done. That way, I can mitigate the risk of financial surprises as much as possible.
Seeing as how I’m such a numbers guy, I find it very surprising when I speak to investors who don’t seem to have clue how to analyze a deal or how to determine how profitable a deal was after it’s completed. It’s not that most investors are stupid (far from it!), but many investors have never spent any real time learning the basics of analyzing investment numbers.
I’ve spent many of previous BP blog posts discussing how to analyze a deal upfront to determine if – in theory – the deal is a good one; today I want to tackle the other end of the deal and discuss how to determine whether a specific deal was profitable after all is said and done.
First, let’s clear up some common misconceptions. I’m sure most investors have heard terms like “cash-on-cash return,” “total return,” “return on investment,” etc. These are all terms that indicate in some way, shape or form how successful a particular deal is. The most common I hear people referring to is Return on Investment, or ROI. For many investors, this is the one number that summarizes the entire success or failure of a particular investment.
For those not familiar, ROI is calculated as follows:
ROI = (V1 – V0) / (V0), where V1 is the ending balance and V0 is the starting balance.
A simple scenario for using ROI to calculate an investment return would be as follows: On January 1, you put $1000 into a bank account. On the following January 1, you cash out the account for $1100. Your ROI on the investment is:
ROI = (1100 – 1000) / (1000) = .1 (or 10%)
You start with $1000 and end up with $1100 after a year for a return of 10%. Seems pretty straightforward and even the most non-mathematical among us should be able to do that type of calculation.
Now what if I give you the following scenario: On January 1, you put $1000 into a bank account. On February 1, you put another $500 in the same account. On September 1, you removed $250 from the account. And then on October 1, you removed another $250. On the following January 1, you cash out the account for $1100. Like the first example, you started with $1000 on the first day of the year, and you finished with $1100 on the first day of the following year.
So, is your return still 10%? At first glance, you might think so. In fact, using the ROI formula above, the ROI on this investment appears exactly the same as the previous investment. But, given that you had $1500 invested for several months of the investment period (from February through September), you’d think that a 10% return should have resulted in a higher ending balance. So, in actuality, your ROI is probably a good bit less.
As you can see, the ROI formula has two big limitations:
- For any investments that involve sums of money going in and coming out through the life of the investment, ROI will pretty much ignore every in-come and out-flow other than the first and the last;
- ROI doesn’t take into account the amount of time an investment was held. For example, let’s say in that first example, the $1100 was cashed out after 5 years instead of one – according to the ROI formula, the return is still calculated at 10%.
This is where Internal Rate of Return (IRR) comes in. IRR is the much more powerful cousin to ROI, and while also more complicated than ROI, it’s an essential tool that all serious investors need to understand. I’m not going to go into the nitty-gritty of how IRR is used (and yes, there are some downsides to using IRR that I won’t go into here), but I do want to review the basics…
First, you may hear IRR referred to by different names – on your mortgage truth-in-lending statements as annual percentage yield (APY), as the “effective interest rate” of a loan, as the discounted cash flow rate of return (DCFROR), or sometimes even as the generic rate-of-return (ROR). All of these things essentially mean the same thing, and serve to underscore how important and versatile the concept of IRR is when it comes to investing and finance.
(For the other hard-core finance geeks out there, IRR is most specifically defined as the discount rate that makes an investment’s net present value (NPV) equal to 0.)
Second, and most importantly, I want to do a quick summary of how to calculate IRR for a given investment. Unlike ROI, you can’t calculate IRR in your head. In fact, even doing it with pencil and paper is practically impossible. But, calculating IRR using Microsoft Excel (or any other financial software) is a piece of cake.
In Excel, list the monthly (or annual) dates of your investments in sequential order in one column. Next to each date (month or year), list the aggregate in-come or out-flow for that time period (in-comes are positive and out-flows are negative). Then use the XIRR function in Excel to calculate your IRR. Using the example above where we deposited $1000 into a bank account on Jan 1, deposited another $500 on Feb 1, removed $250 on Sept 1, removed another $250 on Oct 1, and then removed the remaining $1100 on following Jan 1, our Excel calculation would look as follows:
As we suspected above, our return was a good bit less than 10% (almost 25% less!), despite our ROI calculation of 10% return. As you can see, doing a quick ROI calculation in your head would left you feeling a lot better about your investment than it probably should have.
If there is enough interest, I’m happy to go into more complex uses of IRR in future posts, and am also happy to discuss some IRR nuances that sometimes affect the ability to accurately determine returns of some types of investments. In the meantime, if you’re interested in learning more about IRR and how to calculate it using Excel, there are some good online tutorials.
This Article is Copyright © 2004-2010 BiggerPockets, Inc. All Rights Reserved.
Introduction to Internal Rate of Return (IRR)
This Article is Copyright © 2004-2010 BiggerPockets, Inc. All Rights Reserved.
Introduction to Internal Rate of Return (IRR)
Real Estate Investing Rules from Richard Branson
“Even after careful research, not all ideas are good; sometimes your competitors have better ideas or they’re faster than you. The modern entrepreneur takes failure in his or her stride and moves on.” ~ Richard Branson, Screw It, Let’s Do It
Sir Richard Branson made a cameo appearance on the HBO show Entourage this week and it got me thinking about him and the life he leads. I actually had the pleasure of listening to him speak last year in a room of only a few hundred other entrepreneurs and the thing that stuck with me the most is how simple he keeps things. With hundreds of companies to run, I don’t think you could live life any other way. And a few nights ago as I contemplated what to write today, I thought about the life lessons he shared in one of his books, and how those can be applied to real estate (and should be applied for successful – and simple - investing success!). I mean – think about it – every house you buy is essentially a small business with it’s own target market of customers to rent or buy from you, it’s own expenses and it’s own marketing needs. So if you have hundreds of houses then it’s, in a smaller way, like Richard Branson owning hundreds of companies.
Now – not to worry – I’m not going to relive each and every lesson in an effort to motivate you to get off your duff and start taking action towards your real estate investing goals. I did think I would share my favourite five lessons from the book and apply them to real estate investing … but guess what … lesson #1 is basically just that:
Lesson #1: Just Do It
I really can’t say it any better than Sir Richard does:
“If you really want to do something, just do it. Whatever your goal is you will never succeed unless you let go of your fears and fly.”
Lesson #2: Be Bold but Don’t Gamble
As a real estate investor you have to take some bold steps. There is always uncertainty as you can never really know exactly what will happen but there is a big difference between gambling and taking calculated risks. Calculated risks are things you’ve thought through and mitigated in whatever way possible. A gamble is just taking a leap of faith that it will all work out. If you aren’t sure what the difference is or how to mitigate risks there are some great posts kicking around BiggerPockets that can give you a good basis of real estate investing fundamentals like:
- Captain Obvious – Old School Fundamentals Matter
- Grandma Was Right – Especially About the Farmer and His Mare
- Canadian Interest Rates Rise – Now What?
Lesson #3: Have Fun! Life is Too Short to Be Unhappy
I guess his passion for fun is why they featured Sir Richard Branson sandwiched between two beautiful blondes on Sunday night’s episode but I don’t think you have to find two beautiful people to go bowling with to make your life complete. I think that as a real estate investor you have to make sure you take time out for your family, your friends, and your fun time. This probably sounds a bit silly for people who are getting into real estate for the free time it gives you – but the reality is that many investors that are working to really get their business rolling also find themselves working all the time to keep up with everything they are trying to do.
Keep things simple. Focus on WHY you are doing what you are doing and remind yourself it’s not about owning more houses than the next guy or being the richest woman in your book club it’s about creating the life of your dreams and then living it!!
Lesson #4: Have Respect
I’m not going to tell you all the times we’ve been cheated by folks in the real estate business but it has been more than once. And it’s been by just about everyone you can think of from the property manager that robbed rent money from us to the tenant that worked the system so well she got three months free rent from us, and of course our joint venture partner that ditched out on a deal at the very last minute leaving us holding on to a pretty big potential problem.
There are people out there that don’t live by this rule but I believe that it’s one of the most important in all your dealings … treat others with respect. Just because a seller is in distress does not mean it’s open season to take advantage of them. Find a good solution for them and for you.
If you are doing something that will haunt you at night – stop – and don’t do it.
I believe what goes around comes around and karma is a big witch. 
Lesson #5: Do things with POW/Shazam
To me, no entrepreneur embodies this more than Sir Richard himself – but you don’t have to rappel down the side of a sky scraper to do things a little differently. Real estate investors can take a page out of his book simply by trying to solve problems with a unique approach. Just because a deal has never been done the way you want to do it – does not mean it’s not possible. I can’t tell you how many times a real estate agent has told us “you can’t do that” only to learn that it’s possible and actually pretty easy with the right lawyer. Folks who’ve been in the business for decades aren’t always the best ones to listen to -many of them are pretty set in their ways as to how things are to be done. Come at things with a little pizzaz – try different angles to solve your problems.
“Sometimes when you start from scratch with a clean sheet of paper, with the principle of keeping things simple, you get results that wouldn’t be possible by leaving it to the so-called experts.” ~ Richard Branson, Screw it, Let’s Do It.
Every property you buy can be considered it’s own small business – so maybe these little lessons from the worlds most interesting and inspirational entrepreneur (in my opinion) might help you enjoy your life, find more success and have a little more fun with every single deal.
Image Credit: Ftvkun
This Article is Copyright © 2004-2010 BiggerPockets, Inc. All Rights Reserved.
Real Estate Investing Rules from Richard Branson
This Article is Copyright © 2004-2010 BiggerPockets, Inc. All Rights Reserved.
Real Estate Investing Rules from Richard Branson
The 4 Most Important Things to Remember When Evaluating Real Estate Deals
There are a lot of things to consider when evaluating a deal. As real estate investors, we must find great deals. Not good deals, but great deals where we can minimize risk, maximize annual return and control our success.
Here are the 4 most important things to remember when evaluating deals:
- Avoid Speculation as the only way to profit – Appreciation is great, but it absolutely cannot be the only way to profit. The fact is, the value of the market is out of our control. At no point in time should investors buy at market value and speculate for appreciation. Who wants to take a gamble and risk taking a loss when they can control their success by buying 30% below value? Appreciation is an extra bonus, follow the next 3 tips and never speculate as the only way to profit.
- Max 70% LTV – The total cost of purchase, fees and any repairs must be a maximum of 70% of the value of the property. If not, pass and get 10 or more prospects like it and cherry pick the best deals.
- Rents are 1.5-3% of Purchase – A property that rents for $750/month should be purchased for no more than $50,000 or rents are 1.5% of purchase. Some higher priced markets it is very tough to find this type of cash flow, you are lucky if rents are close to 1%. The best markets with the highest returns there are many deals with max 70% LTV and rents are 1.5-3% of purchase. These markets you not only minimize risk, but you maximize annual return which should be the goal of all investors. Sometimes, you can find really great cash flow deals where rents are $2400 and total cost in is only $80,000 or rents are 3% of purchase. Now that’s some cash flow!
- Strong & Multiple Exit Strategies – With equity and cash flow you end up with multiple exit strategies. You can sell at retail, sell to an investor, wholesale, seller finance a sale, lease option, rent and hold, refinance, sell the note, sell the entity holding title to the property, quick claim deed the property to transfer title, etc, etc. Having multiple exit strategies is a must and significantly mitigates risk. You must also evaluate and if possible test your exit strategies to ensure you have strong exit strategies.
Here’s the recap:
Photo: Jacob Botter
This Article is Copyright © 2004-2010 BiggerPockets, Inc. All Rights Reserved.
The 4 Most Important Things to Remember When Evaluating Real Estate Deals
This Article is Copyright © 2004-2010 BiggerPockets, Inc. All Rights Reserved.
The 4 Most Important Things to Remember When Evaluating Real Estate Deals
Can Nevada or Wyoming Protect Your Real Estate Investments in Another State — Draft for Review
I received an email from a client recently who was concerned about some information she received from an promoter of Wyoming and Nevada LLCs. She was told that a Wyoming LLC registered to conduct business in California will provide greater protection from charging orders than a California LLC. I hear this same argument time to time from Nevada or Wyoming ptichmen who’s only concern is selling you an entity and not in protecting your affairs. The information they provide is full of half-truths and misleading statements with one purpose in mind — to get you to buy an entity. I thought that I should share my response:
Dear Jane Doe,
In my opinion a WY LLC or a NV LLC registered to do business in California would not prevent the creditor of a member from enforcing a charging order against the LLC. – Why? — When it comes to asset protection and LLCs we are concerned with two forms of liability — inside liability and outside liability. With inside liability the primary concern is protecting ourselves as members from liabilities associated with the activities taking place in the LLC e.g., rental real estate. The protection for inside liability claims is derived from two places: state law and the LLC operating agreement that governs how the LLC is run and the protection it offers to its members. Most states are fairly uniform in their approach to inside protection. Liabilities that occur inside a LLC remain inside and will not attach to the owners of the LLC. Of course, this is contingent upon having a solid LLC operating agreement that has adequate protection and indemnification provisions for the member and managers. Unfortunately, when I review a client’s operating agreement it is not uncommon to find two or three critical defects that, if exposed in a lawsuit, could spell disaster. Nevertheless, with the protection provided by state law and a good operating agreement, the LLC offers excellent protection from the liabilities associated with owning real estate. Thus, if you created a California LLC or a Wyoming LLC registered in California to hold your rental real estate, both entities will protect you from claims arising out of liabilities associated with the LLC’s assets. If, on the other hand, you simply set up a Wyoming LLC to hold the property without registering it California, it would provide with you no protection whatsoever.
Outside liability protection is just the opposite. Rather than looking to the assets of the LLC for recovery, a creditor is seeking a judgment against a LLC member because it is the member that caused the harm and not the LLC. Most people I meet completely miss this point because so much attention is given to protecting you from your real estate that very little thought is given to your personal actions or, for that matter, those of your children who could also jeopardize your investments. You, by your everyday actions, are probably the greatest threat to your assets.
Nilse, an avid real estate investor, is traveling in his new BMW 7-series sedan on Interstate 5. Confused by the electronics, his focus is on the stereo and not the road! Because his attention is diverted, Nilse does not see the car in front of him suddenly brake. Nilse plows into the car, causing substantial damage to both vehicles and injuries to the occupants of the other vehicle. If Nilse owns his real estate investments in his personal name, he is at serious risk. Fortunately for Nilse, his attorney recommended he place his investments in LLCs. How does the LLC help Nilse? It has to do with state law and what the creditor of a LLC member can reach when he collects on his judgment.
Every state has, to some extent, given LLC members what the law refers to as “charging order” protections. Unlike the situation with “Inside Liability” where the creditor can only look to the assets of the LLC and not the members individually for recovery, with outside liability the creditor is looking to recover against the member’s assets. Your LLC membership interest, like the stock you own in a publicly traded company, is an asset that is considered personal property. One important feature of this asset is its unique characteristics that prevent creditors from levying on it if they have obtained a judgment against you personally. Approximately 23 states, Nevada and Wyoming included in this number, limit the judgment creditor to a charging order.
The benefit of the charging order is it limits your judgment creditor to a lien on any distributions you decide to make from your LLC. If you do not make distributions, then your creditor does not collect on the judgment. It sounds great and it is, but unfortunately all states do not adhere to the charging order as the sole remedy. Some states, like California, go so far as to allow a judgment creditor to foreclose on the member’s interest if the LLC is not making distributions. For many investors this is disconcerting given that the state requires the investor to have a LLC registered in the state if it is to hold real estate (the statute actually refers to conducting business and renting property falls within this definition). To trump a state like California and its creditor-friendly approach to asset protection, many investors will establish a LLC in a state like Nevada or Wyoming then register their LLC to conduct business in California as a foreign LLC. These investors believe that California must apply the law of the entity’s home jurisdiction when it comes to matters of charging order protections. For example, if I created a Nevada LLC (remember Nevada does not allow any remedy other than a charging order) then register it in California as a foreign LLC, I will be immune from California’s approach to the charging order should someone attempt to collect on my LLC interest. Unfortunately, California and every other state that I have researched does not take this approach.
Under California Corporation Code 17450 the laws of the state … under which a foreign limited liability company is organized shall govern its organization and internal affairs and the liability and authority of its managers and members. In other words, the laws of the state of organization will govern any claims arising between the members or managers with respect to the inner workings of the company or between the company and its members or managers. The enforcement of a charging order on a member’s LLC interest does not fall within the statute’s definition. A charging order is the application of a judgment against personal property held by a California resident. Thus, if I am creditor and I obtain a charging order against a California’s resident’s interest in their Nevada LLC registered to conduct business in California, I can, under California Corporation Code 17402, foreclose on the member’s interest. This is not considered part of the affairs or internal workings of the company.
In layman’s terms this means I can foreclose on your out-of-state LLC because it has availed itself of California’s (see my previous post on Florida LLC Protections) laws when it registered to conduct business in California. To obtain the protections offered by Wyoming or the other strong asset protection states you can create a LLC in one of these states and have it own your California LLCs. In this way the out of state LLC does not fall within the jurisdiction of California, nor is it subject to its enforcement actions.
- Setting the Record Straight on Florida LLCs
- Series LLCs and Real Estate Investing: A Primer – Look Before You Leap, Though!
- Land Trusts and Asset Protection, a Primer
- Piercing the Veil: Holding Owners Liable for the Acts of the Business
- Recent Tax Court Ruling Denies IRS Sec.121 Gain Exclusion on Sale of a Personal Residence
This Article is Copyright © 2004-2010 BiggerPockets, Inc. All Rights Reserved.
Can Nevada or Wyoming Protect Your Real Estate Investments in Another State — Draft for Review
This Article is Copyright © 2004-2010 BiggerPockets, Inc. All Rights Reserved.
Can Nevada or Wyoming Protect Your Real Estate Investments in Another State — Draft for Review
Green logic, Bertrand Russell and a Girl Named Meka
When I was a freshman in college I took an Introduction to Logic Class. As a business major I thought that taking the class would be a good idea; plus the girl I had a serious crush on was a philosophy major so I figured I’d see her in class.
The first 2 months of class were brutal. We studied proofs and theorems and no matter how much I studied I could not figure out how to decipher them. Proofs like this:
(A ∨ B) ⊃ (C • D)
(C ∨ D) ⊃ (A • B) / ∴ A ≡ C
My professor, Billy Joe Lucas, was very patient with me. I’d visit him during his office hours and we’d go through the proofs and he’d explain the logic (sic) behind the logic. I never got it. It was completely different language and after 2 months in and countless hours studying I had made zero progress. (You’ll see how this relates to green real estate in a minute).
One night after a typically bad cafeteria dinner I resigned myself to more proof studying. I was at it for about 2 hours when something happened. Somehow I started seeing the proofs in a new way and they made perfect sense. I flew through the proof I had just spent an hour working on and solved the next one in under a minute. At that moment it just clicked for me. Here’s what happened after that:
Here’s how this relates to green:
What’s most important here is not the process of going green or becoming a Philosophical RainMan. The RESULTS are the key. Once I figured out the way to think about proofs, it became effortless and my results (grades) were excellent. It is the same thing with green real estate investing. Once you get it, you get it.
I have seen this time and time again with clients. In the beginning of our work, they count on me for everything green. We work hand-in-hand on their projects and they begin to experience success. After we’ve worked together for a while, they’re able to see how I think and begin to think differently about all of their projects.
It is then that they become true green CEO’s. It becomes an effortless process for them that is highly profitable and puts them light years ahead of their competition.
Put simply, once you learn how to ‘think green’ in your business it’s hard to stop. Going forward you can’t help but think green because you are conditioned to see that green is the clearest and easiest path to your success.
The key is to take that first step. While most people sit staring at the pool the truly successful jump right in. They take that chance and find that they have the whole pool all to themselves.
Is it time for you to jump in?
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Green logic, Bertrand Russell and a Girl Named Meka
This Article is Copyright © 2004-2010 BiggerPockets, Inc. All Rights Reserved.
Green logic, Bertrand Russell and a Girl Named Meka
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