14 Comments

Some friends and I are probably going the LLC route in buying property together. Thanks for all the resources you have shared online!! Would you be willing to share the bylaws/ownership agreement that you all use, to save me some time in writing up drafts etc? We plan to come up with our own guidelines and then bring that to a lawyer to make it official. I'm also curious if you see any way to get around the tax redundancy of paying yourself? We are thinking of calculating rents the way you all do, but then cancelling out what owner-residents would receive back, and then letting everyone pay based on what they actually would have to once all is divided out. Is that tax evasive? Does that make sense?

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Wonderful! Might ya'll be willing to share your LLC documents and bylaws etc as a template (perhaps with private info redacted?)? Or could recommend preexisting templates?

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thankyou for this super helpful overview! im curious to hear more about how you differentiate the rights and responsibilities of owners vs residents. obviously there are some costs and decisions that are clearly in the owners category (like, "when should we sell?") buy there are others that seem to fall in a grey area, particularly those that are 'semi-permanent' or 'non-essential infrastructure'... like planting a fruit tree? a permanent spa? a ride on lawn mover? who pays for it and who does the work of installing it or caring for it? we are trying to work this out in anticipation of starting up our 'homestead' style co-living project soon (in Australia) where we'll have lots of these grey area garden-related items to work out!

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This is super helpful, thanks. Does inflation or appreciation have any impact on setting the rents (eg do they increase over time?)? Thanks!

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author

Inflation yes: We allow rents to go up every year to match cost inflation and keep the target return at 5%.

Appreciation: Does not factor in.

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Nov 11, 2023·edited Nov 11, 2023

what would you do if the interest rate on the mortgage is so high that it is simply not possible to find residents/renters willing to pay a rental amount that would provide a positive return (at least in the first 5-10 years). I guess you just accept a loss for a while...? Or set the rent at a rate that is reasonable / market typical and make sure investors are willing to wait for a return?

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Who sets the rents? Is adopting the rent roster just part of adopting the budget?

How is each investor's exit price determined? Or to say it another way, how were the Year 5 Appreciation figures calculated in the example.

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author

The rent is set using the "5% rule." The LLC allocates rent between the units.

Exit price is whatever the property ends up selling for. The proceeds are just split between shareholders. The Year 5 Appreciation in the figure is just an example to show a possible scenario.

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Have you written somewhere about how you got your mortgage? Your property is more house-shaped than the ones I pursued, but even as I slowly approached house-ness I still had to talk to hundreds of banks before I found a single opportunity to get a loan. This was for me individually, with enough income to cover the loan. If it was easier for your LLC, I'd love to know that.

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Radish is a commercial property (5+ units). We got a commercial loan from a big bank and had to personally guarantee the loan.

They were happy with us holding as an LLC or in our own name.

Where did you run into trouble?

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All of the properties I was looking at were 1 or a few units, with a very large number of bedrooms. Think dormitories, not houses. I spoke to dozens of banks each time, hundreds in total, and found *one* willing to lend on the most-house-shaped property I pursued. Trying to discuss buying as an LLC or with multiple borrowers was even more of a non starter.

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Same here. They were very evasive of having additional cosigners on our loan. They wouldn't lend to my LLC, it had to be personally guaranteed.

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phil this is such a good explanation u have detailed.

Once again so proud of u!

Love from TN

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