Step 2 - Fortification
How do you plan to hold title to your investment properties? What type of insurance do you need? What should your lawyer do for you? How do I legally access retirement funds? Do I need a CPA? What is landlord-tenant law? How much security deposit can I ask for? Do I need a special bank account? TriStone Group has the experience of almost 20 years navigating these alligator-filled waters. We can help you answer these questions ahead of time. Regardless of your experience and comfort level with these questions, we will work with you to guide you and prepare you as necessary. Part of that preparation involves taking certain precautions to strengthen your own walls.
One of the first questions a potential investor must prepare for is longevity. Are you prepared to invest in a house (or houses) for at least five years, preferably ten? Houses are not liquid. If there is a downside to consider, that's probably first and foremost. If you need easy access to your investment principal, cash-flowing houses are probably not for you. If you've determined that you're tired of your stock broker churning your account to generate fees for him/her self while trimming your earnings, and the long term investment strategy is part of your plan anyway, read on.
Now consider how you might want to "take title" to an investment house. For some, it may make sense to establish an Limited Liability Company (LLC). This affords the owner some protection from certain types of debt collection and court orders. What about a Series LLC? Maybe an S-Corp or a C-Corp make more sense. That depends on your current tax structure. Owning an investment property in your personal name is not advisable, except in rare circumstances. In any case, this is a topic that should be explored with a reputable real estate attorney and tax professional that you trust.
If you are planning on financing the purchase of an investment home, did you know that only certain types of loans are available for this? Also, you are only allowed so many of these types of loans, whether used for investment houses or otherwise. If you are using a lender, they'll want insurance on your home right away, and they don't like empty houses. Vacant dwelling policies are expensive. Some carriers have dropped them altogether.
You'll want to be very familiar with the North Carolina General Statutes regarding rental properties. In particular, Chapter 42 outlines the Landlord-Tenant laws of the state. For example, were you aware that an Agent can represent an owner in an eviction hearing, but not if the case is appealled? Technicalities abound when professional tenants get hold of your property. A knowledgeable manager and real estate attorney can help avoid the most common mistakes made by new owners. You can see for yourself right here how extensive the law is when it comes to rentals.
Here is a list of things you'll need to protect yourself right at the start:
- Reputable and knowledgable real estate attorney
- Holding company (LLC, S-Corp, C-Corp)
- Insurance company, specializing in rental property
- Savvy lender, depending on your method of finance
- General contractor and/or handyman
- Knowledgeable property manager (you're looking at us!)
We can hook you up with all of these professionals. That's only part of what we do!