Q: My dad is 93 years old. He and I own a four-apartment summer place in Rhode Island. We rent out these apartments during the summer. I have four children, 25 to 35 years old. Can we form a corporation ourselves - without the expense of having a lawyer form it?
A: In your circumstances, forming a corporation without a lawyer is theoretically possible. But it's probably not practically feasible. One of the reasons is that you need to carefully determine whether you can qualify as a Subcapter S (or "tax option") corporation.But that's only one reason. Others are that successfully forming the corporation requires (1) strict compliance with (sometimes rather abstruse) statutory laws, and (2) completion and filing of somewhat technical documents and several lengthy forms.
My suggestion: Consider carefully what you believe will be the benefits gained by incorporating - in every way, including dollars and cents. Weigh this against probable attorney's fees for forming the corporation.
Q: My husband and I own a house in York County, Va., that has been leased to tenants for three years. We are planning to sell it and they are interested in buying it. What is the best way to arrive at an equitable price?
A: Have it appraised by a qualified real estate appraiser.
Q: Of all the types of real estate investments available, which one offers the small investor with $2,000 to $5,000 to invest the best opportunity?
A: You are limited to ownership of relatively inexpensive single-family dwellings. With such a relatively small amount of cash, your purchase is going to be very highly leveraged. In addition, your purchase is probably going to have to be based on the seller doing the financing. You might also find it feasible to join in a sound, well-invested syndicate.
Q: When a developer is developing land or contructing a building, what does he mean when he talks about "indirect costs.?"
A: Generally he means those costs that are in contrast with the "direct costs" of the bricks, mortar, lumber, other materials and labor. Some of these costs are:
(1) Surveys, title cost, feasibility studies, if any.
(2) Financing costs.
(3) Interest on the construction loan and on land cost during construction.
(4) Developer's overhead.
(5) Fees (architectural, engineering, consulting, legal).
(6) Insurance and taxes during construction.
(7) Loss of reasonable return on investment until anticipated occupancy is achieved.
Earl A. Snyder, a realtor, appraiser and attorney who specializes in investment real estate appraising and counseling, answers questions only in this column. His address: 14909 Kalmia Dr., Laurel, Md. 20810.