What structure for a couple with high incomes ?

Question

Linda Weygant · Answer

If you are legally married, your wife is not permitted the Head of Household Status.  Your choices are Married Filing Joint or Married Filing Separate.

Once you fix that, then you'll need to figure out whether your rentals will have net profits after depreciation or net losses (or a mixture).  Based on that, you'll need to figure out a plan for working with the Passive Loss Rules.

Antoine Martel · Answer

Brandon.

I would recommend the rental property strategy. Since both of you have high paying jobs and have good W2 income. I would recommend buying rental properties with an LLC holding each property. The mortgage (if you want one) will be held in your personal name but you can hold the property in an LLC.

I live in Los Angeles and invest only out of state and sometimes sell properties in my portfolio. Would love to chat with you about OOS investing and how we do business!

Brandon Baker · Answer

Thank you all for your replies. I'm buying the book and will be talking with a CPA soon.

John Mocker · Answer

Brandon,

I would strongly recommend you speak to an experienced CPA and an Attorney who is experienced in Real Estate from the Landlords side.  They can advise you best on how to insulate your personal assests from the business (you have to look at it as a business).     From an Insurance perspective, look at an umbrella for additional Liability coverage on the property(ies).

A CPA here in CT wrote a book that may be helpful:

The Tax Smart Landlord by Ted Lanzaro

Because of your incomes, you may want to discuss an "S corp" with the CPA.  I've heard that there are some advantages of the S Corp.   I think it had to do with Social Security or Unemployment taxes.

Good Luck

Jana Cain · Answer

If you haven't done so already, I recommend first meeting with a tax pro to make sure your current [tax] actions are appropriate for your situation. Said professional should then be able to provide some guidance regarding how to best structure your real estate investments.

Heather Skowronsky · Answer

Setting up the business (assuming you are meaning an LLC or some other type of entity) is easy but you will have a difficult time financing property in the LLC as the LLC does not have any established credit history, etc.  Currently we flip houses and buy them in our LLC - but we are paying cash so there is no bank involved.  It would be best if you could find a lender that will lend to your LLC - and know that prior to writing a contract on a home.

James Letchford · Answer

@Brandon Baker:  You don't necessarily need to start 'businesses' or LLCs to purchase the properties. Get off to the races immediately by purchasing the properties in one name at a time (if you plan on leveraging mortgages). Both you and your wife can have up to 10 mortgages to your names, each. (Total of 20.)

I know it's been done, but it's very difficult to get a property deeded in an LLC when you're getting started, unless you buy it with all cash.

What structure for a couple with high incomes ?

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