Newbie Investor Questions (Taxes/LLC)

[David Yee]

Hi Everyone, 

My friend and I purchased our first investment property in July.  It's a 4 unit in Ohio (we are both in CA).  I was wondering if a few savvy investors could help assist me with a few things.

1 - Cost Segregation - The property is only 125k.  I'm wondering if cost segregation is worthwhile.  I was going to get a quote and seeing how much it costs.  Has anyone had any experience w/ this service?  

2 - LLC Ownership - I wanted to purchase the property directly from the LLC but it wasn't feasible at the time. I was told this wasn't a big issue. However, I learned that if I transfer the property I could trigger a due on sale clause in my loan. I know I can bypass this with an asset protection trust but I really want the LLC protection. What is the optimal way around this?

3 - We had a difficult tenant who owes us a good amount of money.  The tenant is gone now and the odds of them paying the money owed is very very low.  I know I'm getting like 8% of the money owed but I'd like to sell the debt to get something.  Anyone have experience doing something like this?

[Paul Moore]

@David Yee. There are three levels of cost segregation studies. A very expensive engineering-based study would obviously not be worth it. These are for commercial properties. There is a less expensive study that might be around $5000 and that would certainly not be worth it either. My understanding is that there is a very inexpensive study that can be done rather easily for well under $1000. You should certainly speak with a CPA who knows real estate to find out if it would be worth it for you to carry forward those passive losses. I recommend getting a CPA who is also a real estate tax strategist. I know one in Columbus Ohio if you want to PM me. Good luck!