Get started, buy and hold questions.

[Tristan S.]

Hello all,

I am a new investor from Houston, Tx. I plan on acquiring my first rental property within a few months if everything goes well.

I have some questions regarding the ownership of a rental property :

- whenever you collect rent, will you have to pay federal income tax on the rents ?

- Is it easier to create a corporation (LLC) if my plan is to acquire multiple properties in the future ? If yes, how does the process work ? are the house at my name or the llc name ? what is the situation regarding taxes ?

For investing purposes, would you recommend getting a real estate licence to have full access to the MLS. How much does it cost to have an active licence in the state of Texas per year ?

Thank you all for your help.

[Drew Shirley]

Hi Tristan, welcome.

*** This is not legal advice and I am not your attorney. ***

1. Rent is taxable income and you would pay taxes on the rent; however, you can deduct the cost of paying the mortgage, maintenance. utilities, etc., so you only pay taxes on your profits.

2. I recommend a "series LLC" for my clients who will be acquiring multiple properties. It is basically like having many companies under one roof, but each "series" has its own assets and liabilities and is insulated from the other properties. You would want to acquire the property in the LLC's name, though some lenders do not allow this. Avoid putting properties in your name or being personally liable for the debts of your investments.

3. You can elect "pass through" tax treatment when you form your LLC, so the entity itself is not taxed. You are taxed on the LLC's income, but you pay no corporate tax. You may have Texas franchise taxes to pay, but not right away.

4. To become a licensed real estate agent, you must take a bunch of real estate continuing education courses, pay a fee, and pass the real estate exam. THEN you must find a broker to sponsor you AND you will have to pay an annual fee to your local realtor's association to have access to the MLS. It is a fairly expensive and time-consuming process, so you might be better off finding a flexible, aggressive agent who will help you with listings, comps, etc.

Good luck.