501c3 investing idea

[Josh Myrick]

I need assistant or advise on the feasibility of one of my crazy ideas. Or what seems crazy to me.

Is it legal to create a 501c3 organization to buy investment properties and rent them out at fair market value?

Essentially, people could donate money and get tax deductions and then that money could be pooled to buy property, fix it, rent it and pay a manager.

I’m assuming it would be similar to a self invested Ira. That all revenue generated would have to stay in the company and couldn’t be used for personal things.

I’m trying to find a way to use my God given talents and the only one I seem to have is in Real Estate hahaha. I’m not amazing at it but not bad at it either and would like to find ways to give back.

A read some articles that some rents may still be taxable which is fine. All money would stay in the company for repairs, management, buying new properties, and paying taxes if necessary. The main purpose would be to pool money to purchase properties and rent at fair market value. Then essentially repeat the process.

My original thought was a 501c3 that could use donations to help first responders buy their first home. Like down payment assistance.

Would love some advice if anyone has any experience in this.

[Kory Reynolds]

What are you getting at here? As in some loophole that allows investment in real property through a tax exempt entity?   Anyone who contributes money here does exactly that - makes a charitable contribution and gets no money in return.  If they are receiving something in return, it isn't a charitable contribution.  

You don't need to start a 501(c)(3) to start investing in real estate and rent them out at FMV to first responders. If the rents end up being taxable in the organization, they'll actually be subject to maximum income tax rates very quickly - much faster than if you just did this personally.

There are groups now starting with "socially responsible" investing - effectively a standard partnership/syndicate that is "investing for good" - that would likely be a better structure to avoid 501(c)(3) headaches in a for profit venture.  

I don't think too many donors would be excited to start donating to a non profit if they find out the target audience is still paying FMV rent, and the person running the organization is collecting FMV management fees in his own pocket. The question at that point is what are you really providing to the community that would attract donors?

[Josh Myrick]

Quote from @Kory Reynolds:

What are you getting at here? As in some loophole that allows investment in real property through a tax exempt entity?   Anyone who contributes money here does exactly that - makes a charitable contribution and gets no money in return.  If they are receiving something in return, it isn't a charitable contribution.  

You don't need to start a 501(c)(3) to start investing in real estate and rent them out at FMV to first responders. If the rents end up being taxable in the organization, they'll actually be subject to maximum income tax rates very quickly - much faster than if you just did this personally.

There are groups now starting with "socially responsible" investing - effectively a standard partnership/syndicate that is "investing for good" - that would likely be a better structure to avoid 501(c)(3) headaches in a for profit venture.  

I don't think too many donors would be excited to start donating to a non profit if they find out the target audience is still paying FMV rent, and the person running the organization is collecting FMV management fees in his own pocket. The question at that point is what are you really providing to the community that would attract donors?

 Hey Kory, Thanks for the response. 

So no, not looking for a loophole to make money through a charitable contribution. I put two ideas into one post which has gotten some confusion on other platforms. That was mistake. I will discuss them separately in the future. 

The one idea I was asking for help with was if its possible to invest in real estate with a 501C3. I understand it would be a completely charitable contribution and that's what I am looking for. I have trying to find ways to give back to the community and while I would love to increase my monthly tithe percentage but that's not currently an option. So I thought of finding investors that would help me buy local rental properties through a 501C3 so they get a deduction and then I can manage it as a charitable contribution or hire another PM and they get a charitable deduction.

But the goal would be to buy property and rent it at "Fair Market Value" lol and this term also got some flak in other groups. But my idea of fair market is essentially low income I guess after talking to some other investors that responded to my post. Because in my opinion todays rental rates aren't fair but that's a whole other discussion. So after discussing with others the point of the 501c3 would be to rent to low income families or disabled veterans. 

I have never heard of socially responsible investing groups. That is definitely something I will look into. This was just the first thought that popped into my head and I wanted to pursue it until something better came up or it was not possible. 

[Josh Myrick]

Quote from @Josh Myrick:

Quote from @Kory Reynolds:

What are you getting at here? As in some loophole that allows investment in real property through a tax exempt entity?   Anyone who contributes money here does exactly that - makes a charitable contribution and gets no money in return.  If they are receiving something in return, it isn't a charitable contribution.  

You don't need to start a 501(c)(3) to start investing in real estate and rent them out at FMV to first responders. If the rents end up being taxable in the organization, they'll actually be subject to maximum income tax rates very quickly - much faster than if you just did this personally.

There are groups now starting with "socially responsible" investing - effectively a standard partnership/syndicate that is "investing for good" - that would likely be a better structure to avoid 501(c)(3) headaches in a for profit venture.  

I don't think too many donors would be excited to start donating to a non profit if they find out the target audience is still paying FMV rent, and the person running the organization is collecting FMV management fees in his own pocket. The question at that point is what are you really providing to the community that would attract donors?

 Hey Kory, Thanks for the response. 

So no, not looking for a loophole to make money through a charitable contribution. I put two ideas into one post which has gotten some confusion on other platforms. That was mistake. I will discuss them separately in the future. 

The one idea I was asking for help with was if its possible to invest in real estate with a 501C3. I understand it would be a completely charitable contribution and that's what I am looking for. I have trying to find ways to give back to the community and while I would love to increase my monthly tithe percentage but that's not currently an option. So I thought of finding investors that would help me buy local rental properties through a 501C3 so they get a deduction and then I can manage it as a charitable contribution or hire another PM and they get a charitable deduction.

But the goal would be to buy property and rent it at "Fair Market Value" lol and this term also got some flak in other groups. But my idea of fair market is essentially low income I guess after talking to some other investors that responded to my post. Because in my opinion todays rental rates aren't fair but that's a whole other discussion. So after discussing with others the point of the 501c3 would be to rent to low income families or disabled veterans. 

I have never heard of socially responsible investing groups. That is definitely something I will look into. This was just the first thought that popped into my head and I wanted to pursue it until something better came up or it was not possible. 

 The second idea I had was some other foundation or 501C3 or whatever it needed to be. It would collect donations that would go into a fund that could then be used as down payment assistance for qualified first responders to buy their first home. I used to be law enforcement and know how hard it is to own a home on first responder pay so I thought it would be cool to help that small area of the work force. 

[Chris Seveney]

@Josh Myrick

You technically can but if you start the non profit typically you cannot be an employee or make $ from it, and profits should be reinvested in more housing.

If your goal was to profit in any way, the answer is no

[Josh Myrick]

Quote from @Chris Seveney:

@Josh Myrick

You technically can but if you start the non profit typically you cannot be an employee or make $ from it, and profits should be reinvested in more housing.

If your goal was to profit in any way, the answer is no

 Yea, the goal is no profit or it be reinvested in more housing or improving the current rentals for better living conditions for tenants. I explained a little more detail after discussing with some other investors. Apparently my initial post was a little confusing.