All Forum Posts by: Aaron Rosenberg

 Thank you Michael, and Alex, and Zachary, and Kelly.  Sounds like I should provide some details.  

The W2 income is high through marriage; it is two W2s and a child deduction.  

With all of that info entered into TurboTax I started putting in the info from 5 properties onto Schedule E.  Normally Turbo Tax shows you how each line entry affects your tax return, numbers on top of the screen bouncing up and down.  This year: nothing.  No info from Schedule E had any affect.  

SO.  If you know any way I can get these deductions applied to this year or what I need to do to move the losses to next year, please let me know.  

It may be true that it's time for a CPA and we have an excellent way to find that out, right here, right now:  Which CPA here would take me as a client?  Easy fix, right?  I send you two W2s and two Schedule E's, 2 hours of data entry, big cash prize for both of us.  Who's in?

In 2023 my five properties across two single-member LLC's had 7 tenants just decide not to pay rent, and 3 roofs had to be replaced. Thank goodness for tax deductions, right? Before I was in real estate my business just bought stuff and sold it for more, so I know losses from a single-member LLC lower your AGI. Right?

Wrong.  I KNOW.  It goes against everything our books and meetings and articles and gurus say.  But TurboTax won't move my losses from Schedule E to Federal Taxes.  They say rental income is Passive and therefore ineligible.  I say depreciation, travel, and auto expenses aren't passive and those should at least count for something.  

Have I truly been screwed here?  Can I at least somehow carry the loss over to future years so I won't get taxed on future income?

Thank you for the data point.  To answer your question I do own two LLCs so this project wouldn't be from the ground up, but close to it.  

Of course we all understand that legal protection is a must.  It is worth every penny to hire the appropriate professionals to make sure your business is lawsuit-proof and pays as little in taxes as the law allows.  Well...not EVERY penny.

I'm shopping around to have this work done and I'd like to know what it should cost. Even having a simple LLC made can cost anywhere from $150 to well over $1000 but the work is the same. So I'm looking to find out what the community thinks is a proper price range for a project of this magnitude, or at least what is TOO much to spend. e.g., not NOT use LegalZoom. They are an overpriced brand name; nearly anyone else will make you an LLC for less.

Suppose there is only one owner for everything.  That means there is a trust or C-corp that Owner has 100% control of, and the trust owns five different LLCs.  Looking for ballpark estimates on what this project should cost. 

What can one expect to pay for this?
Anyone known to charge too much?
Anyone known to be an industry leader that serves the BP community?

I'm not sure if I've succeeded or failed.  

This is my 8th year using TurboTax.  I put in the Schedule E's for my two completely-owned properties and for my mortgaged property.  I put in my W2 and my wife's W2.  The software was reviewing and asked me to uncheck a box.  All of a sudden, what was looking like an $8,000 return became a $4500 bill.

The team of me and TurboTax has never turned up such a substantial loss before.  Have I succeeded because we made enough extra money to have to pay this tax, or failed because I'm paying tax that neither me nor TurboTax knows how to avoid?  

Naturally, there's $4500 on the line here so I have to ask if there's something I can be doing better.  If you are a tax professional I will definitely pay you some of the money you can save me.  

Can you help?  

@Ali Boone I'm not terribly worried about the balloon.  It's a 3-year mortgage and the bank plans to issue another loan rather than call in the payment in full.  I can pay the balloon when the time comes but I hope it doesn't come to that.  

Cash flow is my priority.  So I'm going to take that $150 and put it where that gets me more cash flow.  Whether it's in paying off the mortgage or buying a new property depends on the properties available.  However, since inflation is so high I'd rather have a nice fixed-rate mortgage.  This new situation makes the math a lot harder.  

@Ben Lin I'm selling because that was always the plan.  C-class was a low-entry cost experience builder for me but my plan was always to sell those for a more stable asset class.  I don't want more doors, I want more cash flow and more stability.  

I'm not using a broker but I suppose I will have to pay a lawyer.  The gain on the sale is gravy.  These houses have returned between 10 and 20% for the time I've had them.  The reason I'm willing to offload them is I want to be invested in a different asset class.  I see a C class property as a ticking time bomb.  Sure the roof is great now but will it be great in 5 years?  10 years?  Yes it's a money printing machine but it flickers on and off sometimes.  Lately one of them is running at half power.  Is what it is.  

The fact is I'm confident I can take my $150k and get myself another $1500~$2000 a month in cash flow with it.  On paper that's what my 2 C's are doing, but not after repair expenses.  

Mostly I'm worried about the impending doom because I am about to make a move.  But not for another month.  I guess by then I'll have a better idea of whether or not the market will crash or has already crashed.

Thanks for the input; I do appreciate the advice.  

To answer your questions: I bought these 3 years ago during the "coming crash."  I've had one house for 2 years, the other for 3.  For a seasoned investor like yourself to call the 25% gain decent, well, "decent" isn't bad for a very first project.  It could be a lot worse in this industry

You raise a good point about losing to taxes.  I was thinking of taking the $150k and investing in a better deal.  Using a 1031 Exchange I could pick up a B class property that cash flows equal to or greater than the two C-classes combined, except more consistently and with less tenant drama and with more appreciation.  

It hadn't crossed my mind to never invest in real estate again.  I'm not getting out of the game.  I don't want out.  I want better.  As an investor I want cash flow.  I don't like debt, and it sounds like having a mortgage is becoming a worse idea by the day.  6.25% interest is fine as long as the cash flow is decent after all the bills have been paid.  I can always refinance when the storm is over right?  

So, let's recap:  I want more cash flow.  I'm not sure of the best move to get from where I am to where I want to be.  I do want to pick up another property this Summer.  Any advice there?

I have two C-class properties, no mortgage.  I paid about $120,000 for both of them.  

I also have a B-class property.  Cheap mortgage, with balloon payment of $140k due in 2 years.  

The B gives easy, stable, and regular income, the C's give variable income but have the occasional tenant drama.  This is not news to anyone who knows what B and C mean here.  

So.  I have been offered $150,000 for the two C-class properties.  Their values have gone up in just a handful of years.  

It is also known that the housing markets are about to collapse.  Mortgage rates are 6.25%.  What should I do?

My gut says to take the $150k and get something sweet when the market collapses, but my gut can be kind of an idiot sometimes.  

I know times are "unprecedented" but what do you all think I should do?

I own two C-class properties, no mortgage.  The repair bills are high and the tenant quirks can be irritating but on average these properties cash flow positively.  Many look down on such types of properties but everyone has to start somewhere.  

I also own a B-class property.  The cash flow is great but there's a mortgage.  I'm not a huge fan of mortgages but it's about $130k and this seemed like a good time to hedge against inflation.  

Unfortunately the bank was one step ahead of me on this: The balloon payment of $130k is due in 2 and a half years.  There is an intention to give me another mortgage before that happens, but I'm afraid of getting a much worse deal.  

My main concern as an investor is cash flow for FIRE purposes.  I want to continue growing my portfolio but I'm not sure what to do next.  

I'm thinking of selling 1 or 2 C's and paying off the mortgage in 2 and a half years.  The bank's plan is I won't have the money and they can name their terms, (I know it's 5% now but we want 9%) but it'll be nice to pay it all off, surprise them, and walk away with a $2400/month cash flow.  BUT.  That deprives me of my next move for 2 and a half years.  

I can sell the C's ASAP, leave the C-game, and pick up another nice B with another shaky mortgage.  My credit is amazing, but the banks have this lovely balloon strategy preventing us from hedging against inflation.  This would leave me in a bad position with little recourse if I have to renegotiate TWO mortgages in 2025.  OH but what a sweet, cash-flowing, 2.5 years they would be.

I can leave all properties alone and shove more of my  own money into some new project.  This ties up all my personal money but leaves me in a good position to renegotiate terms.  

So.  What would you do?