All Forum Posts by: Aaron Zimmerman

You may be in a situation where you’re paying for tax prep only. I would encourage you to ask your CPA what’s included in the scope of services.

If you have a California LLC, there's an $800 per year filing fee, at a minimum, so that's likely why your accountant is saying not to have an LLC.

The leases can be set up under your name. That’s what I do for my leases.

I echo the comment on getting really good insurance with an umbrella policy as well. 

@Garrett Kula thanks for posting!

I’ve personally house hacked in the Irving park neighborhood in Chicago with a multifamily so not completely relatable experience to what you’re looking to do but hopefully can provide a few insights.

If you go with the suburbs in a SFH, you could rent by the room and presumably increase cash flow. You'll likely need to get more bedrooms (probably 4-5). Another thing about most suburbs is that the property taxes can be brutal which needs to be factored in to your analysis.

The biggest thing is where ever you buy, you need to feel comfortable living in AND upon move out, the property needs to cash flow. 

Feel free to PM if I can be of any help. Happy to be a resource! 

I would also encourage you to get involved in networking groups in the Chicagoland area as well as listen to the straight up Chicago investor podcast.

Hard no. There are plenty of other qualified applicants. Especially in blue states, if you’ve gone through an eviction that generally takes multi months, it’s a clear indication of poor behavior in most instances. Most landlords are willing to do cash for keys so if they don’t accept that, they’re trying to game the system.

Unfortunately, CPAs aren’t able to advertise their services on here. However, if you look through the comments, you’ll find 20+ accountants on here. Interview a few people and then make a decision from there

One other point to add is considering donating appreciated stock. However, if you’re just a W-2 with no STRs or REPs, it’s going to be challenging to reduce that tax via real estate. 

That’s the million dollar question. It depends on a variety of factors. 

Scope of services: do you just want the tax return done or do you want tax planning?

Location of accountant: some accountants will charge more if they’re in a higher priced location

Generalist vs specialist: if you want someone real estate specific, it will likely cost more. But, you get the piece of mind knowing it’s likely done correctly.

I don’t see a way where this would be passive income. Like others in the post, interest income is portfolio income.

What you can do is invest a self directed IRA/roth and put this money into notes. The account will grow tax deferred.

@Justin Cummings - congratulations on building a nearly paid off portfolio.

What are your future goals? To acquire more properties? Or to live off the cash flow?

Are you debt averse or want to take on more debt?

Something to consider is that you mentioned you had a day job so I’m assuming you’re not a real estate professional. When the properties are paid off, you’ll probably have a healthy profit. What you can do to offset this profit is to invest in syndications that do cost segregation studies (which will lower your tax you pay). The caveat is to make sure the passive investment you choose aligns with your goals and it’s a good investment. 

Something else to consider is that once these properties are paid off, you could cross collateralize to purchase additional properties that fit your buy box so that you may not need to bring cash to the table for a down payment. From there, you could do a cost segregation study on that property which will lower taxes for that year and potentially create additional carryover losses.

@Tessa Mac do you have other cash available to purchase real estate?

Based off your situation, the best option is to roll the money into a self directed IRA. However, I'd add that real estate is already tax efficient, so it does not make the most sense to put this in a self directed IRA. As others have mentioned, there are a lot of rules you will need to follow so please make sure you're educated.

Something to consider with a self directed IRA should you go that route is to invest in notes/promissory agreements. You can have an agreement with an investor(s) and they pay you x%. This is more tax efficient as the interest you collect would be subject to ordinary income (outside of an IRA, whereas in an IRA, there'd be no tax on this. Something to consider depending on your risk profile.

 To add to this, the reason why you want to keep personal and business separate is because you don’t want to pierce the corporate veil by mixing the two. If the veil gets pierced, anyone that sues the company can also sue you and your personal assets.