All Forum Posts by: Ahad Ali

Hello @Cliff T.

1) You most likely do not need a LLC in CA and just having one in PA should suffice but I would suggest speaking with an attorney to determine what the exact details are especially regarding what CA considers as income in the state of CA.

2) You do not really need to transfer any funds to a business account when purchasing an LLC, especially if you are the only person involved. If others are involved, it is still possible but may require additional agreements to be done. I would highly recommend to transfer the fund to your business bank account. The transfer of the funds to the business bank account would be your equity into the business which in turn is used to purchase the property under the LLC. This would typically benefit you more than having the funds in your personal account and utilizing it to purchase the property under the LLC.

3) It really is as simple as having the LLC formed and taking the documents to a bank to have the accounts opened. The only thing to really consider here is which bank you want to open up with.

Hello @Evan O'Brien

All of your transactions relating to the real estate property should be tracked. Whether its income, expenses or transfers, having a clear, legible record of what's happening if very valuable for you.

You can get either a bookkeeper or CPA or even do the bookkeeping yourself if you are comfortable with it. The main purpose is to make sure the books are being recorded properly on a consistent basis (typically monthly) so you can refer to them to analyze and make any decisions needed. This would help with determining if any changes need to be made or if things can continue to proceed.

A big plus of having your books in order is that it makes filing your taxes much simpler. Even if there are transactions that aren't deductible for tax purposes, having the information pre-organized and summarized will save a lot of time and effort.

I would highly suggest for you to have separate bank accounts (if not already) to make the bookkeeping easier and avoid confusions with other unrelated transactions.

Hello @Tammy Ginsburg

Both what Ethan and Joseph stated are great advice to begin with. Definitely speak to tax advisors and CPAs to get better insight on how to proceed and what it could mean for you. You don't want to dive into this without the necessary information and get blindsided down the road.

Having a 3 unit property and residing in 1 unit means you can claim the expenses incurred for the other 2 units along with partial depreciation, mortgage interest, taxes etc. to offset the rental income for tax purposes. Depending on your overall tax details, this can potentially help your tax return filing. 

While breaking even for the property may be difficult since you are residing in 1 unit, its not impossible. Depending on how you proceed you can utilize this property as leverage for future investments.

Hello @Mark Delosreyes

This would depend on quite a few variables such as your income, activity/involvement, rental income and expenses etc.

Increasing your depreciation can be beneficial when you have substantial income or profit and your able to utilize the increased deduction. If you do not meet the requirements to take advantage of this or do not have substantial income to offset then this may not be the best course of action to take for you.

I would suggest to speak with a CPA in detail regarding this to come up with a projection or estimation of whether this will be beneficial for you.

Hello @Trent Reeve

The other posts explain very well how to start out with a STR and I would like to add to what @Alex Pino mentioned. While an LLC is not required for a single property (or multiple for that matter) it is beneficial to further reduce liability. This may depend of course on location and other details so that is up to your disclosure or with further information and discussion with a CPA.

If you do set up an LLC, you can set it up in a separate state but may be required to file taxes to that state respectively. You may also be required to have a registered agent for the LLC if it is a different state so do bare that in mind and do look into it before proceeding.

You would not need a tax ID for the property if you are not getting an LLC as you as the individual would be the owner of it.

Regardless of whether you go with an LLC or not, I highly agree with having a separate bank account for the property specifically to keep your transactions organized. Having a mixed account can lead to a lot of confusions in finance managing. A separate bank account also helps with when it comes to filing the taxes.

Hi Sean 

Many CPA firms help their Clients with Gift tax. Most of the gift is exempted  up to ($11.7 million). 

@Kirsten Crotts  there are many CPA firms with specialized on real estate tax who help their clients remotely. If you open to work remotely, you will find  lot  of them online. Having Profit and Loss Statement makes life easy and stress free for many taxpayers. so before talk with any CPA , make sure your book is ready or  if you do not have P & L ,ask them if they can help you to do your bookkeeping. 

Hi @Heather Whittaker , Keep book up to date is reduce stress  during the tax season.  You can do it yourself if you feel comfortable to do it. Otherwise, there are some  firms help  people like both you  bookkeeping &  tax  services. I would like to say if you have more than one rental properties and you do not want any stress during the tax season, it is worthy having a firm. 

Hi Nicholas,

I would recommend you to get a CPA who is also an investor and can relate to you. You can try looking for someone within your state or find someone from a different state. There are a lot of firms who provide good remote service.

Hi Heather,

You can do the bookkeeping yourself if the expenses are minimal. There are some CPAs who may offer bookkeeping services along with tax preparation. Or if you would like to keep things organized, I would recommend using Quickbooks