All Forum Posts by: Andrew Namkoong

Hi everyone,

I am trying to figure out what the depreciation basis will be for the property that I will be closing in two weeks.

I am buying a property with full cash, doing some minor exterior rehabs (place is already rented out to a tenant) and then going to do a cash out refinance within 1-2 month. I found a bank that would do a cash out refi with no seasoning + on ARV.

My question is: 

Purchase price: $31,500

Expected Rehab: $3,000

Expected ARV appraised by the bank: $42,000

Land value on tax assessor's website: $11,500

Is my depreciation basis 31,500 - 11,500 = 20,000? or is it 42,000 - 11,500 = 30,500?

Thanks in advance!

Thanks everyone for the input. 

@Mateusz Prawdzik

Answers to your questions - 

1. Is it beneficial to form an LLC? Putting a property under an LLC gives you protection on your personal assets, only if you treat your LLC like a business and not mingle your personal expenses through. There are podcasts done with Amanda Han that can help you more on this.

2. What if there are 2 people involved? & What if the Equity splits are different? I don't know exact answers to these but I am guessing this would be hard to achieve with conventional loans. I think creating multi-member LLC is the way to go for these situations. You can always create another LLC to purchase a different asset that might have different equity split.

My situation is that I am buying some properties in cash since I am not able to get commercial loan because I don't have enough 'experience'. I am trying to do a cash out refi few months after with a commercial loan under my LLC.

3. Is it possible to take out a commercial loan under your own name? I think you can and at least for the first few, you could be able to put the title under your LLC but still personally liable for the loan. Once you pass a certain point and become an experienced investor to banks - then you would be able to put both title and loans under an LLC.

Hi everyone,

I am trying to understand this whole tax situation with a LLC and how we actually get taxed.

Say I have a property, under my personal name, that generates $1,000 per month on rents and $800 per month on all expenses combined. My annual cash flow would be $2,400 but I wouldn't pay a nickel in taxes due to depreciation and this will show up as a paper loss in my income tax.

Say if I held the exact same property under a LLC. To make the comparison easier, let's assume I have a 50% ownership in a multi-member LLC and the LLC has two of the properties noted above. So I would have $2,400 in actual cash flow (my portion) but the income statement will show a loss.

Question 1: I heard LLC owners pay taxes on their distribution. My portion of the distribution will be $2,400 but LLC had a loss in P&L. Do I pay taxes on this $2,400 or no?, If I do pay taxes, do I pay taxes based on the table below? or based on something else? (this is personal income tax table)

Look forward to hearing from you and thanks in advance.

Yes, I met up with an experienced local agent today and decided not to purchase this property. Thanks for the input!

Hi everyone,

I am in the process of buying my first investment property...signed the contract but have two days to send the earnest money and 8 days for an inspection period. I made that decision right before reading BP podcasts and blogs. Now I am really hesitant to close this deal...

Deal summary

Location: Norcross, GA

Purchase Price: $218k

Using conventional loan - 4.375%, 20% downpayment

market rent $1600-1650

brand new (less than 4 years old) townhome, end unit, in a very favorable location

This community/area has gone up $60k in the last 3 years and I thought there was some room for more growth given the market condition + desirable location. 15 year old houses are trading around the same price in the area, which gave me a little more confidence that this property could gain value in the next few years. My strategy is to exit in 3 years.

Based on my calculations, it will generate 3.7% cash-on-cash return in the first year (with an aggressive expense estimates) - I am betting on the appreciation value than cash flow. But now that I have listened to bunch of BRRRR strategy podcasts and blogs, BRRRR seems a lot less riskier than buying a property and hoping for a "potential" appreciation.

Regardless of buying this property or not, my next deal will be BRRR and already made an investment partner who has a good connection with rehab workers.

Any advice would be very helpful.

Thanks guys!