All Forum Posts by: Andrew Angell

Quote from @Sarah Kensinger:

I would recommend getting ahold of Anderson Advisors and if they're a good fit for you, hiring them to help work through structure set up and all the tax benefits you can get. We have an s-corporation for our co-hosting business, and then our personal properties would be a separate LLC that the co-hosting business would be "hired", to run alongside our client properties. I'm guessing they would suggest the same for you.

I am actually with Anderson, and they are some of the "professionals" I mention I've been talking with.

I talk with a strategist, and then I sit in on "Office Hours", and I submit questions to the platinum portal, and I get similar but conflicting answers back from each source.

I do like them overall, so far, but it has been difficult to actually get somebody to sit and go over all of this stuff in this detail like I was hoping for.

Quote from @Evan Polaski:

Non-CPA, layman here.  So like others stated, talk to a CPA.

As for the LLC for Management, I believe most do this for liability protection: i.e. if you did something against fair housing laws (I know you are talking STR and not LTR) you are sued as a contract manager. I feel like there could be some tax advantages, maybe, but you are jumping through a lot of hoops here to likely get a little tax advantage.

Additionally, as I understand passive losses effectively never move over to active income.  The "exception" is qualified real estate professional, but then they are never passive losses to start, in the IRS's view.  And there are fairly strict time requirements and proportion of time spent on that income to hit these thresholds. 

I hope this at least gives you some questions to talk to your CPA about, because while I know a few things about taxes, I am not a tax advisor or CPA.

Thanks for the feedback. That's where the STR "loophole" comes into play. If you have an avg stay of less than 7 days (or less than 30 days and offer specific services to your guests) and you are a "material participant" based on hours worked, then they treat you more like a hotel, which is active. As such, it offsets active income if you have losses, so cost seg and bonus depreciation, etc. can really be cool here.

CPA's and tax attorney's I've spoken with all agree on that, but where I'm getting a bit stuck is that in our situation, because of the passive losses we already have on paper combined with the fact that it's only one $280k property, running it as passive actually makes more sense right now.

The answer I can't seem to get out of any of these professionals is whether or not the act of simply running it as short term, and we end up with avg stay of 6 days, for example, and we're managing it ourselves...are they automatically going to make it active when I actually don't want them to..??

That's the part where I can't seem to get a clear answer out of these people, so I was hoping to get some feedback from people that have already been doing this stuff and have maybe run into these situations before.

We are under contract on a property that we'll be operating as a STR and managing it ourselves.

We have paper losses on our books from a syndication that generated bonus depreciation last year.  

We also have an S-corp that is our primary business and generates the majority of our household income.  It puts us in a relatively high tax bracket.

My wife and I are both on our s-corp payroll, so I don't think we'd be able to qualify ourselves as REPS.

I was reviewing some info about running the STR as active and taking advantage of bonus depreciation via cost seg. to drive up our paper losses which could then offset our active s-corp income.

However, with the passive losses on our books it seems to make more sense to just run it as passive and let the income be offset by our paper losses.

But then I got thinking - we are going to manage this property ourselves, and we likely will have an avg. stay of fewer than 7 days, which seem to be the qualifiers for a STR being treated as active instead of passive.

They're going to force us to treat it as active anyway aren't they?  

I guess I would need the same type of documentation (ie. time logs) showing that we are not a "material participant"..??  Or would being the property manager automatically make you a material participant?

Is that why people use a separate LLC to act as the property manager even when managing it themselves? So your rental LLC pays a management fee to your property manager LLC. Now the property manager LLC has a little bit of active income you have to book, but the rest is left as passive inside the rental LLC..??

As you can see if you made it here I'm a bit all over the place with this.  Any general feedback, thoughts, or info would be greatly appreciated.  Thanks!

Quote from @Chris Seveney:

@Andrew Angell

I would absolutely have an attorney read the fine print as some of the ones I have seen (not full disclosure I run a mortgage note fund so they are competition) actually have the loan non-recourse and have multiple loans against a property.

Make sure it is first secured and you are in a first position if it’s only on one loan. These fractional models can be challenging

 Thanks for the feedback.  I'm checking yours out, too.

I'm researching a company that is a private lender.  They pool investor funds to lend.  You can choose the specific deals you loan into.

They are the first lien position on a Deed of Trust filed with the county, and included on that document is an "Exhibit A" listing all of the individual investors that are part of that lien.

The loans are typically to builders developing land, and they drip out chunks of the cash to the builders as they reach each stage of development.

They pay 10% monthly interest distributions.  9 month term with a 9 month extension option, so would expect it to run 18 months but it could be shorter.

They have been lending since 2011 and do ~70 loans per year.  In that time they have a record of of 39 defaults, so if my math is corret that's ~ a 5% default rate.

Of those 39 defaults they still came out even or ahead on 20 of them. 

Does this sound legit?  Any thoughts or general feedback on this would be greatly apprecaited.  Thanks!

Okay, thanks for the feedback!

I'm in a syndication that pays monthly distributions but will provide a K1 with paper losses due to depreciation.

I am looking to do some private lending where I would be receiving a 1099-INT from the borrower on interest paid.  

My understanding is that this would be earned income, and would not be offset by the K1 losses, but I'm getting some conflicting info on that.

I'm going to talk to my CPA, of course, but just wanted to and prepare a little bit for that conversation ahead of time.  

Any information on this would be greatly appreciated.  Thanks!

Quote from @Michael Baum:

Hey @Andrew Angell, so I have been reading about this and I see a few things that concern me somewhat

One is that they don't own that many properties to support the returns they are promising. It appears they have about 18-20 properties. For someone who is nationally syndicating this plan with potential thousands of investors, that isn't nearly enough to support 12%+ return they are promising.

Each listing appears to be listed by a couple, not a company. That is fine, but a bit shady. Guests think they are getting into a place that a couple owns vs part of a company portfolio. I could be an issue. Not sure though why anyone would care if it is run well, but there it is.

The final part and why I would stay away, the CEO Sief Khafagi left his last venture, Scoutpads.com suddenly. It appears he left investors holding the bag with everyone losing their dough. There are several articles on it.

EDIT - They appear to own 33 properties. Still not enough IMHO. Plus I have read that they require a minimum of 25k down but a annual income of over 200k to participate.

 Thanks for your feedback!  I'll do some more research on what happened with Scoutpads.  Some are showing it was shady, and others are showing it was a legit restructuring.  Maybe that's them trying to save face.  I'll check deeper.

As for the $200k income, I think that is just part of the accredited investor qualification isn't it?  This would be the same with pretty much any syndication that requires accreditation, wouldn't it?

I'm talking with Techvestor, a STR syndication. It seems legit, but I'm not finding much info about them on here, which was a bit surprising. Anybody familiar with them and investing with them already? Can you offer any feedback on what it's like to work with them? I'm considering getting in on their next round but going through due diligence and would appreciate any feedback I can get. Thanks!

Quote from @Matthew Kap:

I worked directly with them and for them and I can tell you they have no idea what they are doing.  

 Can you elaborate on this?