All Forum Posts by: David M.

Well then definitely fine a new cpa if he advised to hold real property in a S corp...

@Matt Jamieson If I understand what you are asking, I do not believe so.  You can't use the sec121 exemption twice in the same 2 year period.  of course, consult with a professional, but recommend starting here https://www.irs.gov/taxtopics/tc701

As mentioned, you still have to pay the depreciation unrecapture.

Good luck.

@Penny Peng

Depends on what they are offering and what are your strategy/goals for this investment.

Debt sits on the top of the capital stack as its the first to be paid back.  Equity is the last, and on the bottom of the stack.  Preferreds are typically one step above equity.  So, the preferred have a slightly higher priority in getting paid back if anything goes wrong.

Again, it really should be laid out in the syndication's official docs.  Good luck.

@Jesse Buchanan Yup, cut out the middleman.  Also, saves you on what should be the 10% to 30% gc markup, mostly for their insurance.  Most policies have you pay a percentage of your work to them as part of the premium.

Good luck.

@Jesse Buchanan @Brandon Stiles

I think hiring your own trades is better, if you have the time. Even doing it personally is fine --- that's what a regular homeowner does when getting work done on their house.

I guess it seems I would need to caveat that you are NOT hiring employees.  Hire the plumbing trademens (either work for themselves or a plumbing shop), electricians, drywall/spacklers, flooring, painter, hvac, ktichen/bath, etc.  They carry their own insurance, wc, etc.  While you maybe flipping, I guess I don't jump to seeing this as a new "world" any different than a homeowner wanting to remodel their own home and having to buy their own insurance...

If you have the time to do this, it lets you find and hopefully hold on to the "good" trades, the ones you like and get along with well.  Lets face it, the GC is basically doing the same thing.  They are just sub'ing out to whomever they know.  What if you like half of your GC's trades' work?  Sucks to fire the GC and the whole thing to try to find another one that will have a crew that you like.

At least in NJ, the trades still pull the permits, even if they were doing work on a regular homeowner's property.  Their license/registration is on the hook.

I know flippers who get their own liablity and wc insurance and put an umbrella on top of it (remember, you need the basic underlying insurance below the umbrella policy). I did it at one time, but that was for licensure/registration purposes. If you have a lLC, you should have something otherwise when/if you are sued, you'll go broke in legal fees defending your LLC, even if there is nothing in it. For some, it make them feel more comfortable should the trade's insurance max out for some reason. Also, sometimes you hire uninsured people, e.g. a cleaning crew at the end, so having the insurance is rather justified at that point.

For better or worse, if you can pay everybody with a credit card, you don't need to file 1099's.. Save you some paperwork.  :)

Hope this helps  Good luck.

@Matt Devincenzo I thought it varies by State whether spousal llC partnerships are also disregarded?  I thought it had something to do with the community property status.

@Joe Black Otherwise, this does seem odd.  Maybe it has something to do with how the assets were transferred?

When the LLC was created, did you ask about tax implications? Did the attorney and CPA coordinate aynthing? Honestly, that does seem silly since this is such a common/simple transaction, but thought I'd ask.

@Aaron Landau

There is a huge bucket list...  

I guess some additional items would be how much are the floors sagging?  Usually its not a structural problem, its just that things sag even with buildings from the 1900s...

If it hasn't been renovated, are you keeping the lathe walls?  They are really heavy and suck up the rf for wifi...

The wall studs are really thin, from the early 1900's homes I've seen.  Are you going to beef out the exterior walls to make room for more insulation?  Perhaps add it to the outside?

Any historical society complications?

Regarding the due diligence, its not always a "red herring."  At least in NJ its always "buyer beware" (the onus is truly on the buyer) so its used as reminder especially in situations where there is a higher risk or more unknowns from the seller.  

Good luck.

@George Martin

To me, its a sizable job.  You would need to check at minimum:  zoning, whether the municpality would support it, architect, contractor or however you'd plan on doing the addition.

What's the current sq ft?  Any point in adding vs. demo all but one wall or the whole thing?

The Its mostly about the numbers.  There is the carrying cost in the time it takes to do this.

Would this addition make it stand out in the neighborhood?

Where is this?  Check for floodzone / prior flood?  Any deed restrictions or other reason why it can't be expanded.

Since this is on the mls if this really was a good deal, any of the really good reno/flippers would have snatched it up before it went on the market, and not that its on the market reno/flippers would be all over this.  So, I am little leary about this, but maybe you found the diamond in the rough.  Now just have to do the due diligence.

Hope this bit helps.  Happy to chat.  Good luck.

@Dan Fritschen good.  That's what I figured you'd be fine with 0% yield.  "parking" the funds should avoid the lockup period.  I assume the funds will get the stepup in basis on death --- not sure why they wouldn't.

Yeah, borrowing to pay for your own money always sucks.

But as I said, never invested in them.  Good luck.

@Jessica Perez Velazquez

Are you still local to the property?

What was the purchase price of the property?  You have less than $100k of appreciation it looks like...

$275/mo net isn't too bad...

If you really think that it will appreciate, then it is worth it rent out.  Of course, you'll just deal with the taxes (including on depreciation) when that times come.  It doesn't look like you would be getting much from the sec121 exclusion.

Not sure how selling this property would get your more funds into your Roth IRA, unless it just because it frees up money to make the contribution..

If you need funds to build up a reserve / rain day fund / etc., this might be a way to go...  You will need, or should have, an existing reserve of funds to service this potential rental. So...

My pet peeve is comparing a single rental property with either index funds and/or a HYSA...  Not because they are different investment classes, they are an apples to oranges comparison.  They are basically opposites.

While I am guessing the pool is common in TX, just remember that its another significant liability when having a rental.

I guess the other aspect is to you really want to be a landlord?  If you don't, no reason to make this property rental just because of the low rate.

Think about this transaction as a matter of opportunity cost.  Where do you want to take the risk?  And where do you think you can make a better return?

There is a bunch of stuff to muddle through.  Hope this helps, and happy to chat.  Good luck.