All Forum Posts by: David M.

@Yang Zeng 

https://www.biggerpockets.com/forums/48/topics/1174243-seeki...

Here is another Californian's experience if you didn't see it :)

@Jeffery Speck

What aspect of the S-Corp do you like??? that is if you aren't wanting to pay yourselves a reasonable salary?  You know it should cost more to have S-Corp because of the extra filings/reporting...

What are you doing???? What's the LLC for?

Its not advisable to hold real property in corporations, and S Corp are more corporate-like.

Just stay with the default partnership and deal with the 1065 and K-1.

More importantly, discuss with a qualified professional or two.

@Yang Zeng

Didn't scan through the other posts..  You might want to check out this thread from another Californian about investing out of state:  https://www.biggerpockets.com/forums/48/topics/1159104-overl...

This one about cash flow... https://www.biggerpockets.com/forums/52/topics/1159067-less-...

Another about cash flow not being king:  

https://www.biggerpockets.com/forums/48/topics/1131066-cash-flow-is-not-king

In the end, its up to your strategy and goals, and perhaps your risk tolerance.  sometimes, just one is good enough.  The one nearby eliminates lots of risks and headaches.  Remember, only because the IRS code defines rental real estate as passive for tax purposes.  Its not really passive, at least all the time.

About your 30% down... It might be better to borrow more and preserve some of your cash.  For use some of it to help pay for the increased loan costs.  Actually, having built-up losses, Passive Allowed Losses (PAL), can be helpful later should you sell or even if rents increase.  Meanwhile, youstill have a cash reserve in case of incidents at the property or in personal life.  Part of the risk/plan would be to refi when/if rates go down.

Also, you might consider other investments, at least for now.  For example, private lending where you lend out your money, take the Note and 1st position lien, and get the interest payments.  There is no price upside, but also little downside.  Investing in debt can be better than investing in equity --- it depends on your take on it.  Fix n flip loans are ~12%.  You don't have to do all the work yourself (its one of the avenues I've been doing).

There are other investing avenues since it sounds like you are right on the "edge."

I hope this helps.  Happy to chat.  Good luck.

@Jess Azong

Well, the owner's draw is how you account for taking funds out the LLC.

Some things to remember.. Taxation has nothing to do with what you take in or out of the LLC. It will be the profit/loss as calculated on your 1065 partnership return in your case and as distributed to your two personal returns.

This isn't a trust.  There is no beneficiary.

You need to move the funds along the lines of ownership. As per your OP, you two are the owner/members of the LLC. So, its should go to you two. If you send money to the holding company, now its some sort of payment, allegedly "embezzelment?," or something.

Also, by taking out "all the funds," you also run the risk of under capitalizing the LLC which is another way to pierce the corporate veil.

@Jess Azong

So, if Title is held by the LLC and the loan is being issue to the LLC (good job in keeping it clean), the refi should issue the cash to the LLC. Otherwise, what you are asking would be similar to me refi'ing a property of mine and your friend telling escrow to send the money to your friend instead of me.

Remember, the property/cash is under the ownership of the LLC now.

To "get the money out," you would do an "owner's draw" for which there is no tax consequence. It just simply as easy as writing a check from the LLC to your friend. You would annotate the transaction as such on the LLC's books. With the two of you, you just need to make sure that your Operating Agreement allows this, i.e. for your friend to draw off so much cash. Or, else you need to create some paperwork saying as the members of the LLC this is "okay."

You really should get some professional advice on how to properly operate your LLC. Otherwise, you'll be pierciing its corporate veil (assuming you care about it).

Hope this helps.  Happy to chat.  Good luck.

@Kelley Joyce no experience, but I believe https://www.questtrustcompany.com/ is sponsored by NREIA for better or worse. 

Good luck.

@Tyler Sherman For your rentals (I'm assuming), they are reported on SchE and supported with f8582 as mentioned.  Your Passive Allowed/Activity Losses (PAL) will be reconciled on f8582 and brought onto SchE if allowed.

Again for rentals, its basically your Rents - expenses - depreciation.

Does that help?

@Lewis Finney if you need reno money, i believe the loans all have something. Conventional is just called renovation. VA should also have an option.

Not sure what sort of lender you are working with, but honestly in my experience the brokers that are marketed to you through the military aren't very helpful.

You still need to qualify for the reno --- basically qualify for the larger loan.  All the work has to be done through one licensed contractor.  You need to find a contractor who can do a bit of paperwork since to get the loan, he will need to submit detailed estimates.  That's the most stressful part since you need that to qualify for the loan.  Contrary to popular belief, there is no "certification" to be a 203/reno contractor....

Good luck.

@Martingale Kim I've never used TurboTax.  Its been decades, but back then I thought TurboTax was only good for somebody just reporting there income in the same state.  Just for simple stuff.

Maybe you should try calling their help line.  Maybe you just need to check some box or put the numbers in a different spot.

You aren't even posting here because you have an investment, right?  So, just call Turbotax

@Bryan Brown

The "best" would be to transfer upon the current owner's death.  In this manner, you get the step up in basis.  You get that "tax-free, clean slate."  

If they quitclaim deed it to you as a gift / $1, then you assume their cost basis and I think they have the tax liabiilty.

Is this property already a rental?  Should it be a rental?  How important is this property to the family?

If you want to or can delay the Title transfer, there should be some ways to handle that since its within the family.  Either by Deed transfer on death (if available in your state), some sort of trust setup, master lease with purchase option, etc.  You'd need an estate attorney or similar professional to walk yo through the pros and cons.  It depends on what your family is willing to accept.

If it needs to be moved immediately, then probably as a gift.  Quitclaim deed is the easiest.  I'd probably do that.  I've heard that some might find issue to it later so go with a warranty deed so you have Title Insurance and maintain the quality of the chain of Title...

I hope this helps.  Happy to chat.  Good luck.