All Forum Posts by: Basit Siddiqi

@Matthew Jure

Cleveland has experienced population decreases since the 1960's. Cleveland also had a lot of employers leave after the most recent recession. With that said - I am hearing great things about Cleveland in recent years.

Congrats on your househack and being able to life a debt-free lifestyle!

If you do not get any recommendations in this post I would do 3 things

1) create a keyword alert for "Cleveland" and "Lakewood". You will notice frequent posters on topics that have those keywords. Reach out to the frequent posts for who they use for a CPA.

2) Attend local real estate networking events and ask the attendees on which CPA they use.

3) If you are still having trouble - you may want to reach out to a CPA who works with clients remotely. I, along with others on this website, work with people remotely.

Everyone mentioned some great points.

The only thing I would add is that you can look for homes with owner financing.

@Christina Gomez

If you are projected to make $40,000 this year - There is room to save on payroll taxes with the S-Corp.

You will need to talk to your CPA/Tax accountant and see what portion of the $40,000 will be allocated to salary.

The portion not allocated to salary will generate you 15.3% in payroll taxes.

Let me know if you have any other questions

How did you calculate that you will only be able to rent it for 12% of the time?
Are you able to lower the daily rent amount so you can project a higher occupancy rate?

@Mike Mefferd

Hi Mike - How much Profit/Loss/Capital do you own in each of the LLC's?
if the answer is 100% - Then; you may not be able to take the losses on your return.

You pretty much have the option of 
Disregarded entity or S-corp

S-corp can save you on self-employment taxes. However, you have to factor in all the costs associated with having an S-corp.

You will need to see if the tax savings associated with having an S-corp outweigh the costs of running an S-corp.

What is your projected taxable income for the year?

I am a little confused from your description.
You live in Missouri and have investments in Missouri. However, you are looking to also invest in Kansas and see what the tax implications are?

As a Missouri resident - you will be taxed on worldwide income. 
1) you would file a Kansas non-resident return and report the Kansas rental income/loss and pay taxes(if applicable)
2) you would file a Missouri resident return and also report the Kansas rental income/loss. You would then get a credit for the taxes you paid to kansas.(the credit may not be 100% of the taxes paid to kansas).

Sometimes - neighboring states have reciprocal agreements where you may not have to file a nonresident state return with the other state. however, it doesn't appear to be the case with Kansas and Missouri.

@Christina Gomez

Hi Christina - If you are the sole owner of the LLC - you have 2 options.
Disregarded entity - Income/expenses will be directly reported on your personal return. This is the simplest option. 

S-Corp/C-Corp - as a general rule - you don't want to hold real estate in an C-Corp.
If your vacation rental can be deemed ordinary income(if you provide items outside of solely renting a room such as bread and breakfast) - there may be some advantages of operating it as an S-Corp.

If you have other owners in the LLC - you have the option of a partnership taxation or S/C-Corp.

@Gjon Rexha

Hi Gjon - Welcome to BP!

Did the couple use the property as their personal residence?
they should have $500,000 of gain exclusion if they lived in the property.(1031 would not apply in this case)

If they used this property as a rental property - they are pretty much fully depreciated.
2017 - 1992 = 25 years.

They can look into doing an installment sale which would spread the tax(and payments) over several periods.

@Tony Lin

Hopefully someone responds to this thread to give you a recommendation.

What states are you investing in?
Things that sucks about being a California resident and investing in RE in other states are
1) you have to file multiple state tax returns
2) Since California taxes on worldwide income - you are ultimately paying CA tax rates on the income(you do get a credit for taxes paid to other states but you still are paying CA rates)

Did you have any specific questions in mind?