All Forum Posts by: Brandon Hall

@Albert Bui All good points. The point I was trying to make is that for an incompetent lender, EBITDA will be a better explanation of your investment decisions prior to any tax strategies you employ. 

Also, to your point about depreciation recapture - you can always report accumulated depreciation once you dispose of a property. You file Form 3115 (application for change in accounting method) to claim the depreciation, then report the adjustment of accumulated depreciation on Schedule E as an "Other Expense." So you would still get the benefit of depreciation.

*I should note, that's obviously not ideal.

Throw in "EBITDA" on your financial statements, then show them to loan officers. EBITDA (Earnings Before Interest Taxes Depreciation & Amortization) will show the result of your business's operations. Then you apply your tax strategies to arrive at a Net Income/Loss. 

Regardless, you absolutely need to report your expenses, especially on big ticket items that need to be capitalized and depreciated, as that is the law.

This is a complicated issue. I'm thinking you cannot deduct the costs as an expense, but if you made capital improvements you can add the costs to the basis of the property. 

You may be able to claim that an "unforeseeable event" caused you to not be able to live in the house, but there is still a lot of grey area.

Honestly, I'd suggest visiting an attorney to review your contracts that you have signed and try to understand whether or not you were "preparing a rental for operation" during the year or if you broke the contract because you never occupied the house. Then come back here with that info or speak to an accountant.

Not legal advice. 

A roof is a capital improvement that extends the life of your property. Therefore the cost of the roof should be capitalized and depreciated over a period of 27.5 years. 

I believe you are talking about the "Safe Harbor for Routine Maintenance" rules which state that you may expense items that you reasonably expect to perform such maintenance at least once every ten years. Typically, a roof would not fall under this safe harbor, however if you are in an area that experiences extreme weather conditions, you may be able to make the case that you have to repair your roof or do a total re-roofing at least once every ten years. 

My opinion, not professional advice. 

http://www.irs.gov/Help-&-Resources/Tools-&-FAQs/FAQs-for-Individuals/Frequently-Asked-Tax-Questions-&-Answers/Sale-or-Trade-of-Business,-Depreciation,-Rentals/Depreciation-&-Recapture/Depreciation-&-Recapture-4

Both have their pros and cons but for your situation, it sounds like you will be much better off forming an LLC with a 50-50 split, then putting the title of the property in the name of the LLC.

The home in question is your primary residence and is subject to short/long-term capital gains tax, not business income tax. Your flips are basically your inventory, since you lived in your personal residence, it is not inventory and not subject to income tax. 

@Martin S. You said you looked in NC? Are you sure? My parents invest in NC and are hitting about 1.7%. I went to a specific town this past weekend and viewed several multi-family properties that pull 1.5% and with a bit of maintenance and TLC they'd pull closer to 2%.

Not that hard bud. Get off your couch and step outside once in a while.  

I'm under the impression that even if @Martin S. found his 2% property, his investment would under-perform the market.

When people hand you information, you don't learn anything. Take some initiative. Stop bashing people. The majority of people on this forum are very smart and very successful and you have just outcasted yourself from the community. 

Yeah definitely not going to post potential properties for you, but Baltimore, MD has plenty of properties that exceed 3%. You just have to know where to look.

I can speak to LLP vs. LLC vs General Partnership. An LLP is used by professionals like lawyers and accountants. There is no need for you to look into that entity type. General Partnerships do not off you much liability protection and as a result you see less and less of them around.

LLC is by far the best structure out of those provided. You will only be at risk for the amount you contributed and you will be protected in a suit if one of your partners acts negligently.