All Forum Posts by: Brett Sorenson

Couple questions - 1. Does the LLC own the properties ? 2. A two person llc is a partnership which changes the tax treatment slightly because generally a 1065 return needs to be filed. Then you would receive a K-1 from the return that would then be input on your personal 1040. 3. If you decided in the partnership to split everything 50-50 then yes that is how it should work. Some people decide to split things differently though because you need to have enough basis in the partnership to take "paper" losses generated from the partnership. This is probably more than you wanted to know.

If the cameras primary use is real estate driven deduct it.

I purchased a duplex 5 years ago for 175k. It is doing well and is now worth about 290k. I took out a Heloc for 38k on the property a couple months ago and used that cash (and 20k of my own) to purchase another duplex. I now use the monthly cash flow after all bills to pay down the Heloc. It is rather simple and works well. It is also nice having the piece of mind to have the line available if something crazy came up. I plan on paying it down over next couple years and then trying to increase the line to have more options available to make purchases etc.

CPAs will always charge for audit defense unless they were at fault. Unlike what Dave said above.. the client gives the CPA the work papers and information and with those figures the CPA prepares the return. The numbers being audited by the government are Dave's...not the CPAs. I am a CPA as well.

Derek, I currently have three properties which total 5 units. With these units comes a bit over 500k in debt. I also have 20 k in student loans left. Now, I am planning on building up reserves and throwing a tad extra at the mortgages each month. Will one more unit make your portfolio that much better ? No. Will not having the correct reserves to deal with 100 year old repair costs potentially cripple your portfolio for a couple years? Yes. In my opinion the downside risk eclipses the upside so I would save for a year or two and mitigate the potential for those losses. That is what I will be doing. I hope to have a million in debt by 30 but along side that I plan on having 100k in 401k and 25k in cash sitting there..just in case.

Comparing stocks and real estate is horribly naive. 1.If the real estate market plummets and you can maintain tenants to pay mortgage and bills you are unscathed. Sure, the equity isn't there but in the long term buy and hold that really doesn't matter. 2. It looks like you are 29 (I am 28) and neither of us have really experienced a bear market. The last few years under Obama and now under Trump the fed has continued to prop the economy and stock market up. If you had all your dough in stock what happens when the 15-30% correction comes? There is no getting out of that unscathed. 3. Being a landlord is stressful at times. I would be more stressed if my 200k of equity was in the stock market and lost 30k value over a month. That was 30k I worked hard to acquire. 4. Finally, long term wealth is built with leverage. If that is your goal I think real estate is the way to go. Holding debt during inflation is a tool overlooked quite often. I have 1 million in assets with 700k in debt attached to them and all the properties cash flow quite well. There is no way I could hope to acquire 1 million in the stock market during a 15 year timeframe which is what I will manage to pay all the properties off during. Just my two cents.

Brian, I actually did this last week. I house hacked a duplex 4 years ago out of college and began building equity. I found another property to purchase but only had 20k of the 60k needed for a down payment. I was able to take a Heloc for the additional 40k to get me there. It was worked out great and the interest is only 200 a month so if things get tight it isn't a huge burden. Theoretically I will be throwing all the additional rent at the Heloc to pay it down. Also, a Heloc is pretty great in general because it can be drawn on at any point in time. I think I will be looking to use this option time and time again as my equity in my first property grows. Saving 25% cash is hard so being able to kick in an extra 30-75k from a Heloc makes all the difference.

I just purchased my second duplex near a college in Wisconsin which is about an hour away from Minneapolis. I am planning on being out there one Saturday a month if necessary to take care of things. If things are an emergency and plumbers and electricians need to be called then that is just part of the game.

I currently have a similar situation and have opted to keep the property for the long term wealth aspect. If an opportunity comes available that I can't pass up it is easy enough to sell and roll funds into project or simply refi out. I would hold property until there is a better opportunity.

FHA needs to be owner occupied and if you are putting that on your buddy I would shy away from college renters. Next, with that budget you aren't going to find any multis worth purchasing in a decent Minneapolis neighborhood. I have a duplex in south Minneapolis that isn't great but it would still sell for close to 300k with gross rents of 2,500 a month. Where does your buddy live? There are definitely some cheaper opportunities in the metro area that could provide solid cash flow while sacrificing potential appreciation. I would evaluate those instead of "stretching" for a rental at top dollar. That's just me though.