All Forum Posts by: Brian Moran

Did you find an answer to this? I am wondering the same thing.

Does Jim have to work more hours than Maria?

Next question. What if Maria's W2 doesn't require a lot of hours, say she is an airline pilot who sits on-call a lot, and is not needed much.  So she works 40-50 hours a month.  What if she wants to be the real estate agent, to off-set her and Jim's investment portfolio?

We just purchased a 4-plex in November.  Everyone was on a month-to-month except one family whose lease ends in 31 May.  I agreed as part of the purchase to allow everyone to stay at current rates for 3 months. I have leases written (should have done this week one) and ready to hand out next week with rents going from $575 to $775 starting on 1 March.  We will see who stays.  I think 1 of the 3 will leave.  The 4th, whose term has time left, is 50/50.  So while we wish we could just upgrade all the whole unit and get our cash out (we paid cash thinking we could refi ASAP - found out most banks make you wait 6-months, plus rates are awful, comparatively speaking.)

All that said - we are working on the outside of the units (new roof, encapsulated the crawlspace, will paint the brick, possibly get the parking lot upgraded, etc.)  We will update all the exterior doors, common hallway (boutique hotel style.) As a tenant moves out, we will update that place, increase the rent another $200, and offer the place to one of our current tenants....rinse repeat.  

We may put a note on it with a federal credit union, one without the 6-month waiting period, and then depending on an appraisal, refi again once its all the way updated.  

Not ideal, but you roll with the punches. 

I am in a similar boat - W2 income is high, and hours are less than a normal job.  This is leading me to seek Real Estate Professional Status.  I will likely look close at my W2 hours the next few months.  I have 1 multi-family LTR, and realize that is not requiring enough time to qualify.  My gameplan is to acquire more, while seeking to get my Real Estate License.  I think working as a realtor, and managing my rentals, while not working more than 40-60 hours a month at the W2 could get me past the Quantitative and Material tests of REP.

I have watched multiple videos on REP status, and listened to the BP & Short-Term Shop podcasts on the subject.  I have also downloaded and reviewed the Passive Activity Loss, Audit Technique Guide (ATG), produced by the IRS. 

Goal - Reach REP status if possible

Details - Married-Filing Jointly. Wife is a home-maker. We have purchased a 4-plex, and plan to purchase additional as we are able.  I have a very good W2 job, however, most months my hours are low, and I am seemingly "on-call" or "released" from duty.  

For instance - in December I only worked 49 hours at my W2, but was paid my full-salary.  This best-case month would average 600 hours a year.  A higher would be 80-100 hours, yearly average of 1000-1200 hours. 

I could never get 750 - 1201 hours a year in a single rental property and the ATG explicitly says a rental is mostly passive and doesn't require much time (although mine is keeping us busy for the time being.) 

I need something else to get me over 1200 hours/year.

The ATG mentions the following jobs as "real property business":

Development or redevelopment

Construction or reconstruction

Acquisition or conversion

Rental

Management or operation

Leasing

Brokerage

Opinions - Does a Realtor count, I would think yes. What about a Mortgage "broker"?

My thought process - Start a side-gig (Realtor or Mortgage Broker) to my side-gig (purchasing, updating, and managing my rental property(s)) in order to meet the majority test.

I think as a realtor I would be able to work 20 hours a week, and then with my less amount of work at my rental(s) log over 1200 hours a year. 

Has anyone executed this with a W2 that wasn't real estate?

What am I missing - none of the videos talk about something inbetween......Mixing the real estate investing with one of the above business's to claim REP status, and thus write-off any and all income, including their W2. 

Thank you Joseph - I think you mean well, so your comment about someone getting hurt doesn't bother me.  I've got emails and phone calls into most of these places, and if you read my post, I'm asking if anyone has the reference to the code.  If this is such an important requirement, to...you know, protect life, then its written somewhere.  When I find it I will post it, so the next guy finds it when he searches.   

I understand what they are, just trying to figure out if its required and/or standard for a small apartment.

I have a single story four Plex in Lucas County, Ohio, built in 1973. There’s a common hallway down the middle with a door on each end that exits to the outside. There are two units on each side of the hallway.

I am planning to replace all the doors because they are old, damaged and outdated in appearance. The store pricing the doors asked me what fire rating I need, telling me that it’s required.

My hour long, google search has, dry, there are some similar post from about 10 years ago in BiggerPockets, but don’t answer my question.

Are fire rated doors required for the two exits, and apartment entrances? Of so, has anyone found the code reference that explains the requirement; 20-minute, 90-minute, etc. 
I plan on making a lot of phone calls tomorrow, but wanted to check in here. I will post what I find.

@Katherine Serrell - did you find someone in your area? Or did you go remote?

I'm calling folks in NW Ohio and most either don't have the expertise (though they say yes that they do :/) or they are full and can't take on anymore clients. 

My investment portfolio is remote (Vanguard) - I'm thinking I can have a remote CPA....thoughts?

as far as REI - We have a 4-plex only

Thanks for the replies - I ultimately decided to close the LLC. This was very easy. I had to fill out an online form with the Ohio Secretary of State's Office. Upon submitting the form, the LLC was closed within 24 hours (even over a weekend.) I then had to fill out some forms and snail-mail to the IRS. This too was very simple since the LLC had zero activity in the last 2-3 years.

Once the LLC was closed with Ohio (they email you that its done), I was able to apply for a new LLC (same name) and also apply for a new EIN with the IRS, which was granted, even though I assume the snail-mailed forms are still enroute.

I made the "new" LLC a sole-proprietorship with me as the only member. This will help with taxes, and my wife will still be able to be involved.

Brian

I have an LLC that my partner and I used to purchase, flip, and sell a home in 2019. That is the only thing we done with the LLC.

He is willing to leave, and I then want to add my wife.

There is no capitol or equity in the LLC, just a name and EIN.

The state of Ohio says all I need to do is update the Operating Agreement.  On-hold with the IRS as I type.

Why not have her “buy” him out for $1. Then he is removed and she is inserted?

Next question - doesn't the LLC then become a "disregarded" entity?

We have purchased a 4-plex, and want the LLC to move rents into a account in the LLC, etc.

thanks for any advice.