All Forum Posts by: Chelsea Monk

That's awesome, good for you @Gabriel Ramiez! My best advice is don't get stuck in analysis paralysis and end up never buying your first property - and don't beat yourself up if a property doesn't end up panning out like you expected.

How you should structure it depends on how much net profit you're making and what LLC laws are in your state. Some states will not allow an S-Corp to receive RE commissions - CA comes to mind. If you actively treat the RE sales as a business, then any potential losses will offset your W2 income regardless of how your business is structured. Once you start attempting to make sales, your business is open and net losses are currently deductible.

Starting out, you should just be a regular old sole prop. Should you form an LLC? Depends on state law and what benefits you would potentially get from changing your legal status to LLC. LLC won't affect your tax status at all unless you make a tax election - which you absolutely should not do when you're just starting out unless a competent tax advisor tells you to (emphasis on competent). Whether to form an LLC is a question for your attorney.

Such a great post, @Michael Plaks!

I would even go so far as to add that hiring someone who doesn't know what they're doing with real estate can actually cost you significantly more than the amount you saved on fees by using the less expensive preparer. It genuinely makes me sick to my stomach to have to tell a new client that their previous preparer's advice to put all their rental property in an S-Corp was a bad idea, because now we need to amend their personal returns to treat the income as passive because S-Corp income doesn't automagically become nonpassive (honestly, why do those concepts always go together?). Oh, and since we're on the topic, we have to discuss what will happen if you ever pull that property out to refi, etc.

Depends on state law. Sometimes it makes sense to use both in tandem. Note I said sometimes. Consult an attorney in the state your properties are in for the best answer.

Regardless of trust vs LLC, insurance is the best option for protecting property owners.

They're coming up with a ~38% tax bracket. Given that CA doesn't conform to federal bonus depreciation rules, you'd be looking at a max tax bracket of 24% fed and 9.3% state, so already their estimate is high. Then consider that you're not a RE professional (unless your work in RE accounts for more than 50% of your money-making time AND is more than 750 hours), and your losses are limited to $25k max, less if the rest of your income is over $100k. So max savings in a single tax year would be ~$8500, bearing in mind that you'd be offsetting any rental profits with the losses generated by the cost seg study, so potentially just a smidge higher on the federal side. And also bear in mind that the state savings may actually be less since you'll have to depreciate all class lives over their actual life and not up front.

Does it make sense for you? Maybe. I've recommended similar. But you'd need to sit down with your accountant and run projections to see the pros and cons, including what you expect income to look like in future years and your plans for your properties.

@Steven Hamilton II

@Steven Hamilton II is who you need

Hey, Drew!

Xero uses Yodlee to bring in feeds from most banks. However, if your bank doesn't connect, I recommend downloading the monthly statement in .QBO format and uploading it to Xero. It isn't quite as convenient as bank feeds, but its much easier than manually inputting them, or trying to utilize spreadsheets.

@Brian G. I find that Xero is easier to use when you have a larger portfolio, it's less clunky to navigate. The reports are better and can be customized. You can set up bank feeds with most banks and import transactions automatically. You never want any system to automatically record your transactions, I've seen so many issues with that! However, you can set up a rule where it tells you automatically what a transaction probably is, and all you have to do is double-check that you agree and accept.

Came here to say exactly what @Justin R. said. Check out multi-family properties close to work and rent out the other units. You can collect enough rent to cover your mortgage and you can basically live for free.