All Forum Posts by: Cliff T.

Can anyone clarify... for your S-Corp's K1, do you retain your profit as ordinary income (Box 1) or distribute everything to yourself (I believe Box 12)? I'm running into a situation where a lender is saying that can only count Box 12, even though I own the S-Corp 100% and any ordinary income is mine.

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Hi all,

I'm in contract on a few condos in Madison. Can anyone recommend a good home inspector?

Many thanks in advance!

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Madison, Wisconsin

Originally posted by @Paul Ewing:

Originally posted by

However, if you are working in the real estate field (i.e. as a broker) and working for someone else (i.e. you are an employee), you do not get to count these hours or services toward the two criteria stated above unless you own at least 5% equity of the business you work for.

Does this apply if you are a 1099 contractor to the broker or just a W-2 employee?

Bumping this back up. Do hours spent as a real estate agent count towards the Professional status 750 hours requirement?

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Bumping this thread back up. Have lender guidelines changed dramatically due to Covid regarding HELOCs? Or does it still depend on the lender and some do NOT count HELOCs against DTI?

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Originally posted by @Chris Mason:

Quick note on re-reading this thread:

Giving yourself a W-2 isn't a magic spell that will automatically help you. I've had more than one person reset their 1-2 year self employment waiting period by doing this.

If you own 25% or more of the business entity, it's going to fall under the self employment underwriting guidelines, no matter what tax forms you use. Period, end of story, no exceptions in the Agency 30YF low interest rate world.

There are also cases where it makes no difference, so they issue themselves a W-2 and it's fine. Depends on what appears on the tax returns. EG, for the last several years they have been W2-ing themselves to include an end-of-the-year bonus that makes the business have a net taxable income close to zero. It's still going to be underwritten as self employment, and their qualifying income would have been exactly the same had no W-2 been issued, but that business owner can quite possibly be none the wiser of that fact (so they might, say, run around on an internet forum telling everyone to W-2 themselves thinking they are helping...).

"W-2!" is not a magic spell that a self employed person can invoke to suddenly not be self employed, if they are in fact self employed.

In 2007 things were different, and people wold in fact give themselves a crazy W-2 for a million dollars to qualify for a mortgage (presumably with several years of net loss carryover in the future?). Now, in 2017, we're going to go ahead and look at that business, and confirm first and foremost that it even has a million dollars to pay it's owner, according to what your personal and business tax returns say, and see if this is how you've been running your business for a while...

Hey Chris,

I know this is an old post but I found the content to be very relevant for my situation. Can you explain what you meant by "I've had more than one person reset their 1-2 year self employment waiting period by doing this."

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Bumping this back up. Any thoughts on hotel investing in the current climate? With travel down significantly, I assume there might be some distressed properties hitting the market soon.

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Thanks @Brian Eastman! Just to clarify, if you have multiple LLCs (e.g. for rental properties, one for flipping, one for realtor work, etc.) would one still qualify, assuming no full-time employees with any of those entities?

And is the Solo 401k contribution limit for the individual or each business?

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@Dmitriy Fomichenko - does a realtor who has created an LLC taxed as S-corp qualify as well?

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@Eric Fernwood - I'm sure you know the market better than me as a local realtor, but the main issue I see with your post is that you're only providing lagging indicators. I'm sure everything in Vegas looked fine for March and it sounds like April was only minimally impacted. But I have a hard time believing that with the Strip entirely shut down and travel for the foreseeable to Vegas heavily impacted, that this won't drive down rents and prices across the board in the city.

As @Victor S. pointed out, I don't think we'll see the full effects of COVID on Vegas until 6-12 months from now.

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Justin, I'm not based in Vegas so take my questions/thoughts with a grain of salt, but wouldn't it be better to at least give COVID a little bit of time to settle down before making this huge financial decision? You're trying to decide whether to sell or keep your main asset and purchase a new condo in the midst of all of this, with Vegas being one of the hardest hit markets? I just think it's extremely difficult to know how reliable your sales and rent comps are right given the situation.

But assuming the numbers are accurate, I'd recommend selling your house. I think the situation pretty much boils down to.. do you want to take $50k in profit now ($325k - $275k purchase - selling costs) or let that equity ride in the rental. But the problem is that home is likely to be break-even at best.

And I'd agree with everyone else here. That condo doesn't make too much sense, especially with $170/month HOA. That will really hurt you over time.

Best of luck!

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Las Vegas, Nevada

All Forum Posts by: Cliff T.

Cliff T. has started 35 posts and replied 199 times.

Post: S Corp Employed and Obtaining Mortagegs

Post: Anyone able to recommend a good home inspector?

Post: Am I a real estate professional for tax purposes ?

Post: Will a HELOC affect my DTI if I have a Zero balance?

Post: How do Banks look Self Employed (1099) v. W-2

Post: Hotel investing

Post: Self-Directed IRA VS Solo 401K

Post: Self-Directed IRA VS Solo 401K

Post: Corona Virus Impact to Las Vegas Market

Post: Deal or No Deal: Condo Potential?