All Forum Posts by: Colton Joseph

@Vinod Dasani Thanks Again! I was just doing a bit of research on that. Definitely seems like a good Idea to set up to protect personal assets since income will be taxed basically just as it would without the LLC!

Thanks for the input @Vinod Dasani @Daniel Hyman Would a multi-member LLC avoid being tax twiced etc. I.E if the company pays taxes on total net income would each member have to also pay income tax, or is it just shown on a form (K1?)? Sorry I'm new to the legal/tax side of the business so all opinions are appreciated!

Hello, and thanks in advance for reading!

I am a real estate investor in Central Texas, and have thus far been a Sole Proprietor come tax season. We are starting a new family business constructing, and selling Spec homes as 3 partners. I know I am going to need to meet with a CPA eventually, but I am hoping some of you can provide me with some preliminary knowledge on what the best way to structure the business would be for tax/liability reasons. 

There are 3 of us all equal partners that ideally want to just split net profit on each deal equally unless that is a horrible idea tax wise. Should we be looking at an LLC, or other business structure?

Thanks Again!

Good Evening All!

I am looking for creative/low cost ways to fund a spec home and have a question about pulling equity out of my current residence.

I have a newly built homestead house that was just appraised at $260k. I am currently in the process of getting a HELOC for 50% of the value which seems to be the max amount Texas laws allow for a single cash out loan (or so Ive been told!)

My question is would it be possible to get another HELOC, or home equity loan, etc. for an additional 30%-40% possibly?

Thanks in advance to anyone that may be able to help!

Hello all! I am looking for some good spec home lenders in the Central Texas area. We have some property in Lago Vista where specs are flying off the market. We have a GREAT record of experience, low LTV needs (60-65% of finished value for the first one) GREAT credit, but heres the catch... HORRIBLE tax returns (I mean doesn't every self employed person?) Is there anyone out there that has any recommendations? We have had trouble at local banks thanks to their red tape tax return requirements!

Thanks!

@Tommy F. that quote holds a lot of truth! Unfortunately I do not own my primary residence. I will have the cash to do the deal myself though, and I'm pretty certain I'm going to go ahead and do it. The only thing really in question is if I will sell imediately on completion accepting the tax burden, or turn it into a rental property! As far as holding it for a year unfortunately that's not in the cards for me at the moment! Thanks again for all the opinions!

Hey @Tommy F. thanks for the detailed opinion. Both positive and negative opinions are appreciated as I am a realist. Although you make valid points, most of them have been checked/dont apply to my situation. First off in the example of a 3 bed 2 bath that is worth 170k in the area that would be built for 100k. The 170k valuation is based on a 1100 square foot home which is much smaller than the 1600 PSF that you assumed. That would put us at about $90PSF of construction costs including permitting, sewer/water tap fees etc that are only $2,700 in the small community that I am building in. This can be done by a quality builder in central texas with lower-mid end finishes. A house as such has comps of $155 PSF in the same area/finish out/ size range putting us at a hair over 170k valuation. Homes are going up like CRAZY in this little lakeside community. (like 30 in a tiny established community at the moment.)

All utilities are available for a low $2,700 at the property which is properly zoned for my intended use. I was sure to check those details before putting the lot under contract...

So what we are looking at is 8K lot cost + 100k home cost (everything from permits to grass included) =108k cost. 170k selling price-108k Build cost= 62k profit minus sales commissions etc due at closing. Now the point I agree with you on the most... TAXES... yes I agree it would probably be considered inventory and taxed at a high tax rate if I sold immediately. That is what made me consider trying to turn it into a rental in the first place. 

And last point... my past taxes have been filed however they were filed as "capital gains" last year by my FORMER CPA who had no idea what he was doing. I have tried to get a construction to perm this year and did not qualify because the banks don't see "capital gains" as stable income. 

That is where the original question spawned from...Is it easier to finance a house as an income property if you pay for the build in cash, have it leased, then Refi, or "sell it back to yourself" so to speak using the instant equity as a down payment.

RECAP: I buy lot, and have house built for $108,000 in cash. 

I have the options to turn around and sell for $170,000 pay commissions and taxes which take a huge chunk.

Or finance it after completion as a rental property and cash flow $400-$500 per month while still getting my original $108,000 back. The lease seems it should serve as proof to the bank that the loan will be repaid plus there is a good bit of equity in it for the bank per the other responses. By that point I will have strong 2016 tax evidence, and my decent 2015 tax evidence filed wrongly as capital gains to back it up as well.

Thanks Again for taking the time to read/ give you response!

Thanks for the responses! @Thomas S. Thank you as well! That would definitely be nice if I could pull out as much, or like you said even more than I have in it. That would leave me the opportunity to add and repeat as many times as I can find the right property, and financing adding $400-$500 passive income each time while also building equity in the homes. I would like to shortly add some stable income rental so I have a consistent form of income as well as the buy/sell type deals. That way one bad deal couldn't make me go broke!

Thank you both for the input and Cheers to Success!

Hey @Julie Falen thank you very much for your response! Being that you are a lender yourself, I'm not sure I could have asked for a better respondent! Thats the way I was thinking it should work, but wanted to see if the banking industry agreed with me! It will come in very helpful when deciding to hold long term, or take the profits and run! I definitely want to get into some more long term income properties soon, but am still on the fence on this one! 

Thanks for your contribution, and have a fantastic weekend!

Good Evening everyone!

I am looking for some advice/opinions on a build I am about to do, and greatly value any input from those of you with more knowledge on the subject than I!

I typically buy and sell property to make a quick profit, but have recently been valuing/considering long term income properties in the form of single family homes to obtain passive income.

I recently went under contract for a lot with intentions of building a small house with cash to resell for profit. Only recently I have been tossing around the idea of seeing if it would be possible for me to turn the property into a rental, and after building the house have it financed as income property. I would still like to build in cash so that I can do it on my terms, but would need to cash out when it is done to put into other investments.

So heres the details. 

Purchased a lot for 8K in community with strong growth and a very desirable rental market. I plan to build a small simple 3 bed 2 bath home for +/- $100,000. I estimate the value if I were to turn around and sell it the home would be worth approximately $170,000, or rent for approximately $1,300+ per month. 

I do not have acceptable proof of income to qualify for a mortgage personally, but am curious if you all have found it easier, or harder to receive a loan for a rental property? I figure I should be able to cash flow around $400 if I were able to finance the $110,000 as sort of a "cash out" finance and use the original money to rinse and repeat while adding $400 +/- passive income each time. Like I said I do not have any experience with rental properties so anyone with experience would be appreciated to chime in! I'm trying to decide which route I want to go with the build before selecting exact plans/finishes etc.