All Forum Posts by: Account Closed

I'd probably check in to the S-corp tax election for the LLC for your wholesaling. This would let you divide your income between salary and distributions to minimize self employment tax.

Once you have rentals, it's all passive income anyway for most people so it won't be subject to Self Employment tax.

The attorney may have other reasons to do other things strictly based on the liability protection. Keep us posted! Good luck and congrats on getting started!

I second what Mitch said. Ask him which will be better to minimize self-employment taxes.

You may find a hardmoney lender to do the front end financing, but the back end refi is going tough. It's tough for experienced investors with full time jobs to get cash out refi's on rental properties these days...

The wholesaling gig would be a good way to raise money, but make sure you know what a good deal looks like. The numbers must work if you want to have end buyers viewing you as a reliable source for deals.

If I were in your position, my priority right now would be to get some verifiable income and clean up my personal balance sheet before dabbling in real estate. It'll make your life much easier I'd think. But, everyone has their own way so find what works for you. Good luck!

The fund manager won't tell you your current balance? Do you have any sort of agreement documents outlining when you can pull your money out, quarterly update requirements or anything?

I would atleast want the fund manager to tell me my balance, having the accounts frozen shouldn't affect whether or not you know how much your investment is worth with them.

Keep us posted what happens. I'd be persistent with requesting status and balance updates. Hopefully your losses (if any) are minimal.

Without any more detail than what the property is worth, no one is going to be able to help you very much.

The worth does not do much to determine the capital gains he'll owe.

Questions you may want to answer are:
1. When did he buy it?
2. Has it been an investment property the entire period of ownership?
3. How much depreciation has he taken on the property in the past?
4. What did he pay for the property?
5. Did he rehab the property and for how much? When?
6. What could he realistically sell it for today?

These are a few of the basic questions someone would need answered before even worrying about capital gains. He may not even owe anything.

You probably need to spend a couple hundred bucks and go talk to a CPA in your area so the CPA can look at the complete picture and help your client make a decision on what to do. Decisions like these usually involve a larger scope of the clients entire portfolio and goals.

Let us know how it goes!

I live on the gulf of Mexico, I'm talking offshore fishing!

If I came into $10m in cash right now, I'd probably buy a decent house on the bay outright, buy a nice fishing boat, and put the rest in free and clear multifamilies and let a property manager handle the day to day stuff. I'd shoot to generate enough cashflow to allow myself to not work and go fishing whenever I liked.

Ultimately, isn't why we invest to be able to lay off the gas and enjoy life with less worries?

Also, by nature almost all mortgages are simple interest. Compound interest means you are making (or being charged) interest on your interest. There were a few of these back in the subprime mortgage days, but I believe they are a thing of the past now. They may even be illegal.

I don't think your calculation of $600/year in interest is correct to represent 5% APR. If you finance $360,000 and show only $600 as interest income, then you will have shown an APR of 0.17%. ($600/360,000 x 100). This will not meet the minimum. Remember interest rate is on an annual basis, not on a total basis. If the seller were to put $360,000 into a 1.5% CD he's getting $5,400 a year. He's getting the shaft with $600/year in interest.

Also with the nature of installment sales (which is what seller financing is) the seller is going to have to take the agreed upon sales amount divided by his cost to come up with a gross profit percentage. This percentage will be multiplied by the installment payments to come up with the profit he's going to have to report each year. So the monthly payments will have three elements for the seller: 1. Principal reduction 2. Gain (profit %) 3. Interest income element.

Even if the seller sells the property at his cost, that only takes out the gain and you still have to show the minimum interest income.

If you fix the foundation to make the property rent ready, I'd probably capitalize this as a capital improvement.

If you already had tenants in place and you had to fix the slab to get it back to working condition, you could possibly expense it that year as a repair expense.