All Forum Posts by: Doug G.

I'm still learning, so perhaps it is a guru-ism, I honestly don't know. I can reference a few investment books and multiple websites that use the term, but I cannot speak directly to their validity (Robert Kiyosaki discussed it in length in Own Your Own Corporation, as do Diane Kennedy and Drew Miles on their respective websites). Learning in the Internet Age can be a tricky business- you've gotta be selective about your sources! :)

The corporate structure for me is a tool for asset protection. I work in a litigious field, and the less I personally own, the better off I am. Tax savings and any other benefit I can wrangle from owing a corp is just icing on the cake.

I am yet to make my first investment- but have been doing my homework and saving, and I'm "almost ready". I work in a secure, full-time employed position, and I love my job. To be clear, I do Not intend to quit anytime soon to run into the real estate investment world. That said, my benefits at work are restricted to what my employer provides.
I learned about defined benefits plans, and how I can create this benefit under certain corporate entities. Then I learned a bit about upstreaming between entities, which, on paper, sounds like a good tax-saving idea. I'm having a much harder time trying to model the tax savings under my circumstance.
Specifically, I don't see how this scenario could work when the bulk of my income still comes from my employment rather than my investments. My job-earned income funds the purchase of assets that are held in a corporation. I've already paid income tax on all the money I'd use to fund any corporate spending (it's all my earned income from my job), so it seems like the second entity is redundant. I'd be upstreaming just to get a write-off to avoid being double taxed on transactions that are passed through an unnecessary second corporate entity. The whole situation would be avoided if I simply had one corporation that owned the investment property and provided a defined benefit plan for it's executive board, wouldn't it?
Can anyone explain to me how upstreaming works in the "real world"? I'm sure there's a way to optimize that flow for non-self-employed people, but I just can't see it yet.
Thanks,
Doug

Yes, good points, and I'll take that advice! I'm mostly targeting graduate students and young faculty. Although grad students are just as cash-strapped as their undergrad colleagues, they also tend to be more responsible and concerned with things like credit. Due diligence seems to be the key in any case.

Uuuf. I didn't think about that. I can see where things could go Bad very quickly if you get the wrong tenant in a commercial property, particularly since many small businesses fail.

There are a few options here for "rental management companies" that will basically collect rent, do some minor building maintenence, and field phone calls for a percentage of the monthly collected rent. I'm in touch with a reliable handyman that can handle basic repairs. I've budgeted for these expenses into my cash flow estimates, based on rent prices obtained from CL. I was ultimately hoping to create a business entity that oversees the operations of property management, repair and maintenance. I wanted to hold the property in a separate entity and upstream from A->B. Unfortunately, I'm still struggling with those cash flow details, and wondering if that plan makes real-world sense. I should mention that I work in a very litigious field, so asset protection is a major concern.

One of the reasons I've bookmarked this site- everyone here is really generous with their time and knowledge. Thanks again!

Thanks Jon- I was not aware that over 4 units is also considered commercial property. Most of the buildings that I have been evaluating are over 4 units. I read about triple-net last night, and it does sound hands off once a lease is secured. Unfortunately, my region is fairly stagnant for business growth and there are a lot of unoccupied buildings around. This is either a great opportunity or a really bad indicator, and I don't know enough to make an informed investment.

How do I locate a commercial professional that can assist me, and what am I looking for in this professional that will distinguish him/her as being qualified? Is it a bad idea to ask my residential real estate agent for help? Thanks again!

Hi Group-

I've been reading and saving diligently to make my first transaction. My investment goal is to secure some passive income through real estate on a cash flow basis. I have focused my studies on residential income property, and gravitated towards the idea of a multi-unit building near a major university.

I thought I was doing well, until I started reading posts from people who specifically recommend against residential property for people like me. I am an employed (i.e.: employee) healthcare professional with excellent base income, but a very busy schedule. I love my work, and don't have any interest in "quitting my day job" in the near future. Nevertheless, I like the idea of having positive cash flow (who wouldn't?!) and putting my liquid cash assets to work for me.

A lot of people here are recommending commercial real estate for passive income, but I honestly know nothing about it. Is the general consensus that residential real estate is too time consuming, even if professionally managed? Would anyone be willing to give me the "reader's digest" version of how cash flows through a commercial property, and a what the big picture looks like? Finally, are there any particularly good resources that you can point me towards where I can learn more?

Any help, insight, opinion is greatly appreciated!

Thanks,
D