All Forum Posts by: Donna Smolinski

Brian,

Thank you for your quick response. 

Actually, the firm that set up my LLC "DID" say what you stated above, however, in past years I was given some bad advice from a licensed "CPA" which cost me about $11k in penalties. Of course I switched CPAs immediately after that, and I learned to be more pro-active in tax matters and self-educate as much as possible now, since even the professionals make errors, (especially in complex tax areas of SDIRA issues). The IRS tax codes are complex & can be confusing about the filing requirements for SDIRA entities. I thought BP was a good place for a little clarification and backup support. I'm sorry you feel that I shouldn't have to come to BP for support on this topic???

Rental Income going into a SDIRA (checkbook LLC) ......

I just purchased a rental property in my LLC (cash transaction - no financing). The LLC is a "single member" entity, therefore, I understand there is no 1065 filing reuirement (only multi-member LLC requires 1065 filing). However, rental income is $1400 per month. Do I need to file Form 990T to report rental income?? If so, I "assume" the rental income is tax deferred until distributions are received from the IRA custodian??

I appreciate any input.  Thanks!

We own 3 rentals and we switched everything to Geico a couple yrs ago, where we have our Primary residence coverage.  This way all properties are also included under our $2mil umbrella policy, for extra protection.  Geico uses Stillwater Insurance for the rentals, but they add each rental to our Geico Umbrella Policy too.  We've been very happy with Geico handling all our insurance needs.  If you don't have your rentals covered on an Umbrella, you might want to consider it.  It's very inexpensive for a whole lot of extra coverage.

This is a good post, just as a reminder why we always have to do ALOT of homework. And the sweeter the deal looks, the more research I do. If it looks too good, there is usually a reason!

I've been with Entrust, and no complaints. They funded our SDIRA very quickly into our LLC, so we have full checkbook priveleges for our investments. Yes, there are some minimal annual fees, but why shouldn't there be? They aren't earning commissions on investments since we invest all our funds into real estate (fix n flip).

Yes, there is $800 per yr on the LLC in Ca, but considering the tax free profits that we've been earning, who cares? Having the LLC give us alot more freedom to have control and to be able to act promptly without the delays. Without the LLC, the custodian has to fund all your transactions. They can't do it as fast as you can.

If you are shopping for SDIRA custodian, remember there is usually an "exit fee" when you eventually cash it out. This can be steep if your account has had substantial growth. For this reason, we are starting to withdraw some each year, now that we are over 59-1/2. We can now withdraw without IRS penalty and invest the funds in our Corp. As the funds continue to grow in our corp, there will no longer be fees paid to exit the SDIRA acct, since we are doing so before the growth becomes too great.

All these things should be considered when setting up your SDIRA, plus alot more. Invest a few bucks to talk to a QUALIFIED tax advisor before jumping in.

One more thing that I've always liked about Entrust. They offer ALOT of seminars on RE and note investing (and more). Some are live and some are webinars. They aren't all free, but they don't charge alot for the ones you have to pay. They often have a Tax Attorney as part of the panel for their seminars. You need to stay educated in this arena to avoid costly mistakes and to stay on top of any new regs that may be imposed on SDIRA accounts. So, you can add my vote for Entrust.

Michael,
Penalties are VERY steep if you make any mistakes investing in your SDIRA. You should take some time to study all the info and be sure you get a Tax attorney that's qualified to help you set it up. Don't rush into it. You should fund it through a LLC, but the LLC needs to be new (not one u have already been using),. There's alot of good info online, but there are so many restrictions that can trigger a disqualified transaction, that it can make your head spin. If it's not setup correctly from the get-go, you can find yourself in big trouble.

This is definitely a good way to invest, just be careful and do your home & invest a few $ to hire a pro to help.

I only owned one in the past and won't do it again. When we sold our unit VA, we needed termite clearance. The adjoining neighbor wouldn't agree to pay 1/2 of the termmite cost to tent the bldg. We absorbed the whole cost, which of course was double. The neighbor got free termite work, just so we could close the deal. The lender would not accept alternative treatment for just our side. We're lucky we never had roof issues during the ownership.

If there is no HOA, one side can get really run down, affecting values for your side. Not much you can do about it without HOA enforcement. Just my $.02.

I would have loved to drive to AZ for a few days to attend. Unfortunately we have a wedding we need to attend that date. Please let us know when the 2nd meeting will be, if there is room for more at that time:) Would love to attend.
GREAT job getting this off the ground!

I've been pondering the same questions lately. I've ALWAYS used licensed/insured contractors, but profits are shrinking, so I've "considered" using unlicensed contractors for simple jobs that have little injury risk. From the research I've found so far, it appears that most of the answers to your questions are NOT what we want to hear. Unlicensed workers can be risky business for all the points you stated above. However, I'm still inclined to use handymen, unlicensed workers for simple jobs like gardening, simple landscape improvements, interior paint (single story, low ceilings only), drywall repairs, etc. Anything that has higher injury risk, scares me. Murphey has always lurked me (Murphey's law).

ANY/ALL unlicensed workers that I use (if I decide to do this) will have to sign an Injury Liability Waiver form and show proof of personal medical insurance coverage. The waiver will include a stmt that says they will maintain their medical insurance during the entire work period. I don't want someone on our job sites that doesn't have medical insurance because that will increase potential liability even more. Now if there was a major injury, there's a good chance that a court may throw out the waiver and hold us responsible, even with a waiver signed, which is why I do not want to employ anyone for work requiring ladders, granite fabrication, roof work or other high liability jobs. Just my $.02.

I'd been curious to know if anyone has horror stories regarding this???