All Forum Posts by: Dorys Prentice

Thanks Ron.  I found your other threads after I posted here.  Agreed that the responses were mixed.  I just posted myself on another thread.

I'm hoping there are some CPAs or personal experience (knowing I need to confer with a CPA) here to assist me with a decision on whether or not to open a LLC in TX (our place of residence and where we'll do all our business).

My husband and I just put in an offer with another married couple for a flip in TX.  The other couple already has a LLC.  Our plan was to create a Joint Venture between the two LLCs for this one project. 

Since TX is a community property state, we can open our LLC and be treated as SMLLC for tax purposes so we would be treated as a single member LLC vs a partnership.

I guess my question is, is there any downside to creating an LLC other than how we report our taxes and reports to the TX Franchise Tax Board? Is there an advantage to listing as a partnership vs a SMLLC?

Investment Info:

Single-family residence buy & hold investment.

Purchase price: $300,000
Sale price: $715,000

SFR 4bed/2 bath with add-on unit studio in back. Rental until 2016 when we converted it to our primary residence. Sold in 2018 and moved out of state.

What made you interested in investing in this type of deal?

This property fell into our laps as it was the next door neighbor's house.

How did you find this deal and how did you negotiate it?

My husband and family lived next door to this property for 60+ years. We knew the neighbor and had told him to let us know before he ever sold it. The house and property were much larger than our own, and we always hoped we would get the chance to purchase it and move into it. He succumbed to a short sale in 2009 and we had the opportunity to buy it.

How did you finance this deal?

Borrowed money from a parent.

How did you add value to the deal?

We didn't really do any due diligence as we were very naive at the time. Since we planned on living in the house at some point, and probably retiring in the same spot, we didn't buy it with the intention of selling any time soon. We knew the price they asked us to pay to get the bank to accept the short sale was worth it.

What was the outcome?

We ended up renting the main house to my husband's brothers and the studio to a friend of a friend. The plan was to eventually swap houses, for us to convert the rental into our primary residence and move the brothers into the smaller house. Due to the change in the area we lived, influx of drugs and homeless in the area, we decided to change our goals and sell the smaller house and take the cap gains exclusion, remodel the rental and move in, and then sell 2 yrs later.

Lessons learned? Challenges?

Biggest lesson learned was to not ever do any business with family! They paid way below market value on rent and when it was time to move, it tore the family apart. Long story...

Paid a ton in capital gains taxes on rental turned primary because we left before 2 yrs plus we had to pay depreciation recapture.

Did you work with any real estate professionals (agents, lenders, etc.) that you'd recommend to others?

Yes on the initial purchase. Owner's grand daughter was the agent. No when we sold. We found a neighbor that wanted the property so we made a deal on our own.

I'm interested in this thread.  I too would be interested in learning more about passive investing. 

Hello, 

I'm trying to get some guidance and what to do with the profit we made on a sale of our property in CA.  My husband and I recently moved from CA to TX.  In CA, we owned 2 properties, one we lived in and the property right next door was rented to family for about 9 yrs.  We ended up selling our primary to my mom, used the profit to rehab the rental and moved into the rental.

First lesson learned - do not do business with family.  (very long story)

This being said, we did make a decent profit on our sale in CA. We were able to pay cash for a new property in TX and put a large chunk of change in the bank.  Hubby is 65 and basically decided to retire (with no retirement savings) and I'm 55 and work as a contract web designer/developer.  My income alone is not enough to live off of so right now we're dipping onto our savings. 

I'd like to invest either in a SFH or duplex and get some cash flow going. We have cash to purchase a property outright but we do not want to tie up that much cash in one property. We have a great credit score, just not enough income so we do not qualify for a conventional bank loan for purchase.

So my question is, if we purchase a property for cash, rehab, get new tenants in with leases, and THEN go to a lender to pull money out would that help us securing a loan?