All Forum Posts by: Greg Scott

@Johnny McKeon

I'm not a CPA but my experience says, yes, you probably can.

To avoid confusion it is helpful to separate out the concepts.

REPS - Roughly, the requirements are minimum 750 hours active in real estate and those hours must exceed any hours in a non-real estate job.  You can get REPS status regardless of how you handle depreciation.

Straight Line Depreciation - This is taken 27.5 years on residential and 39 for commercial.

Accelerated Depreciation - This requires a cost segregation analysis so you can divide the total value of the building into 5, 7, 15, and 27.5 (or 39) year depreciation buckets.   The attached chart shows a good example of why this is helpful.

Bonus Depreciation - This allows you to accelerate the depreciation even further, deducting anything with a 15 year depreciation life or less in the first year.  This rule has been phasing out and for 2025 has 40% of the benefit unless the new administration renews it.

Have you checked with an SEC attorney to make sure you know how to legally raise money?  Many people in the past few years that were simply raising money for funds or syndications, are now in serious legal trouble.

Condos are problematic as rent properties.  Instead of keeping them, I'd look to sell them and buy something more suitable as a long term rental.

If you want to know why I have such a strong opinion on this, just google the following:

- HOA Special Assessment

- Florida Condos 2024 - search for news on the new laws

- Zombie Condos

You can do a cost segregation study on pretty much any property you own as an investment.  You can do it on a SF rental, an apartment, a car wash, a golf course, a hotel, a warehouse, etc.  The only one you really can't is raw land, because there are no costs to segregate.

The bigger question is whether or not you can utilize the increased deductions from the cost segregation.  That will depend on the taxpayer's personal situation.

The attorneys I have worked with when buying a large apartment complex have all recommend one LLC for holding the property and one for managing it. Most seem to like there to be a business reason for the state you use to create the LLC, either the property is there or you live there. None have proposed to us a parent / child LLC. Since I'm not a lawyer, there might be a specific reason, depending on your situation, why that might be useful.

On the other hand, I've seen crazy large structures for small portfolios, and there are many attorneys willing to charge you for the help of setting them up. I had a buddy with 5 SF rentals. He had one LLC for each rental, a management LLC, and all of those LLCs were owned by a Wyoming LLC. He must have spent gobs of time and money every year maintaining the books and the structure. Sadly, if he didn't do it right, all the structure was pretty much worthless, because it could have gotten thrown out in a court case.

You are correct that if you have silent partners (LPs), you would need to set up a syndication.  

Your operating agreement would have to specify exactly what you can do with those monies.  Your SEC attorney can help you with the details.

Typically you would have one LLC that owns the properties and another LLC that acts as manager. How you hold your your shares in the ownership LLC is up to you. You could use an LLC, Trust, personal name, etc. In other words, your personal holding company isn't terribly relevant to the discussion. Use it or don't, it won't change the rest.

Hopefully you never actually have to make a claim. Insurance proceeds are typically provided in a check that must be endorsed by both the policy holder and the mortgage holder. Will the mortgage holder sign off if the proceeds go to an LLC that isn't their borrower?

Wow, that sounds like a mess.  That is a significant (18%) difference that needs to be cleaned up. That will be a process.

If I were the injured party, I would be reaching out to the owner, title company, seller, and /or the developer for compensation.

If you are the current owner and renting out the space, you can not claim ignorance of the issue.  I would fully disclose the discrepancy.  This may result in lower rents and recoverable expenses, but it avoids a future lawsuit against you.

The law doesn't say "you have to be selling".  The law says "any commercial messages".  You must allow the recipient to opt out.  Here is a source.

https://www.ftc.gov/business-guidance/resources/can-spam-act...

This is my personal opinion, which probably won't be popular.

If you are worried about the cost of hiring an attorney to create a proper operating agreement for your LLC, you probably don't need an LLC, and if you choose to use an online site to create an LLC, you probably get the protection you paid for.