All Forum Posts by: Jeff Thompson

Another alternate I've though of is hold the property passively personally(in llc or not) and have a C-corporation as your managing company where you work billing hours to yourself and contracting out.

Because the property is held passively you should have to pay no self employment taxes, just capital gains. Of course if you didn't hold them as rentals for a while the IRS may call you on it being passive. But I think if your general business is flip into rentals the occasional sell wouldn't be out of place, so sell as needed for income (preferably one held longer than a year), hold the rest.

If your plan is flipping homes that don't work as rentals obviously this idea wouldn't work for you...

Remember though, each entity (LLC, partnership C/S-corp) will cost you a minimum of $800 each per year in California. If these were multimillion dollar apartments that may be a good idea (I'd have a good lawyer to ask in that case), but you'd probably be better off making sure you have good liability coverage and skipping that $800 expense per property. Besides If the mortgages are in your name putting them in the LLC won't release your personal responsibility to pay them.

I'd also look into if electing as a S-corp for taxes would actually save enough money to justify the hassle it adds (I'm guessing not). It may make the most sense to skip the entities all together. Here's a link supporting this idea:http://dollardisciple.com/3-reasons-not-to-use-an-llc-for-rental-property/

If you have significant personal assets a LLC provides an extra layer of protection and is worth it, but make sure you do it right (Articles of Organization and all that). Whatever the case get an Umbrella policy and ensure each property has enough liability protection.

I think I get it now, Asking for cash only means they are looking for offers not subject to financing. Apparently some REO's even want a bank statement showing the funds are available. Ultimately at close if money is there it doesn't matter though.

I changed my mind, forget buying cash, I have a finite amount of it. I'll be pursuing hard/private money.

Nathan, Somehow I missed your response before, but I'm glad I found it! Thanks for the very thorough answer, that helps a lot in evaluating multi's.

This is of course referring to the flip into rental strategy: Ultimately the best ROI comes from a deal that has decent cashflow and all cash is pulled out at refinancing (ROI of infinity!). Getting that percentage of ARV down should be the major focus.

Brian Hoyt Interesting comment about Civil Engineering as that was the path I was previously pursuing, in fact I have an AA in Engineering (which is of course mostly GE and math). Thing is I have no desire anymore to be an engineer, I'd rather hire one.

I debated going to business school when I'm attempting to learn business on my own right now, and will be running one before attending. I am very much the 'self taught' and "lifelong learning" type, but down the road when I become interested in bigger deals having credentials certainly won't hurt and school will fill in things I missed and give me an opportunity to improve the way I do things. Should I study something different just to diversify?

Thanks guys, I'm solidifying my choice.

Thanks for the tips everyone, good points raised (yeah, I should learn Spanish...) I think like I stated before is a good plan and maybe Sac states Urban Land Development for my masters.

I believe we are in the middle of a fundamental shift in housing with the new direction into tighter (higher density) communities vs the isolation of the suburbs. "Walkability" and biking is becoming a major focus as is more interaction and sharing with your neighbors like co-housing projects. This is of course a long term trend and won't really bloom until the gen Y'ers come of age and the boomers are retired, but I see it coming and Urban Land Development degree will help me stay ahead. For now it's hard to beat SFH's though!

I'll second Jon, that's a horrible rental. There may be homes for rent similar to your home, but I'd bet they weren't bought with a rental in mind or if they were it was at a time when prices were different or the 'investor' didn't know any better. Your best bet is to tap your equity (if you have any) with a HELOC/refinance to stay or Sell and move.

I was earlier looking at this problem that places I want to live are bad investments for cashflow, but factoring in deductions and such it's still often cheaper than renting living there yourself. If the difference is less than you can make by investing in a few cheaper homes that make good rentals then it may make sense to move. If not your better off staying put. You'd have to run the numbers to see what the difference is, then decide if it's worth it to you.

I did mean what YOU would study. I want to know how people in this field would do things if they were starting out.

For now I'm looking at undergrad, but I will probably go for a masters later. I'm leaning toward attending Sacramento State's B.S. Real Estate and Land Use concentration. It's close to family, in an area I like and understand, the school looks decent, and I see lots of potential deals in Sacramento both for flips and cashflow.

Some may consider it a waste of the investment, but I have the "post 911 GI Bill" to use so I'll actually have my schooling 100% paid for while getting a housing allowance based on the expenses of the area.

If you had this opportunity where would you go, what would you study, and why?

I have a choice I'm leaning towards, but don't want that to color your answers, so I'll leave it out for now.

I guess I need to look into hard money a little more. Is this essentially the same as cash when buying? I understand some properties are only available for cash.