All Forum Posts by: Harrison Smith

@Juan Rango I got my real estate license earlier this year because I thought it made sense to have it. I work in a real estate holding company that has operating companies (construction and property management) and holds real estate assets (residential and commercial). I have personal investments in real estate outside of that. I figured where I spend most of my waking hours working on or talking about real estate, that I should have my license because it just made sense. I can do my own deals, broker some of my company's deals, I can generate leads from the network I am building everyday, and worst case I learned a lot more about the real estate industry that I can probably use everyday. If you are going to be fully involved in real estate, it just makes sense to me to get your license because it opens up opportunities that you can choose whether or not you pursue. 

@Kevin Allen This is one of the reason's you buy title insurance. @Brandon Hicks is right, you should reach out to the title company from your refinance. If you purchased the title insurance for yourself (not just the bank) then they will have to defend you from any title defects and this should qualify as one of them. If they can argue that it happened after their title work cleared title, then you might have to pay out of pocket for it but a title attorney should be able to clear this up. 

@Stephanie C. With commercial, forced appreciation is really only created through raising rents or extending leases. Most of your commercial spaces are appraised using the income method, so a higher rent or a longer lease makes the property income higher and more stable which translates into a higher value. 

@Brenda Whittaker You could try hard money lenders as a worst case option. BP has a whole directory of them. HML tend to like rehab work and the shorter time frames. It will cost you, but might prove to be a decent option.

@A.R Shakir I would make sure that I structure any debt against this purchase with a 20 year term to make sure that I came out of the lease period with the debt being fully repaid so you aren't worried about debt service without a tenant. Does the lease have any renewal options in it? Could you renegotiate with the hospital tenant and add renewal options or buy out provisions in the case they leave? In my experience with tenants in the medical fields, @Brian Halstead is right and they don't move very often. They tend to like long, stable lease terms and don't move because their cost of moving is so much higher than a standard tenant, not to mention finding medical quality space with enough parking is not easy in most markets. 

@Alik Levin If your wife spends 750 hours a year and earns most of her income through real estate activities (agent, property mgmt, investor, etc.) then normally this would qualify her for the RE professional status. If you file your taxes jointly, that would mean her status would apply to all of your cumulative real estate activities. I would consult with a CPA to review your situation as there are nuances to the rule that might apply to you, but it would appear you are on the right track to achieve that status. 

@Jared Chipkin You will be able to mitigate some of your income with losses on the rental side, but the amount you can recognize is limited due to the job and the passive nature of the investment. The ability to utilize those losses also begins to phase out at certain income levels, so there are other things to consider as well. A CPA should clarify how much you can expect to recognize, but having a spouse with the REP designation is a completely game changer. 

@Jared Chipkin Here are some of my thoughts on this and how my company has structured the PM company.

1. I am assuming your current job is not in real estate. Due to that, your tax advantages are limited due to the passive nature of your investing. I would recommend putting the PM entity in your fiance's name and have her be the lead on that. Once you are married, you could file jointly and she would be able to claim status as a Real Estate Professional. This would allow all of your losses to flow through, without limitations due to them being passive. I would consult a CPA, but your maximum tax benefits lie in the ability to claim status as a real estate professional, which you won't be able to do while continuing in your job but she could if she was dedicated to working in real estate (agent, PM, investor, etc.). 

2. The PM company should collect all rents, pay all expenses, bill you for repairs like any other customer, collects its fees (% of rent, placement fees, turnover fees) then remit to you the remainder (profit). You can have that remitted to the LLC that holds the asset and use that money to pay future bills, draw for yourself, or invest in additional properties. Keeping the businesses separate and treating yourself like a customer will help make this work much easier.

Hope this helps. Let me know if you have any questions. 

@Joe Watson This is also true in Maine. Compensation for any activity that results in the sale of real estate requires a license. The Real Estate Commission determines this, NAR does not have a say on it.

I can't offer a referral fee to anyone that isn't licensed, even if they are in the business of real estate (i.e. title companies, mortgage brokers, general contractors, etc.). 

@JD Martin Good points, glad to hear that more or less we all do something similar. Loved your podcast by the way, it was one of my favorites.