All Forum Posts by: Jason NA

I recently bought a property for cash. I sourced some of the cash used for this deal form my business line of credit.

My business line of credit is NOT linked to my real estate business. The LOC is for another business I have which deals with cars.

Can I deduct the interest payments I have made to this LOC even though the LOC is linked to a clearly non RE business?

Thanks,

Lets say I buy a property and write the contract with 6% seller credit back to me for repairs: As we all know this can be nice in order to finance more $ at a low rate. Well what about taxes? I assume that normally I would never have to pay taxes on this money because it is borrowed.

BUT, what if I resell the property in a very short period of time(like 1-2 weeks), will the IRS then look at the credit received as income because there clearly wasnt enough time to actually spend that money on that house before selling it.

Other than a big deposit into my bank account which may be reported to the IRS as part of homeland security protocall, how would the IRS ever know abou the money I recieve as a seller credit?

Thanks,

Introduction and background on questions:

Currently we are a 2 man operation that is a 50/50 partnership. We will not have any additional partners in the future and we are not interested in selling part ownership of our company to generate capital. We want to flip properties to generate cash that will be used as down payments to buy income properties that generate positive cash flow. We are not looking for a small-time solution. Rather we are interested in a structure that we can grow into.

The following questions are specific and will help supplement our attempt to answer a more general question: What is the best long term corporate structure for our business? How can we best limit liability on our rentals and save on taxes from our flips AND use that cash to buy more property that must also be protected through separate LLC's?

1. Assume one LLC (with standard pass through tax characteristics) already had 3 properties in its name. What are the full tax consequences of splitting off 2 of those properties into their own LLC's so that all properties have their own LLC's?

2. Assume we have an entity (C corp or S corp or LLC that is taxed like a corporation) which does flips and consequently is eligible for many tax deductions and avoids paying Social Security and Medicare taxes. How do we use the capital that is trapped in that corporation to buy income property that would ultimately reside in another LLC? Can you buy the property with the corporation and then transfer it to its own LLC tax free? Can you start a new LLC and then have the corporation lend the money to the LLC to buy the property and therefore avoid gift taxes or any other taxes that might apply in this situation? The same question in a different way: Is there any way to do flips without paying Social Security and Medicare taxes and use that capital to purchase rental properties that end up in another LLC?

3. Assume there were 3 LLC's each with a single property. Let's say that one of the properties had a cracked driveway or something and a tenant tripped and incurred multi million dollar damages. Do they HAVE to sue "the owner" of the property which is the LLC or is it at all possible to sue us as individuals? When do they have grounds to sue us personally as opposed to the LLC? We understand that if we get into a bar fight and kill someone that all of our personal assets and our interests in the LLC's assets are at risk. We also understand that if we personally installed a water heater (or hired a non-licensed handyman) at one of our properties that blew up and killed someone that we would also have a similar fate (this implies direct personal negligence on our part). But where is the line drawn when it comes to negligence? Is a "slip and fall" or a carbon monoxide leak or anything else of that nature, considered personal negligence on my part? What is the REAL difference between putting properties in their own LLC's as opposed to lumping them all together in one LLC?

I suppose outside NY would be fine. California in the bay area or in san diego would be good too as those are places where I live.

I agree as to using someone who has many other REI clients. Hopefully someone who invest themselves or used to be an auditor.

Any reccomends?????

I understand how a land trust can "hide" the fact that I own a property but how can a land trust or any other trust instrument directly offer me liability protection the way a corp can as some on this site seem to suggest.

Thanks,

I own a rental property. Lets say I decide to form and llc which i use to hold this rental property for obvious liability reasons.

My question is do i need to form the llc in ANY way differently for this use as opposed to an llc for another business like a coffee shop.

What if anything specifically must be different about the llc operating agreement when used for real estate?

I have both long term rentals as well as flip properties in NY state. I Need to work with someone in detail to setup corporate structures and to finesse my tax and liability avoidance plans.

Please pass along contact info of those you know to be highly knowledgeable in the details of real estate tax law. I am NOT interested in tax preparers or attorneys that do nothing but closings.

Thanks,

I am just getting started and have already acquired a great cash flow rental property as well as 2 houses to flip. I like to do things right and I feel now is the time to setup my business structures to be the best in terms of tax and liability.

With regards to liability, yes I have great amounts of insurance for everthing I do.

What I plan to do is form an LLC for every rent & hold property I buy. Each LLC will hold title to its property. The Owner of each LLC will be a "master" C corp. I will likely also use this master C corp to flip properties. My reasoning for this setup is that I initially dont need to draw a lot of money from my profits. In fact I want to retain as much cash as possible to building my flipping business. Because of this and the mass deductions that can be made I am not concerned about the possible double taxation.

My questions are as follows:

1. What is the difference between a C corp and an LLC which elects to be taxed as a c corp. Are they EXACTLY the same with NO exceptions? Im sure they are not, someone who really knows please elaborate.

2. When forming an LLC to hold rental property (this is basically done for liability protection) is there a specific wording of the operating agreement that must be employed in order to achieve the strongest liability shield.

3. I am of course planning to buy as many rental properties as possible. I plan to put each property in its own LLC to separate liability form myself and form the other properties I buy. My property manager only sends me one check for the net proceeeds from all my properties. Can recieving all my rental income form all my properties in one chunk, be used against me to unseparate liability from one property to another?

4. I am buying my rental properties and flips in NC and NY. It seems that I should form the LLCs for each property in the state where the property is. In what state should I form my Master c corp? I would assume it would be best to form the master corp in a state like NV which has no income tax.

5. What is the best tax avoidance strategy for the capital gains earned from short term flipping?

BTW: I live in CA, and plan to flip propertes in other states as well

Your comments, opinions, experience, and suggestions please.

Also anyone reccomend a good CPA firm in NY? NC?

Thanks for the reply investment loans, please supply your direct contact info.

Thanks,

Jason

Hello I purchase properties that fit into the following scenario. I purchase 1-2 per month and would like to line up a nice financing program. Please tell me if you have some programs that will go for this loan scenario. If not, can you recommend another bank or broker?

If you do have fit for my loan scenario please respond with the following info:
Rate
Your point/ processing fees
Seasoning requirements
PMI?

NY or NC states
Purchase loan
100% LTV
6% seller credit back
$70-200k purchase price
NOO
2-4 units
Full DOC
720 + Ficos
NO debt

Feel free to call or email.

Thanks for you time,

Jason Norton