All Forum Posts by: Jake Faris

@Sean O'Keefe Would you please send it to me, too? Thank you!

Quote from @Greg Scott:

Quote from @Jake Faris:

@Greg Scott Thanks the response. 

Q1: Great points, we'll need to have a detailed operating agreement that outlines an agreed approach to all potential outcomes. I'll work with an attorney to assist with drafting that.

Q2: Yes, I'll talk to my CPA but we'll most likely hold the property for at least 1 year under the LLC given our timeline to design, permit, build and sell the property, meaning I should avoid short-term capital gains.

You are missing my point on taxes.

Scenario 1:  Your partner buys the house at the same time you put your cash in.  You sell after 12 months and take no depreciation expense in the first year.  You will both incur long term capital gains.  This is pretty clean.

Scenario 2:  Your partner has owned the house for 15 years and has been taking accelerated depreciation, so the book value of the house is very low.  You sell after 12 months.  You then will pay some long term capital gains, but you also have to take depreciation recapture.  Congratulations, you get to share your partners tax burden and pay the depreciation recapture at ordinary income rates.  What I am saying is the tax bill for you could be wildly different depending on how long your partner has owned this property and how much depreciation they have taken.  

Ah got it, thanks for pointing this out! My partner has only owned the property for 2 years. Although it is a short timeframe, I'll ask about their depreciation schedule and will consult with my tax advisor. To off-set the depreciation recapture, it would seem reasonable for me to request a concession (e.g., more shares) that's outlined in the Operating Agreement. Or, at least a contractual commitment from him that we can revisit the share allocation based based on the depreciation recapture based on when, and how much, we sell the property for. 

Thoughts on this approach? 

@Greg Scott Thanks the response. 

Q1: Great points, we'll need to have a detailed operating agreement that outlines an agreed approach to all potential outcomes. I'll work with an attorney to assist with drafting that.

Q2: Yes, I'll talk to my CPA but we'll most likely hold the property for at least 1 year under the LLC given our timeline to design, permit, build and sell the property, meaning I should avoid short-term capital gains.

Seeking advice here on the best approach, any gotcha's that I'm missing, and overall sanity check... 

My business partner owns a residential property in Seattle outright (the title is in their name and they paid all cash). We plan to share ownership of the property as I am going to invest my money into developing (building a Detached ADU in the back) and re-modeling the property so that we can collectively sell it for a profit. My proposal is to do the following:

1) Create an LLC in which my partner and I are both owners/operators
2) Have the title of the property put into the name of the LLC via quitclaim deed
3) Have the Operating Agreement of the LLC outline ownership based on shares ownership model. Currently, my partner owns 100% of the shares based on him putting 100% of the cash (let's say $1,000,000) into the property. However, for every dollar put into the property, a net-new incremental share is added to the share pool; that share is then owned by the giver. So, If I put in $500,000, the total amount of shares rises to $1,500,000 and I own 500,000 shares while my partner still owns $1,000,000.
4) When we sell the property at a profit, the net profit will be distributed based on a percentage of share ownership.

My understanding is that once I am a partner in the LLC, any money that I put into the property will be tax deductible. I'll need the LLC to do that, but are my assumptions here all correct? What might I be missing here?

Thanks for your help!

Hi all - I have a 3-unit multi-family property (3 bed 3 bath, 3 bed 3 bath, and studio) with an unfinished basement and an attached 2-car garage that I plan to remodel soon. The unfinished basement is 900 sf and the garage is 721 sf, so this could all add a lot of value. So far, I've rented one of the units (3 bed and 3 bath) as an STR and the two remaining units as LTR.

The property is zoned as mixed-use tourist commercial, which allows me to convert the property into a motel/hotel. This would also mean that I could convert all the units into STRs. Does anyone have any experience with converting a multi-family property into a motel/hotel? What are the pros and cons to making this transition (e.g., tax implications, insurance, etc.)? If I'm missing any existing threads that covered, please share! 

@Jake Fugman Thanks, Jake! I’ll check them out. By the way, great initials. Does your middle name also start with a “K”? 😁

@Robert Freeborn Thanks!

Hello! I recently became a licensed agent to buy and sell my own properties here in Washington state. I have a full-time job, so only expect 1-2 transactions a year (possibly more for friends and family).

I currently hang my license at a brokerage owned by a friend, but am curious if there are other options with lower fees paid to the brokerage firm. I find that his other agents are full-time, so the commission structure, fees, and resources and tailored as such. What options are out there? Any local, part-time agents out there find a good brokerage firm they can recommend?

Thanks for your help!

Thanks for letting me know about the Meetup Group, @Alex Chin!  I joined the Group and will try to make it out on 8/31.  I'll definitely make it to one of the Eastside meetings as it is much closer to where I live/work.

-Jake

Thanks for the welcome and advice on RE school @Ryland Taniguchi!  You make an excellent point in that specialized knowledge is crucial to successful investing and Portland may be too much of a stretch.  It might make more sense to team up with someone.  How specialized (2-5 neighborhoods or zip codes) are each of your agents?  And for the example on the last flip offer, how'd you manage to get mutual acceptance at $37k below asking with contingencies?  Although the valuation came at $145k, that's still quite impressive.  

When you're referring to the "realtor thing", I'm assuming you mean adherence to the Realtor code of ethics.  I should have clarified that I do not plan to be an official realtor, I tend to use realtor and real estate agent interchangeably, a habit I should stop. 

Thanks again for welcome and advice!

-Jake