All Forum Posts by: Jody Ho

Drew, thank you so much for confirming. This makes sense now. 

Hi everyone

I am a new landlord from last year and working on my tax return. I found two new things along the process. First, 1099-NEC and 1099-MISC. Second, QBI deduction.

I bought two 8 unit multifamily properties in Q4 last year, they are owned by two separate single member LLCs with separate bank account and everything. Both properties are professionally managed by a local property management company. The property management company has my W9, and they will send 1099s to contractors or any repair mans. My ownership is so short, no major things were done except one or two turnover. 

1. If I read the 1099-MISC correct, property management will send me 1099-MISC if there is more than $600 owner distribution. I didn't take any distribution, so there is no 1099-MISC. When I report my tax return, I still report the rental income, and expenses based on the income statement. What's the reason of giving owner 1099-MISC? For example, my rental property generates $10000 in rent with $4000 in expense, the net income is $6000. If I take $3000 as owner distribution and leave $3000 in property management company as reserve, it shouldn't affect how i report on my tax return, right?

2. As an owner, do I send 1099-MISC to the property management company? They do charged more than $600 management fee in 2021. I asked my property management company, but didn't get a clear answer. They only told me the AppFolio (property management software) will do all 1099s for them. I don't even have W9 from the property management company at this point. 

3. For QBI deduction, the safe harbor requirement seems hard to meet, esp. 250 hours or rental services with time spent log. I spent a lot of time during the transition, but didn't really have time spent log. What do I need to show to qualify for Section 162 definition of trade or business? From what I read online, it seems doable, but what documents can prove I am qualified? "The preamble does discuss, however, two requirements for taxpayers to consider, derived from case law addressing trades or businesses under Sec. 162. First, a taxpayer must enter into and carry on the activity with a good-faith intention to earn a profit. Second, the taxpayer must engage in the activity on a regular and continuous basis (see Groetzinger, 480 U.S. 23 (1987)).". 

Thanks

What can you do if cigarette butts are all over the place in the outside public area and parking space of your multifamily property? And you don't know who did that. The tenants are inherited from previous ownership, and don't think there is smoking free policy in place. Thank you

I created a LLC for owning real estate property. In the formation document, it said the next step is to obtain business license. I know I need license for short term rental in Seattle, but how about owning long term rental?

Thank you so much.

I usually go to mortgage brokers and they can shop for me. They usually know which bank has better program at a given time, and I heard some banks only do smaller loans via them. The downside is the extra fee (origination and processing fee, ~1%).

If you want to go to bank directly, local credit unions have great rate. I got a quote from WSECU early, not bad.

Hey investors, I would like to get your thoughts between investing in 2-4 unit multifamily and 4+ unit. It seems to me that the main benefits of 2-4 unit are 30 year fixed rate residential loan and possible house hacking to get even better loan. However, there are way more competition to buy, and harder to find cash flow properties (price per unit is usually higher). If you factor in the property management, the fee is higher for 2-4 units.

On the other hand, when the number of units increase, the price per unit is generally lower, management fee goes lower. It is easier to get positive cash flow. However, it gets into commercial loan, no fixed rate long term loan (cannot take full advantage of the low rate situation).

If I evaluate 2-4 unit properties like 4+ unit properties, the price I come up usually way too low to be competitive. What am I missing when I look at them? Will you guys invest in both or mostly either one? What are you guys looking for when investing in 2-4 unit vs 4+ unit?

I think more units seem to be better investment. What do you think?

Thank you in advance.

Thank you for sharing. This is a very detail post on your whole process. 

If you don’t mind, may I ask where did you get your list and service/software to send out all post cards? What does the assignment contract look like? And the “assignment” process?

Thank you everyone. I think I will cross out the exclusive listing one, management fee seems reasonable.

Reading a property management agreement for a 8 unit MF property, what is the reasonable management fee? There is also exclusive right to represent me when I sell the property. What is the typical brokerage commission when selling a property for seller agent and buyer agent? 

Thank you.

Thank you Daniel and Bruce. I think the only way to figure out is to hire someone given zero record, telling me what was done and whether the property is in good shape now.

Would it better to hire structural engineer or to hire foundation contractor to take a look?

I remember a structural engineer told me they don’t really do foundation, those should go to foundation contractor