All Forum Posts by: Jon Schoeller

Thank you Chris. So on that first part, are you saying that I should just put it in my name and not an LLC? Just wanting to clarify.

Dually noted on everyone's advice about being a property manager. You guys made me realize that if I want to test it out that is fine but that I need to set an exact date to hand it over so that I don't get caught up in it. 

Thank you for the answer @Bryan Noth. It was very helpful. Appreciate it. 

Hello everyone. I am looking to close on my first multifamily real estate deal this week. I have actually been in real estate for a while but mostly just flipping. (Over 130 to date) My partners and I picked this property up at auction about a month ago and I decided to buy it as my first personal rental. It a 4 unit that is fully rented. Purchase price of 100k. The rental income is 2200. ARV 150k. I will be buying it for cash upfront with the hopes to refinance it as soon as possible.

1. Should I buy it in my personal name or my LLC? So far I have decided to buy in my personal name as I have read that is the easiest way to get my refinance with the best terms.

2. I have also read that with having just one property, that insurance is more important than the LLC. As 9 times out of 10 that is what they go after in an event. Which type of insurance should I get and for how much coverage?

3. I have decided to manage the property myself at first just to gain the experience. I am not sure how long or short-lived this will be. The building can easily pay for management on its own so I can go that route at any time. Should I even bother? 

Any other advice would be greatly appreciated. Thank you for your time. 

I just finished signing up for my Solo 401k account with Sense Financial. The service was incredible. As a business owner myself, I wish more people would leave positive reviews just as quickly as they would leave a negative review. This one is well deserved. 

Dmitriy talked me through opening the account on Christmas Day. He didn't have to and I didn't ask him to. He was happy to. He has basically held my hand throughout the entire process in order to get this account set up in time. As many of you know, a Solo 401k must be set up and contributed to before the end of the year. We didn't have much time to work with, especially with the holidays. But we did it. My account is now open with Solera Bank and my account is funded. 

I don't know if they have the best pricing but good luck finding better customer service. 

Thank you, Dmitriy and Sense Financial. 

Now I just need some guidance from the rest of you on how to get this money to work without self-dealing, as I am also a full-time real estate investor and the lines can get blurry. I will make another post for that. 

That 37% tax over 12k profit hurts though.Do you mind giving me a scenario where it would make sense? Let's say I used my Solo to flip a house. 50k purchase. 50k rehab. 150k sale price. Profit 50k. If this is UBTI they are going to take 3k plus 37% of anything over 12k. That seems high? 

That's interesting. I didn't think of that. So you are saying pay the UBTI tax but avoid the rest of taxes that you may otherwise pay if it were standard income. This still allows you to grow the Solo quickly albeit not completely tax-free. Am I understanding you correctly?  Although most of fips make over 12k profit so that would leave me paying the 3k plus 37% tax? Ouch. 

 Thanks Carl. Not saying you are wrong, I am just trying to get clarity. This article seems to state differently. That 1 or 2 may be fine but after that, you must be careful?? 

"Generally one or two real estate transactions in a year would not rise to the level of a trade or business and trigger the UBTI tax rules. The question then becomes what happens if your retirement account engages in three, four, or even ten flipping transactions in a year – would that be considered an active trade or business and, hence, trigger the UBTI tax?"

Not sure if it will let me link the article but it's from Forbes and called Beware of the UBTI Rule When Flipping. 

I believe I read your statement wrong and/or too quickly. I left this conversation believing that I could not flip any houses with my Solo. But that is not what the rule is or what you were saying. I just can't do unlimited. It seems that if I flip 1 or 2 properties per year through my Solo, as long as myself nor my company profits, I should avoid UBTI.  

So let's say I find a property. If I used my checkbook control to purchase the property with my Solo. Pay for all material and labor with my Solo. Then after the sell I put the principle and profit back into the Solo account I should be fine. Is this correct? 

 Gotcha! You are essentially lending HM. I wish I could do this to the company I manage but as stated above I am too close. How do you go about finding people to lend to? It would make me nervous as I am usually the one controlling/managing the money from our investors, not the other way around. 

 Examples of the type of note investing you do?