All Forum Posts by: Jeff Sheraton

My personal opinion would be that the party doing the work should be compensated for the market value of that work.  For example if we own a house together and I do all the management I should get paid market rate for the management (say 8% of gross rent for example).  Then we would split the remaining profit.

Pay the investors like investors and the workers like workers.

That's a good question.  Some areas require owners of vacant properties to register them with the city/county/state.  Maybe you could start there.

The LLC's income flows directly to your personal taxes. LLC's do not pay their own taxes like a corporation would. There would be no benefit.

First of all I am not familiar with PR specific laws but I'd be happy to speak from my experience in Delaware. From my understanding rentals go into an LLC, almost never an s-corp. The reason is that rental income is considered passive and therefore exempt from self employment tax. Since an LLC flows directly to your personal taxes all rental income would not be subject to the extra tax. In an s-corp you would be required to pay yourself a "reasonable wage" which would be subject to the self employment taxes.

As far as setting up the entity it is very simple. Pay an attorney to set up the LLC and transfer the properties into it. I would also be sure to talk to an accountant about the tax consequences of your CA rentals and PR taxes. I would suspect that moving that income out of CA is not as easy as it sounds.

My first bit of advise would be to put money aside for a rainy day fund.  You never want to invest your last dollar.  By definition investment is risky, only invest dollars you can afford to lose.

If you are at that point then the options are endless. I would always suggest going to local REIA meetings and talking to people who are doing what you want to do. If the goal is to supplement income personally I don't think you can beat rental properties. You build equity and cash flow at the same time. If you are looking for the lump sum payday maybe rentals or wholesaling is the ticket. It's all about what you are trying to accomplish.

Lets start with the LLC question. A competent real estate/corporate attorney can get you all set up with your LLC or LLCs, its pretty straightforward (despite seeming overwhelming at first). You will need to form the LLC and then transfer the real estate into it (probably no transfer tax, but a new deed will need to be done). An LLC is pretty straightforward to operate. Think of an LLC as its own entity separate from all of your personal affairs. It should have it's own bank account and accounting. One of the major benefits of an LLC is asset protection. If you commingle (mix) assets (like cash) you will lose that protection in the event you are ever sued. Remember- the LLC will own the property NOT YOU! Everything goes in the LLC's name. Rent gets paid to the LLC, insurance is in the LLC name, the LLC enters into contracts with contractors, ect. Paying yourself out of the LLC is completely ok and simple. For tax purposes the LLC's income or loss flows directly to you so whether you take the money out or leave it in the LLC you pay the tax personally. One other consideration to discuss with your attorney is if you should or want to have an LLC for each house. This would provide the best asset protection.

On to financing. Outside of conventional bank loans you have several options. One of the more popular options would be a line of credit against the equity in your personal home of the homes in your LLC. Other than that you have the hard money lenders if you can stomach the high interest. Also, don't forget about the creative financing options. You could have the owner hold a purchase money mortgage, you could partner with someone who has cash, buy an home with a retirement account, ect.

I would suggest going to a local REIA meeting and asking for a good agent referral.

Are you looking to short sales on the MLS or are you trying to arrange short sales yourself?

I know people have made money on them, but I am not personally a fan.  A mobile home is a depreciating asset.  It will be worth less in over the years.  Maybe if you own the land as well it could be okay, but I don't believe that is the case in many areas.  I would much rather have a house and own the land.

It's hard to say without knowing anything else.  I would say that prior to doing any investing save some money, you will need actual cash not just monthly cash flow to invest in most cases.  

Assuming you have some money saved up $500 per month could pay for a reasonable mortgage.  Maybe a rental or partner on a flip.

Quickbooks is pretty good and cheap (no monthly fee for the desktop version). It definitely does not have the features of some of the high end rental managing software like Propertyware, Appfolio, or Buildium but it gets the job done. I am using it to manage 80 units with minimal issues. I recently hired a VA to do the daily bookkeeping through a remote desktop.