All Forum Posts by: Justin Gomberg

I understand questions like this allow for a broad range of answers. I will try my best to phrase the questions around my particular situation in order to receive more acute answers pertaining to my situation.  

I currently have a CA LLC because I am a CA resident and a foreign entity license in Ohio where my business currently transacts all business.

I currently only do Buy and Holds but will be starting my first flip soon and am curious how the taxation on a flip works in this situation. I will be grouped into the highest tax bracket (I am assuming I will pay short-term capital gains tax as well on these because I will not be holding onto any flips for over a year). The parts I am having trouble understanding is:

1. What taxes at the end of the year will be due in Ohio? 

2. Other than the annual CA LLC filing fees; what taxes will be due at end of the year in California if my income is from flipping properties in another state? (CA is one of the few states where I will have to pay the $800+ LLC filing fees annually regardless of where business is transacted because I'm a full-time resident of CA and they will get money from you any way they can).

3. Will the LLC end up paying short-term gain taxes if we flip multiple houses per year and do it full time?

4. What taxes am I subject to, and which state would it be owed to, CA, OH, Fed, and/or all? 

4. Do you recommend I have a tax professional to file our taxes in the state my LLC is domiciled in or a tax professional in the state we do business in?

I am having a hard time understanding how much to hold back for taxes vs paying myself/K1. 

Please let me know if you need more information and I greatly appreciate the advice in advance! 

Hi @Rick Martin I greatly appreciate your input! That helps a tremendous amount. 

@Greg Scott I appreciate the response, I will seek proper counsel from an SEC attorney. 

Hello Everyone! 

Thank you in advance for all of the support and feedback that enables me to grow! 

Initially, when I started investing in RE everyone I approached with an intent to form a partnership with to spread/share risk and learn with was a bit timid.

I shared how I like to buy properties under market rent with deferred maintenance because I am able to do relatively light rehabs and raise rents to top market rent value. I explained how I was practicing this method on these smaller multi-family properties because I intend to do this same process with small commercial residential buildings because you can increase the property value by increasing the buildings operating income. Once they understood the goal they took interest and I have an opportunity to work with multiple family members who want to all go in on one deal and use my connections and systems while I manage it. 

We have agreed that because I will use my network and systems to source the deal, rehab, rent, and manage the property I will be putting less capital into the deal to acquire it. The investors will be hands-off and their major concern is monthly cash flow, tax benefits, and if we do decide to sell proceeds from the value add (5-year minimum holding time). 

The part I dont know is how to structure the deal? Is it common to do this type of split investing as a General Partner with limited partners or all as operating officers as an LLC? Is it common to split the cash flow equally based on how much everyone invested? I would greatly appreciate any feedback and comments on other important things I am unaware of when investing with multiple people.

You're the best, thank you again! 

@Remington Lyman I contacted a lawyer from your rolodex. Thank you very much! 

@Scott M. Thank you very much for your response! I should have stated that this property is in Ohio. I offered the cash for keys a while back and he was not into that idea because he doesn't qualify for another place. 

@Theresa Harris Hi Theresa, I appreciate your input. He claims he is from PA and doesn't have anyone out in Columbus where the property is located. He seems like a pro-manipulator. 

@Nathan Gesner I enjoy the Ask, Demand, Evict mantra. I think I have to go that route. Thank you! 

Hello Everyone!

I purchased a duplex and both units came with tenants. When I initially took over this property over the rent was incredibly low compared to market rent comps.

I gave the one side on a month-to-month lease a 60-day notice of rent increase and also explained we will be renovating it. I found out at that time there was another person living there who was not on the lease. 

I ran background and added that person onto the lease. Due to his income if the original person on the lease leaves this new person would not qualify by himself. Because the new tenant told me he wouldn't financially qualify by himself (only collects a little bit of disability) and the original tenant didn't want the rent to go up, the original tenant sent me an email putting in his 60-day notice to vacate the premises. 

On the addendum when adding the new tenant it states the new tenant who was living there but not on the lease is staying until the set date the original tenant is moving out July 3rd.

The original tenant has already moved out and given me a forwarding address but the new tenant we added on who is supposed to vacate today 07/03/2021 sent me this long email about how he cannot leave because he was in the hospital and doesn't have the resources to pay for movers and cannot qualify for any other apartments due to his income. 

I would love to hear your advice or ways you have dealt with a sticky situation like this! 

Thank you all so much for the continued help! 

@Michael Robbins

I appreciate the great response! The current lease I assumed at closing does not have any rent increases at end of term, unfortunately. 

I like that you recommended informing the tenants that you will be using an updated/new lease because that would make me feel much more comfortable moving forward. 

Thank you! 

Hi @Kevin Sobilo,

Thank you for the great response. I closed on the property 5 days ago. You are right it does seem silly to screen them if they have already been living there for the past year and a half... The only reason I want to increase rents is that it is currently rented $200 under fair market rent for the area. 

Would you recommend incrementally increasing rent? 

Thank you!

Hello all! 

I just recently closed on my third property (first duplex...yay!) This was managed by a PM prior and one of the units is on a month-to-month lease. I was curious what the right way to increase the rent is? 

I intend on giving them a 60-day notice on 05/01/2021 informing them of the rent change. If the tenants are ok with the rent increase and choose not to move out, is it customary to just start collecting the higher rent or at the start of the rent increase have them sign a new lease associated with me the new owner? 

I would feel more comfortable requiring them to sign a new lease at the start of the rent increase. 

If I decide to have them sign a new lease am I allowed to request their w-2 information and run background on them? I take screening tenants very seriously and hate that I assumed full responsibility for tenants I was never able to screen initially.

Thank you for all of your awesome help in advance!