All Forum Posts by: Kyle Spiewak

One idea might be to start a "business" if you are not already doing so. Be sure you meet the material participant / real estate professional test per the IRS, however assuming such, you could expense as much "business related expenses" as possible to offset your ordinary income (consult with your CPA first!). This might soften the hit when liquidating your stock. Of course capital gains and ordinary income are taxed at different rates therefore the business loss would offset ordinary income not capital gains. Note however that when financing properties the bank will use the losses from your schedule C business against you regarding your qualifying ratios when qualifying for properties.

I believe that is a Fannie guideline. "For > 4 financed properties, a minimum 720 fico is required and subject to following additional requirements... Subject is 2-4 unit investment purchase 70%LTV/CLTV."

From your post 11% looks like the interest rate they are charging you on the $170,000 loan amount. 3 points fee is the lender fee (which seem high) and the broker fee is an additional fee perhaps being paid to the person sourcing the loan. What is the prepay penalty, reserve requirements and length of the loan? What is your calculation of your required cash to close?

Banks can report large transactions in excess of $10,000 to the IRS however the scenario you provided above would not necessarily be a taxable event and should not cause concern. If you sold the property in the example above for $150,000 (assuming no repairs or closing costs ect) then your investors may be looking at a $50,000 taxable gain ($25,000 to each 50/50 investor). Upon the sale you or your investors should receive a 1099 from escrow or the closing attorney depending on your state. Your investor will have to report the 1099 on their tax return. Depending on the deal and partnership agreement it may be easier to wire directly into escrow however there are several missing facts such as who is going to be on title, do you plan to refinance later ect.

Charity limit is generally 50% of you AGI and then it is carried over. See Pub. 526

I think it depends on the complexity of the LLC. If it is going to be a SMLLC and not much is going to be happening then a company like Legal Zoom should work great. Depending on your needs the basic package from legal zoom would work. The upgraded package offers things like applies for the EIN number. If it is a SMLLC you will not need an EIN. Even if you do need one it takes 10 minutes on IRS website.

If the LLC is more complex with several partners you might want to consider going to a law firm to have them draft up the articles.

Steven,

It is my understanding that if you have a Series LLC you have separate EIN numbers for each entity within the series and therefore have to file a return for each EIN? Is that correct?

Bryan,

Thanks that is a great tip. I had never heard of a chattel appraisal until now. I did some research and that is a great idea.

I am working on my first flip and here are a few lessons that I have learned.

1) It cost more than you originally think.

2) Check into home owners insurance. It could be difficult to get since it is a rehab. I was able to get it; however the price doubled once they found out it was not owner occ.

3) As far as financing goes I paid cash so I am not much help. I would say from my experience have an emergency fund and make sure you have significant cash reserves especially since you are looking to finance. We had some unexpected things and it is taking longer so now we will be trying to sell it through winter. We bought at a great discount so I am not concerned, but had we financed I might be a little more stressed going into the winter and trying to sell it.

3) As far as working full time, that is no problem, but I would suggest that you or your dad keeps a very close eye on the project. The reason ours has taken so long is I was traveling early on in the rehab and I was not able to watch the time frame at which things were getting done before it was to late. You could just hire a general contractor and the problem would be solved.

Thanks Jon and J.

J. just so I am understanding correctly; say I were to rent the house and depreciate it for lets say 10 years. Then I sell the house. I would have to pay 25% on the amount that was deprecated?