All Forum Posts by: Logan Allec

@Johnson Lo, I recommend that you keep your own records (or hire it out at a certain point) to verify what your PM is doing.  Also keep in mind that there may be some expenses that your PM does not handle (for example, your mortgage interest), so you'd obviously want to track those.

@Mark Hill

"We are planning to form a separate LLC for our partnership deals, but my question is since I since I live in CA, will I still be responsible for the $800 franchise tax fee?"

This depends. Will you be doing business in California on behalf of the LLC? Making management decisions, corresponding with the property manager, etc.? If so, then California says that you are "doing business in California," and you must register it with the California Secretary of State, pay the annual $800 LLC tax, and file the annual Form 568.

"How do these out of state partnerships/LLC's get handled at tax time?"

Your LLC (assuming it does not elect to be treated as a corporation) will file a federal Form 1065 as well as state tax filings that have various filing requirements depending on the state.

Note that there may also be withholding requirements on these state partnership returns to the extent of nonresident partner income (some states impose such requirements, some states don't, some states you can waiver out of).

@Garrett Davis my first rental property was about 30 steps away!  My second one was about an hour and a half's drive.  Both were manageable, and both came with their unique set of issues.

@Brad RondeauI don't know your income level, but based on your description of the cash flow over the years, you may very well have large suspended losses that get released when you sell the property.  So this may alleviate the pain a bit.  But if you are serious about out of state investing then as others mentioned a 1031 sounds like it may be the way to go.

@Ashly Frasso Welcome!  "I have owned multiple homes in CA".  That is quite an accomplishment.  Congrats on your success in-state, and I hope you find the same out-of-state!

Welcome, @Gerrell King.  SoCal can be a tough nut to crack for newbies.

A couple years ago I mailed out lots of letters to homeowners in LA County with no luck.

Then I tried rural Kern County and got a deal from a distressed homeowner in California City.

The margins were not as large as they would've been in LA or OC, but I was able to rent it out for 2 years before fixing it up and selling it for a decent gain.

Also, have you considered an owner-occupied small multifamily for your first deal?

You only need to put 3.5% down, so cashwise it won't get in the way of other real estate goals you may have.

My first deal was a 4-unit up I bought with FHA 3.5% in Santa Clarita.

I lived for free (as opposed to paying rent) + enjoyed cash flow + built equity.  It was a great investment (and still is).

Good luck!

@Ed Shin

1) There's no "rule" per se concerning which property tax card to use (and I wouldn't imagine the land/improvement split changed much from year to year), so just go with the one when you bought the house if you're using this method to determine your land/building split.  That being said, using the assessor's split, while probably the easiest way to do it, is not the only way. You can also use, say, replacement cost method, agreed-upon valuations, or comparable land sales (and these methods may allow you to allocate more to building), but whatever method you use has to be "reasonable" (vague, I know).

2) I would say (and some more aggressive types may disagree with me) that your closing costs, etc., were incurred just as much to purchase the building as they were to purchase the land, so I typically allocate them to land and building.

@Kade Honaker yes, like @Aaron K. said, you would prorate your property expenses between the portion you occupy and the portion your tenants occupy, and only property taxes on the portion of the property that you occupy would be subject to the new limitation.

I househacked a 4-unit and rented out half of the unit I occupied. So I reported 1/8 of my property taxes on Schedule A and 7/8 on Schedule E. There are other reasonable methods of prorating, such as square footage.

Not sure what your tax situation is, but it's possible that on your 2018 tax return you may not get any benefit from property taxes allocated to your personal residence (Schedule A) since the standard deduction for married filing jointly is is $24,000 in 2018, so it may be especially prudent for you to seek professional advice on how to reasonably as much as possible of your expenses to your Schedule E.

Yes @AJ Angel as others said the administrative paper pushing with the SOS is not difficult.  But the operating agreement is key.  Making money is relatively easy; sharing money not so much (unless it's well-documented who gets what).  Definitely have an attorney memorialize the arrangement between you and your partner in the operating agreement.

It used to be for California residents that on your Indy return you would take a credit for taxes paid to California on your Indiana income.

Now effective for the 2017 tax year, it's switched to "normal."  You take the credit on your California return for taxes paid to Indiana on your Indiana income.

Just an FYI for all you Cali investors in Indy.

Link to Indiana Information Bulletin 28: https://www.in.gov/dor/files/ib28.pdf