All Forum Posts by: Mario Nacev

 Thank you David M.

My understanding is that FHA loans do cover up to and including a 4-plex.

I do plan on making one of the units my permanent residence. The other 3 would be rented.

Regards,

Mario

 Thank you @Brian Gerlach; I will be doing that. My goal in posting here was to see if there are any members who have done similar projects; building a multiplex in which they will live in one unit, and what their tax strategies were. I'd like to see if there are varying opinions and how they compare to what my CPA tells me.

Regards,

Mario

Hello,

I am looking to build a 4 Plex in PA.

I am in the preliminary phase of planning and my questions relate to entity structure, taxes, and finances 

Background:

Land Cost $10K 

Build Cost $200K

Appraised Value at completion $350K

Estimated Sale price (Sale to occur after 2 years of living in property as primary residence) $450K

Income - I have 215K of W2 (Mostly) and 1099 income that I would like to offset the taxes on.

Questions: 

Overall Tax Strategy - 

1) What entity to purchase land under (Buying Cash)

2) At time of sale should I rely on 1031 exchange or does a primary residence exclusion make more sense?

3) This will be a house hack I will live in one unit as a primary residence. I plan on renting the other 3. Does the fact that I'm building the house effect whether or not the rental income and eventual sale income will be passive? I know builders are considered active, but since its my primary residence would it be considered passive?

4) What Entity structure would help most to reduce the taxes on my Income thru depreciation etc?

5) I want to finance the construction cost ($200K) the lower the down payment needed the better, Does this limit me in entity options how so?

6) Multi Entity Options - In relation to controlling the capital gains at sale; does it make sense for me to take a home building loan in my name, and hire a self owned llc to build the home? Does the bank care who you hire? Are there any self dealing rules in this regard? The $ paid to the LLC for the build would be fair market value and passed to me via a K1 (The $200K is a discounted value based on building it myself.)

7) If you think this would make a great case study episode for the podcast please let the appropriate people know =)

Thank you Natalie! 

That seems very good, what is the downside?

How are depreciation and business expense deductions handled in this scenario?

Thank you Linda!

So as  an example using simple #s lets say the property cashflows $500/month, $6000/yr

Would that $6000 first be taxed as Income to the LLC and then again on the K1 level? Or, is it simply distributed as K1s to the partners $3000 a piece which is then taxed at 15%?

Also how often should the K1 be distributed? Monthly, Quarterly, or Yearly, is there an advantage to holding it a certain amount of time?

Thanks! any tips regarding taxes? 

Should the cashflow be passed thru on a 1099, paid as a W2 Salary or distributed as a K1? what about claiming depreciation?

Hello All,

A  friend and I will be paying Cash for a Rental property 50/50 outlay & split.

What is the best Structure for us assuming No Banks will ever be involved. 

Regards,

Mario

Hello I am hoping someone can walk me thru the following hypothetical situation:

Property purchased by an LLC

Rented to Charity for: X

Rental Income contributed back to Charity 100%: X

Please describe what this would look like on year end taxes; including possible filing as an S-Corp vs Pass thru to Personal.

My personal Federal Rate is 28%. I file in NY State. LLC can be formed in another state if tax incentives to do so exist

My research so far I believe that the yearly rental income although donated would still be taxed as Income, and then after words the deduction applied.

Much appreciated.

Regards,

Mario

A cost of $80/ft seems very light...

My suggestion on dealing with contractors is make sure you have a written contract. They should have no problem providing one and it should include a written scope of work showing what you are buying. Once you see this look it over carefully and ask them if you can talk about adding somethings to it to make sure you are on the same page:

Common missed costs:

- All permits and inspection fees included

- Contractor responsible to have all tools, generators etc required for performance of work.

- Includes Contractor having all appropriate insurance.

- Removal offsite of all demo material and old fixtures, finishes, appliances, garbage etc.

- Contractor must protect all adjacent areas to work being performed. If adjacent area is damaged contractor to repair at no cost.

If new Bathroom fixtures are being installed; make sure patching of all tile work required at end of work is included.

Appliance installation should include protecting floors during installation.

Building new partitions? make sure to install all required installation.

Include Touch paint around any demolished areas or new installations.

Any new HVAC or Plumbing Equipment; Boilers, Pumps etc should include startup.

At lot of this seems common sense but better to have it written down then to receive surprise change orders!

Best of luck!