All Forum Posts by: Mike Pena

I'm interested in knowing what

@Jared Pittman

You do not want to pay yourself to do the rehab.  If you did, you would be generating taxable income with your contracting business. This would increase your SE tax. Take advantage of your sweat equity.  FYI at a certain point your flipping would no longer qualify as a passive activity and would now be subject to SE tax. But that is another subject.

I agree with @Trevor Ewen. 

I know the approach and strategy differ between a flipping and a buy and hold deal. Several variables come in to play ( liquidity, time, goals, financing, etc).  @Brandon Turner is always talking about how important it is to analyze deals. You should run the numbers both ways. Once you have all the info you will now be able to pitch this deal to whomever you are seeking financing from. This may help you decide whether a flip or rental is a better fit for you, too.

Either way, you need to fix your credit and depending on what is hurting your credit it could take longer than a year or two. So the time is now.  

You can always contact the 3 F's to help you finance the deals.  Friends, Family and Fools!

Good luck @Jared Pittman 

I might be a little late to the game here. The difference between purchasing and selling a stock vs RE.... You do not actively participate in the company's stock you purchased. In flipping you are actively participating in the business. The houses you purchase are inventory. I don't know if anyone responded to how to avoid SE tax, but you could elect to have your llc taxed as an s-Corp. this only makes sense at a certain level. There are cost associated with the s Corp return and more compliance issues than a llc or sole proprietor.

Without knowing the scope of investing you are doing it is hard to say.

Sid,

A couple of points...

1) Go see your CPA or tax professional to understand the tax consequences.

2) You can still have a passive income (loss) from a LLC. Unless you are a RE professional, RE is a passive activity. No SE tax.

3) You can not pay yourself a salary (w-2) in an LLC unless you have elected and been approved S-corp status. Which if that is the case there are other issues to consider.

4) Passive losses can carry-forward to offset future passive income and complete disposition of a passive activity would free up suspended losses (subject to passive loss limitations).

5) Understand that showing a loss on a tax return could have consequences when looking at financing.

Hope that helps.

I agree with the above. However, make sure the bank is willing to do a cash out refi or you might be looking at another HELOC after the refi. Depending on your business plan and your in laws financial plan, maybe they would be willing to work with you again at some level. This could provide some favorable financing and access to quick cash, which could provide you some better option when looking for deals.

Thanks everyone!  @Brandon Holley I will check out those groups!

Hello,

I am a new member to BP. I have always had and interest in RE, however, my experience has mostly been in some capacity representing an employer or client. I purchased and sold my own residence, which looking back, you could consider it a "live in flip".  I am now ready to begin my own investments. I am starting small, but have big ambitions and goals. I plan to use my background in accounting, finance, and operations to begin my journey and I look forward to leveraging BP to assist in achieving my goals.  I hope to form strategic relationships and increase my knowledge through BP to grow some serious wealth!!!  If you are like-minded, I would enjoy meeting you. Also, I believe as others have helped/mentored me, I should help others. 

Current strategy - Buy and hold 2b/1b  homes in KC area. Also, looking for a play on multi-plex.  However, will consider any deal that makes financial sense.

Goal - $1 million in assets by 2025! (shoot for the moon land on the trees, shoot for the stars and land on the moon, or something like that)

Background - Accountant (Audit and Tax), Asst. VP of Operations at a college (new construction, Facilities and Grounds, SFR purchase in surrounding neighborhoods), Personal residence (live in flip), MBA emphasis in Entrepreneurship, Analytical work for a private equity firm

-Mike