All Forum Posts by: Nathaniel Busch

As @John Horner mentioned, COIN is a great alternative to traditional real estate investor groups. No fees, no hard pitching of products or services, just a great opportunity to give investors what they really want when they attend a group - good information with an opportunity to meet those with good ideas.

Hello @Larry H. !

Obviously every situation is different, but if your question was pretty simplistic (ex "Hey, if i sell X property for $XXX, what's my gain?") charging seems a little overzealous (this coming from a CPA).

I try to look at my client interactions an awful lot like my interactions with my contractors on my properties. If I have a question for my realtor as to what my local comps are for a property, I probably wouldn't be pleased if my realtor sent me a smaller bill for that time to do the comp's.

I realize it's not an apples to apples comparison (as realtors usually receive a commission), but in the world of real estate I find investors like that approach (as it aligns with their normal communications with other contractors in their business). 

Obviously, there are situations where charging could be appropriate (i.e. asking how to properly structure a 1031 across 5 properties, etc.). As long as the CPA notifies you beforehand when they are billing, I think that's a reasonable approach. 

@Jenny Tang In addition to making sure your CPA understands the tax laws as they pertain to real estate, I would also encourage you to find out if your CPA actually invests (and invests well) in real estate. 

Understanding how real estate is taxed is a very good trait when working with a CPA.

Understanding how real estate works is a great bonus when working with a CPA. 

Giving great accounting and tax advice that's compatible with good investing is ideal.

@Amalia G. I also think another factor to look into when searching for a real estate CPA is whether or not they also invest in real estate themselves. Knowing the business beyond the paperwork and being able to lend good solid tax advice from the perspective of a professional who also knows what it's like to deal with tenants, manage contractors, work with permitting, negotiate with partners on deals is an unparalleled trait.

My fault, i'll remove.

@Dmitriy Fomichenko thank you! @David J Lepard we have done a lot of work with clients who have invested in the NYC / NJ area, especially those utilizing AirBNB as well as acquiring multi-units while occupying one unit as a primary home. We are very familiar with your area and the relevant tax issues for NYC residents. Feel free to hit me up with any help you may need!

@Dmitriy Fomichenko thank you for the kind words. I believe it's also important to work with a real estate focused CPA who also actively invests in real estate. @Rachan M. happy to discuss our services, what we offer, and my investment strategy within the Columbus market. We have clients in 40 of the 51 (including DC) states and am happy to share with you what trends and strategies we are seeing, especially out of those in the tri-state area you are located in.

I can see tremendous value in it. The contract (and addendums) can be written in a nature that can assist you in allowing the property to generate more favorable deductions for you when you begin renting the property. Often, what is good tax-wise for the buyer in a contract can be a detriment for the seller (and vice versa). It's always important to seek not only an attorney's opinion but a CPA who specializes in real estate and also has multi-unit investment experience him/herself and understands the process. Taxation of multi units can offer much different tax benefits than SFH's!

In general, he shouldn't need to pay capital gains on the income until the principal is received on cash.

For example, he has basis of $50,000 in property and agrees to sell to you on seller financing for $100,000. His tentative gain is $50,000.

In year one, you give him a 10% down payment. He will be responsible for reporting 10% of his tentative gain ($5,000).

In year two, you make principal payments of $10,000 to him (which represents 10% of the total sales price). He would need to report another 10% of his total gain ($5,000).

And so forth.

In your example, if you would pay interest only then have the whole loan balloon when you can refi at a later date, he would delay paying the cap gains until he receives the cash at the time of the refi.

Of course, he would pay ordinary tax rates on the interest you would pay him.

This is called the installment method of reporting.

@Mike Sivert You are entitled to take the deduction for mortgage interest, property taxes, insurance and anything paid out of escrow, assuming your sub2 deal is written appropriately. An appropriate sub2 deal is one that properly conveys the burdens and benefits of ownership to you (there are 7 tests of this per precedent and case law).

Assuming you meet those tests (which you likely do if you used an attorney), you are entitled to the deductions. Reporting the mortgage interest on the return should be done with care, as the IRS does not have a copy of Form 1098 under your SSN (or EIN if business) reporting the interest. There is a special way to report it to get the deduction while not triggering a computerized notice from the IRS disallowing the deduction. Be sure to consult a real estate CPA that is familiar with the process and knows how to properly deal with sub2's / land trust type deals like yours.

Your seller should also be of the understanding that they are NOT taking the deduction. It is good practice to obtain from them the actual 1098 and to remind them that they are no longer entitled to the deduction since they aren't making the payments anymore (again, these things are usually spelled out in the sub2 agreement).

Happy to help if you have any other questions about the process. I deal extensively with creative financing such as sub2's, land contracts, contract-for-deeds, assumptions, land trusts, etc.

NB