All Forum Posts by: Sebastien Hitier

By the way, I thought conventional loans do not need to be owner occupied: https://thelendersnetwork.com/conventional-loan-requirements/. I was under the impression you just need a credit score, and therefore a SSN, but then I might be mistaken. You better check with several banks.

FATCA might be advertised it as fight against money laundering, but this looks like a fiscal repression tool imposed on US persons. One of the fallout of the crisis is that suddenly every foreign bank and brokerage in the world is requested to do some work for the IRS no matter their jurisdiction. The outcome is that many banks and brokers pulled out from many locations because of the cost of compliance.

 You are a non resident US person? It is curious, I thought you could get a conforming mortgage.

As foreign person, you can try HSBC mortgage, otherwise US micro-banks (the smaller, the better) have portfolio loan department and will lend to foreigners.

Cash on cash return is an affordability and solvency measure. The factor that determine profitability enhancement afforded by the financing is the difference between the cap rate and mortgage APR. see http://www.investor-realestate-accounts.com/wiki/P...

These questions come back periodically on the forum. These are questions for lawyer and CPA...

The short answer is most people own their first handful properties without LLC, but very few operate dozens of properties over decades without a LLC. You have to choose where you put the conservativeness cursor.

I advise you get an ITIN asap to open a bank account. see http://www.usa-nra-tax.com/setup.html

LLC becomes more advisable for many properties in high risk areas. Note that LLC for non US person come with stringent accounting requirements since 2017.

 The short answer is, it seems to me that it depends on the territoriality of the tax basis of you country.

Some countries like US, France tax their fiscal resident (resp US person) on their worldwide income, so it seems preferable for french to set up the LLC as corp, and pay dividend to owner (not sure what happens if it is a partnership).

Some countries like Hong Kong tax their fiscal residents on their territorial income only. Then you can declare US and state tax where the property is located and keep LLC disregarded for tax purpose.

see http://www.investor-realestate-accounts.com/blog/2...

Also, there is an important set of new requirements on disregarded LLC since 2017 for non US persons: http://www.investor-realestate-accounts.com/blog/1...

The simplest foolproof strategies is to have full downpayment for conventional loan, investing in some rental with a cap rate 6-8% so that gives you positive cashflow. That's why people advise you to get 20k and a job.

People with a flip track record, who have been thru several projects and are well calibrated can start chaining several deals per year and that's when they start to talk about putting less money down. You need several project to understand what your market and capabilities. You actually may need more margin of safety for the first deals.

So if inspection reports plenty of problem, you don't want to bring it up with him because you could hurt his feelings by hinting to him that you know he lied? 

Your seller should only be your seller. See after sale is closed.

I would say some inflation on all expenses except for property tax, which are sometimes indexed on property value in some locations.

You can see 30% yoy tax increase in Texas and Florida...

Insurance in disaster prone areas can also suddenly increase.

@Nicholas Aiola

Thanks a lot, I would like your help to spell out the difference between holding in C-corp that files its own return vs holding it directly or in a partnership where income is put in the individual schedule E.

I am not a CPA, so I need help double check the numbers and assumptions:

• RE rentals operating in C-corp had their net income taxed at 35% (corp profit) and again as dividend at 15% (or was it 10%) leading to a (1-(1-35%)*(1-15%))=44.75% total tax rate for the ultimate beneficiary
• RE rentals operated directly or in partnership had their income taxed as part of partner income at the top bracket tax rate of 39.6%

My understanding is that RE was most commonly held directly or by partnership rather than by a tax filing C-corp because it was always far more tax efficient. 

after tax reform:

• RE rentals operating in C corp have their income taxed at 25% (corp profit) and again as dividend at 15% leading to an effective tax rate of 1-(1-0.25)*(1-0.15))=36.25%
• RE rentals operated directly or in partnership that have a 23% deduction on income, making the top marginal tax on this income (1-0.23)*0.396=30.492%

Does this means that partnership will still be most advantageous way to hold RE for most given the higher progressivity of personal income tax and lower top bracket, except for the corner case where one make more than 200k (single filer) and this is less than half of his W2?

Please confirm if my numbers are correct.

So, out of a tax efficiency motive, who should we expect to switch from partnership/DE to tax filing corporation ?