All Forum Posts by: Steve Smith

Quote from @Joe Homs:

@Heath D Wallace check with an attorney, but if you do that then you have two properties at risk under one LLC. Why not create a different LLC that is disregarded for tax purposes and is owned by your Texas LLC. If you are really paranoid and want privacy protection then to place the property in a land trust that is owned by your new LLC, that is owned by your Texas LLC.

Good Investing...

 Joe, That is excellent advise. A trust doesn't necessarily have a situs, so it could be anywhere, but you "may" want to have a situs in it like "formed under the laws/statues of the state of Texas.

And Heath, Why do you need to move it to Texas? Because the property is in TN, that state will still govern the laws regarding it, but a trust makes a lot of sense.

1MM in taxes is a LOT of money to pay in tax, and with depreciation recapture, it could be worse. Get some good advise, there are a LOT of ways to shave that way down. Is real estate involved... a 1031 is a good option, and perhaps you could value the RE on the high side to reduce the stock gain. Look at selling it on installment, make some interest and spread out the tax over years. Or create a loss for the year of sale. Also, I believe there are some reinvestment plans that may work. It's been a long time since I sold my business, so I can't advise on current strategies now. Get some expert help, and be sure you're getting good help. 

If you can't walk to it, it's too far. Stay local.

Quote from @Jeremy Crooks:

Hi everyone,

I have been investing in US real estate for 2 years.  I have done 24 deals remotely from Australia.   I currently have a large buy and hold portfolio of rental homes in the US, yet I still live in Sydney.

It has not always been easy, but with perseverance, there is money to be made in the US real estate market.   That is the big picture, but for foreign investors there are details that the Americans just have no clue about.  (to put it mildly).   

To that end, I have gained knowledge on how foreign investors can set themselves up to invest in the US.  For example:  I am 1 of only 3 IRS Certified Agents located in Australia who can help Australians gain the ITIN (International Tax Identification Number).   It is no use buying a US property, if you can't open a US bank account or file a tax return.  An ITIN is a pre-requisite for both of those tasks).  

Hype around amazing deals is cheap.  But getting the details right is essential for success. 

Jeremy

That's Great, and success to you. I love 'Sydney, and have traveled there often for fun. You have a wonderful city. I have friends that live there that also invest there (and Hong Kong). Do you also invest in your home town?

Quote from @Ken M.:

Quote from @Erik Epperson:

Hello, new here. Currently waiting on hearing back on my appraisal for my first house I'm getting out of.
I want to invest my profit into 1 or 2 multi family duplexes.

I am curious at what income level based on rental cash flow i would need to still qualify for a loan. I have potential job opportunities else where but will purchase a duplex before thinking of leaving the area. I know once I leave my job I will no longer have that work history and steady income the bank expects to see. So at what point can I use my rent as "steady income?" I ask this because once I have enough for another down payment I will want to scale to more properties. 

I am in the Indianapolis Metro area. I can currently find multiple duplexes under 300k. I plan to rent by the room. And possibly convert extra space(dinning room ect) in to bedrooms. 
With the high cost of rent in Indianapolis (1000-1500 for a 1 bed room studio) i believe I will have allot of cash flow even with the current interest rates. I personally know several people paying $800-1000 for a single bedroom. And in 2016 I myself paid 750 to stay in a bedroom in a 4 bed house that was full. Based on the area,my rent alone was covering the mortgage, let alone the other 3 tenants. Ever since i lived in that house iv been dreaming of doing the same but it wasn't in the cards yet.

Also if there is any one here who invest in Indianapolis please message me!

Your question: "When can I quit my W2?"  When you no longer have to ask that question.

 EXACTLY

1. Earned Income – Way to time consuming for the 'income made

2. Business Income – Also way to time consuming and a headache if you have employees. But you'll need a rental management company to handle your rentals, which might cost you an hour a week.

3. Dividend Income – Too risky, while you can average a reasonable return, you have to keep an eye on it and there will be downsides, perhaps big ones, like YESTERDAY.

4. Interest Income – Sure, you need a place to park your income before you spend it and lending it shore term, medium high interest works well. 

5. Rental Income – Profits from real estate investments. Yep!

6. Capital Gains – Don't sell it if you have to pay tax on it. Work to get it in a Roth IRA so there's no tax

7. Royalties or Licensing Income – Royalties with mineral rights are great, but you need to own the land, not in a stock or bond.

I could argue that Diversify is not necessary. Keep all your eggs in the real estate arena, diversity would be having many income streams from the property your own. TIME is your most valuable asset so I would argue to limit your diversity so your time is spent with little management or work. Travel, having fun and goofing off are WAY more important.

How many different income streams are you building? One

Quote from @Ken M.:

Quote from @Steve Smith:

Ken,

Very good posts and I could certainly argue your points. Document, document, disclose, etc, but only to the right people, not necessarily the lender. I don't wave a red flag in front of the lender daring them to call the note. But absolutely be very clear with the seller as to what you're doing. However, I've NEVER had a note called on any properties and the vast majority were "subject too" and/or owner financing. However, don't have any of those loans anymore (most paid off).

The only thing I do that you don't, is use trusts, and love them and they have saved my bacon a number of times.

.
just for clarity. I never disclose to the lender. They are not required to be notified. All disclosures are to the seller, escrow, IRS, that kind of thing.

In one lawsuit, the judge determined that the lender had constructive notice because I had recorded the warranty deed and was making payments from my business checking account. I had done nothing to hide the transfer of title. I won the case based on that.

How has using a trust benefitted you?

With a trust, no one know who owns the property. Thr trust could be in the name of the seller, and your entitty would be the trustee and beneficiary.

If the IRA is not a Roth, I'd convert it to a Roth, but check with a CPA on how to treat the property in the Roth. As a rule, I could argue to have the IRA (Roth preferred) NOT hold property, but control is with options, leases, etc, so the profits come into the IRA. There could be liability owning property in an IRA, and you don't want any issues with that.

I also don't lend in PA, but you might find someone that would fund this with their IRA, assuming it's a stable deal. I'm currently lending out some 6% to strong investors that I have a history with, and lend in the 9 to 10% for short term rehabs and flips. There is money out there, just have to look.

I also don't lend in PA, but you might find someone that would fund this with their IRA, assuming it's a stable deal. I'm currently lending out some 6% to strong investors that I have a history with, and lend in the 9 to 10% for short term rehabs and flips. There is money out there, just have to look.