All Forum Posts by: Shivam Patel

Hey guys,

I wanted to get some advice on if this structure works. It's really hard to get in touch with some lawyers/cpas in my area, so I think I am just going to file everything myself. I just want to know what everyone else things about this. I plan to get an out-of-state trust(Delaware probably) that owns a series holding LLC in that state(Delaware probably). That holding LLC (lets call company A) will be filed as a LLC with tax election as S-corp and hold all the properties. I will create a NJ LLC (company B) that will be my operating company. All my properties are in NJ, and I do all my transactions here for rental income. I want to systemetize have easy filings for following tax year to have 4 filings (1 for trust, 1 for my indiviual w2, 1 for company A, and 1 for company B). I also dont want to create an individual LLC for each set of properties as I get bigger and bigger, which is why i am doing series LLC ina different state that offers it. I understand I will pay slightly more in tax since its out of state, but for the managing, its easier in the long run since it will always be 4 filing. I just don't know how much additional tax it would be since 2 of them are out of state. I think I need to file both the LLC's as S-corp tax election. I also think both need an SOP, and need to be owned by the trust ( i want to remain anonymous as i grow). That brings up the question do I need to create the trust first? Then create the LLC's one in each state. I dont know what type of trust to create. Ideally something in the long-run that is easy to have estate transfer to my future kids. I need to look up how trust filings work. What do you guys think of this structure, or is there anything here that you guys could give advice on/suggestions. Love to here the community input.

@Chris Seveney

Do they do all 50 states?

Did you mean total monthly Profit or total monthly rent? Those are two different things. If its profit you should be fine when you estimate prop. managment, capX, vacancy, etc. However, if its just total rent, I would reassess. Try to negotiate either 0 % int or 0% down.

Also I would get quotes on the insurance while you can, because previous estimates just wont work. Prices of building materials have gone up, and home and car insurances have been creeping up as well. Definitely get a quote before you lock in. I'd hate to see a fellow investor get burned once locked in.

I see, but man does it kill the cashflow huh? I guess in the long scheme of things rents have also increased, so its pretty subjective the way we look at it.

Investment Info:

Single-family residence buy & hold investment in Westampton.

Purchase price: $1
Cash invested: $40,000

Inherited a house, it was completely demolished. Drugs were found in basement, holes in wall, and completely destroyed interior. I fixed it up and rented it out to new tenants. The house unrecognizable.

What made you interested in investing in this type of deal?

I inherited the house, figured to hold it then wholesale. We could definately add value.

How did you find this deal and how did you negotiate it?

I did not have to negotiate this deal.

How did you finance this deal?

I bought this property in cash.

How did you add value to the deal?

Added massive repairs to the property to make it in pristine condition for tenants.

What was the outcome?

Rented for $2000+ a month for this house. Since it is fully paid off, it cashflows nice.

Lessons learned? Challenges?

If you ever do a drug house. Be aware of the dangers of people trying to come to the house and harass your contractors. Be ready to call the police.

Did you work with any real estate professionals (agents, lenders, etc.) that you'd recommend to others?

I worked with some phenomenal contractors but that's classified information.

Im right across the bridge, I couldnt find any good one either, so I ended up just going with HR Block.

Quote from @Jeremy Ray:

@Shivam Patel, not sure about the deduction piece. Best to ask a CPA about that. You would need to get a SDIRA custodian like Rocketmoney, Alto or Equity Trust. Some of them can help with the LLC setup. The LLC kind of sits inside the SDIRA. It can also be a partner on deals as well. One investor could be "John Smith" and the other could be "Shivam Patel SDIRA LLC". All income goes into the LLCs account and expenses paid out of the account. The custodian is also involved in the process, particularly when you sell, etc. I'm by no means an expert on SDIRA, just know the basics I guess…

 Good to know. I don't know too much as well haha. I'm at my third rental and still feel like a newbie. Trying to grasp as much as I can you know haha.

Quote from @Jeremy Ray:

With a self-directed IRA you can buy rentals, flips or even do hard money loans out of it to other investors. Easiest way to manage it is to set up an IRA/LLC.

Ahh I see. So I can actually set up an LLC. Transfer my funds from 401k to the LLC and buy property. I'm surprised they allow that because that's all pre-tax dollars. I thought you'd get hit with a giant tax bill the second you pull it out. Unless the LLC with property in it with the tenants paying the LLC is now considered the IRA. But if that's the case, then is it all pre-tax earnings from the rental? And can you still take the tax benefits for deductions (property tax, closing costs, insurance, depreciation, etc) for it because technically you didn't pay tax on it?  What taxes can you deduct if it turns into a self directed IRA utilizing pre-tax dollars?

Did you have to pay taxes when you pulled out 401k. I thought you have to pay taxes or do some sort of loan from the 401k? Also do you have to buy the whole property in cash if you pull from the 401k or can you use partial for down payment and have seperate bank financing for rest?

Quote from @Michelle Salonga:

Quote from @Shivam Patel:

Quote from @Michelle Salonga:

Hi @Brooke Morton i certainly did. Just last year, i closed out my 401K and purchased my investment STR property. Do i regret it? No. My 401k was losing money from stocks real fast, so i bought property.

 Whats the process, how do you initiate this.

I just closed out my 401k, waited for the funds and hunted for the right property. Now my property is listed on AirBnb catering to both STR and MTR tenants.

Quote from @Michelle Salonga:

Hi @Brooke Morton i certainly did. Just last year, i closed out my 401K and purchased my investment STR property. Do i regret it? No. My 401k was losing money from stocks real fast, so i bought property.

 Whats the process, how do you initiate this.