All Forum Posts by: Mike Neubauer

We have just a couple rental properties, but I learned when we started to always take care of your own pest control, and not only to prevent pests, but also as an easy way to complete period inspections. Find a local guy that will give you a decent price. You can talk to him after his pest sprayings just to see if there is anything obviously out of the ordinary.

He obviously isn't there to snoop, but if he sees it is trashed, or maybe they are packing all their stuff to skip out on the lease, at least you will have a heads up.

Plus, I wouldn't trust any tenants to take care of important preventative maintenance on any of my property.

You are correct, and that is why some people will put each property in a separate LLC. Some states have series LLC that in theory will protect each one individually, but there is no case study on it yet.

To protect your business assets if you were to be sued individually for something unrelated to RE, you should look into creating an LLC in a business friendly state such as WY or NV. These states have laws that put in place a "charging order." The charging order prevents a judge from allowing a plaintiff to come in and just sell off everything for your money.

Disclaimer: If you were to receive a judgement, they may still be entitled to disbursements made to you from the company, but there are other ways to work that.

Also, you should not hold your LLC as 100% owner if at all possible. Set it up 50/50 with your wife if possible.

Also, with your LLC being in WY or NV, these states do not disclose members of an LLC, which would make it quite difficult for an attorney to track down exactly what you own. Plus, they would have to hire an attorney licensed to practice in WY or NV.

These different steps are not 100% guarantees, but they act as roadblocks to an easy lawsuit for an attorney. By setting these steps up, you are basically putting up a lot of red tape in an effort to discourage an attorney from pursuing a case.

You definitely want to have insurance policies as your first defense, but legal company structure is extremely important. If you would like the name of an attorney that we use, let me know.

Plus, be sure that your LLC has all the proper documents in place that would prevent someone from "piercing the veil" For an LLC to identified in court as a legal entity, there are certain required docs including operating agreement, proper articles of organization, disbursed ownership certifications, etc.

We currently buy most of our properties at sheriff sale. We also do quite a bit of short sale investing, but almost everything we do is short term. We are looking to start putting a few of the nicer houses into a long term plan. We have an LLC taxed as an S-corp for flipping. We also have another LLC with a couple of our rental properties, taxed as a straight partnership.

Since we buy some of these houses unseen, we buy them in the s-corp name. If we get one that is better long term, and we would like to sell it to the partnership LLC, what is the best way to do that without comingling assets legally? Simple quit-claim? Close through title company with warranty deed?

Also, if we are paying cash for the property initially in the s-corp, how do we pay that same amount of cash to the s-corp from the partnership, or how do we do it on paper to show it is a completely separate transaction.

Basically, my concern would be that if I were to get sued in one company one day, they could trace back these transactions and get a hold of assets in the other company as well.

Our accountant only does it as a package deal with bookkeeping and wants a monthly fee. I figure I can handle it pretty easily myself. If I pay salary 1 time annually, does that avoid having to pay bi-weekly or quarterly taxes? I can just pay everything at once?

We have an S-corp set up for flipping houses. I need to start paying myself an income, but I prefer not to pay a monthly fee to a payroll company for one person. I know how to calculate the taxes, etc.

Can someone run me through a step-by-step of when certain taxes are due and basically just an overview of doing payroll in house.

A few bed bugs never hurt anyone. For $2k, they can heat treat the house which is the safest way, but also most expensive. If no one is living in it, they can fumigate and go all chemicals for less than that.

That number is for the Chicago area on a 2k sq. ft house.

Glad I can help.

That was the problem we had with our first one. We were so anxious to make a purchase that we let emotions get in the way and blur the numbers. We ended up losing about $15k, but we learned to never make that mistake again!

Michael Baradell I always wondered why more agents didn't get into investing. They have the best feel for the market, but I think most of them just have a different perspective on real estate. Anyways...

As far as a partner, My dad and I are partners because we have complimenting qualities. I handle all of the admin stuff and he handle all of the daily operations. We are mostly fix and flip, starting to do a few fix and holds. Our business wouldn't even be half as successful without each other. We provide a synergistic effect because we master our given responsibilities rather than trying to know a little bit about everything. With that said, if you are looking for a partner to be a passive money guy, I'd say save your profit and do what you can on your own. Usually a passive partner is only used when the his/her funds are absolutely necessary.

As far as setting up an LLC, you can find an asset protection attorney to set up the LLC. For actual protection when the papers are served, you need to set it up correctly from the beginning that means opening a bank account, having an operating agreement and ownership certificates, EIN, etc. An attorney is the one to do this. Once the attorney does 1 for you, it is easy to replicate for future LLC's you open.

A CPA is needed to decide the best tax strategy for the LLC. The tax strategy has nothing to do with asset protection, but everything to do with giving less to Uncle Sam. An LLC can be taxed in different ways. If you are going to do buy and hold, you will probably want it taxed as a sole proprietor where everything passes straight to you. If you are going to be fix and flipping, then you will probably want it taxed as an S-corp because fix and flip income is not passive so there are self-employment taxes you will pay on the profit otherwise.

P.S. Also, talk to the CPA about being established as a real estate professional. Since you are a broker, you already will meet the qualifications. But, it is vital to declare this on your tax returns when investing to save on taxes. It basically allows you to take deductions in the year the losses occur and the ability to deduct passive losses against your ordinary income.

Kay Mays I know this is a real estate forum, but you may want to look into some MLM (multi level marketing) business available. Many people talk about them being a scam because they have some false idea that they are a "get rich quick" system. They are a business just like real estate.

My wife is actually very successful with one, and I have found that many of the principles are exactly the same for what I am doing with real estate.

It is all about consistency. No matter how slow things are going, you need to just keep pushing hard. Marketing is the number one key.

I have found the MLM to be a great way to analyze and see if you are really cut out for your own real estate business. It requires similar commitments, and the success is 100% based on your effort. It is smaller reward, but much less risk. I'd google a few of these opportunities and see if you are disciplined and determined enough to make it successful. If you are, you will be great with real estate investing too. Plus, you can clean that credit up a little along the way.

I have limited knowledge in wholesaling, but that may be another option. I just have first hand experience with MLM so I have seen how the principles translate to Real Estate.

Investing out of state is most likely not going to benefit you too much in the tax area. If you reside in Massachusetts, you will need to claim "tell" Mass. how you money you made no matter what state it was in, and they will most likely require you to pay the income tax anyways. The way this doesn't happen sometimes is if a state has reciprocity with another state. However, I can't imagine that Mass has reciprocity with states as far as Florida and Texas.

As an example, I live in Illinois, but do most of my investing in Indiana. I have to claim all my income in Illinois, and any income that was made in Indiana to IN. These 2 states have reciprocity stating that any taxes I pay to Indiana will be deducted from what I owe Illinois. In my case, the tax rate is the same so it is a wash.

The one way to reduce your taxes if you want to invest out of state would be to tax your LLC as a C corp where the corporation would pay taxes and you would only be taxed on the dividends paid to you personally. The only downside is if you want all the cash from your business in your pocket, you will have to take it all out in dividends and hence be taxed anyway. This option may work with an S-Corp as well, but I'm not 100% sure. If you plan to reinvest the money and grow the company then this strategy may be beneficial. Just realize you may also be somewhat setting yourself up for double taxation as the Corp is taxed as its own entity, and then you are taxed on the income personally from dividends.

As always, talk to a GOOD REAL ESTATE CPA for the best options. Maybe Mass does have reciprocity with a state that you would like to do business in, or maybe they have another way to avoid Mass. taking your money.

Or you could move to Florida or Texas.