All Forum Posts by: Jeff Takle

You are probably referring to a 1031 Starker exchange. Google it and you'll get a ton. They work well. You have to buy a propert of equal or greater value. You have, if memory serves me, 45 days after the sale of your home to designate up to 3 potential properties you will buy, and the purchase must be completed within 180 days of the initial sale of your home.

Another option, if you are a qualified investor, is to do a 1031 Tenancy In Common (TIC) exchange. Here you transfer your money into an industrial, retail, or large scale residential investment property. The benefits are that you don't have to actively be involved managing the property, it provides both monthly cash returns (based on the rents it gets) as well as equity growth and appreciation, and it is much easier to do an even-money exchange into a TIC. Again, google it or find a 1031 TIC company and they can explain all the details.

Both good options.

Probably depends on your situation. You won't get any "more" liability protection using one over the other, if that is the question. Either the LLC holds up in court as a legitimate business, thereby shielding your personal assets and those of your wife, or it doesn't.

Filing taxes does get more complicated with a multi-member LLC b/c then you have to file a separate return and send out K-1 forms to each member by such and such a date. Single member LLCs can just file a Schedule C with your personal taxes and then an "informational tax return" with the fed and state. It is somewhat easier to do.

A good rule of thumb is SIMPLE IS BETTER. Given two choices with equal outcomes, choose the simpler one.

Also, before you leap on the LLC wagon, it may be worth your time to research putting the properties instead into a trust. Should one of you die, and the assets are held in an LLC, you can get clubbed with the estate tax and/or the value of the home will count towards your $2million cap. People do die and using a trust can provide both the liability protection you are seeking, and some specific estate tax benefits as well. Added bonus.

-Jeff

This is great advice. Another rule of thumb is to talk less, ask more questions, and listen. Starting out, many managers/landlords want to talk, talk, talk about all the great features of the property, how great the neighborhood is, and how much they know. You will get the best results (and will talk yourself into fewer problems) if you talk less and ask more questions.

Good luck!

You have a couple of good options. The first is to read the CA landlord-tenant law booklet at http://www.dca.ca.gov/legal/landlordbook/catenant.pdf .

The second is to go to the CA Bureau of Consumer Affairs at http://www.dca.ca.gov/index.html

They're there to help.

Nationally, property managers average between 8%-12% for full service. Vacation and luxury rentals can range up to 25%-50% fee in Hawaii and other locations.

Most management companies will offer some version of "lighter" fee for less service.

Whether it's "worth it" depends on your cash situation, how much profit you want to make, and how involved you want to be in the project. If you want to be hands on and make more money, then do it yourself and deal with the headaches that come with it. If you want an average solution in terms of quality, but one where someone else does the work, then hire it out. You pay for convenience but most people pay out of ignorance -- they often don't know how to landlord correctly and buy property management out of fear or because they don't know what other options they have.

-Jeff

Rents in the Boston and DC areas rose about 5% last year and are expected to rise another 4-5% this year, a solid growth after years of slow going.

Hard stats can be found at the National Apartment Assocation (2006 Survey of Income and Expenses), if you're looking for pre-investment data. May be worth the investment versus relying on random forum contributions like mine, though (!).

Or, if you're a real data hound, HUD posts tables of Fair Market Rents at http://www.huduser.org/datasets/fmr.html. You can take selected markets and compare the last several years and derive their assessed increases/decreases.

-Jeff

You can always send referrals to full time agents, too, so that if you're having a conversation with someone who needs an agent, you solve their problem and make a little money too. In reality, though, that doesn't happen as much.

A second use of the license is that every time you buy or sell a home for yourself -- after all, you need to live SOMEWHERE -- you can play your own agent if that's appropriate. This enables you to take maybe 2%-3% back off the sale. Sellers don't care b/c they're paying the commission anyway. On a $500,000 house, you'll get $10k back (less your broker's split). If you do this just once in your entire lifetime, it will probably offset the costs of getting the license, continuing education, and license fees.

-Jeff

The IRS also has a good quick primer on its website:
http://www.irs.gov/businesses/small/industries/article/0,,id=98881,00.html

An exerpt from IRS Publication 925: Passive Activity and At-Risk Rules
http://www.irs.gov/publications/p925/ar02.html#d0e252

Active participation.

Active participation is not the same as material participation (defined later). Active participation is a less stringent standard than material participation. For example, you may be treated as actively participating if you make management decisions in a significant and bona fide sense. Management decisions that count as active participation include approving new tenants, deciding on rental terms, approving expenditures, and similar decisions.
Example.

Mike, a single taxpayer, had the following income and loss during the tax year:
Salary $42,300
Dividends 300
Interest 1,400
Rental loss (4,000)

The rental loss came from a house Mike owned. He advertised and rented the house to the current tenant himself. He also collected the rents and did the repairs or hired someone to do them.

Even though the rental loss is a loss from a passive activity, Mike can use the entire $4,000 loss to offset his other income because he actively participated.

---I don't know, of course, how much of this directly applies to your situation, but it's a starting point. Pub 925 goes on to discuss real estate professionals, material participation, etc. All the things a growing REI needs!

-Jeff

A guy named Casey who bought 8 houses in 8 months in the height of the real estate hype got overextended and foreclosed on most of his property. He has a very detailed blog of his experiences on his website

www.iamfacingforeclosure.com

Now if only he would have put as much time, effort, and professionalism into real estate investing that he puts into writing and maintaining his blog...

-Jeff :shock:

You can find a lot of Real Estate RSS feeds (yes, I know they're not podcasts) at: http://www.syndic8.com/feedlist.php?ShowMatch=real+estate&ShowStatus=all

And, you can grab real-estate related podcasts, download them, and listen to them from here: http://www.podcast.net/search

And www.realestateradioguys.com have a few.

You can also look at www.YouTube.com for real estate videos. Some good. Lot of crap.

-Jeff