All Forum Posts by: Tar-U-Way Bright

@Tar-U-Way Bright

Using an LLC for real estate can provide liability protection, simplify accounting, and allow you to deduct management expenses, offering tax benefits and scalability. However, keep in mind it may complicate financing, add costs, and require careful management to maintain liability protection. From experience, proper planning, strong insurance coverage, and networking with experienced investors are key to making the most of an LLC for your investments.

Good luck!

@Tar-U-Way Bright

You can use the LLC to set up business bank accounts and business credit cards. This will allow you separate business income and expenses from personal income and expenses.

Since you plan to house hack your bookkeeping and tax return preparation will be more complicated because a percentage of your home expenses will be personal deductions and some will be business deductions. I recommend that you engage with a real estate accountant to ensure you set everything up properly. 

A good real estate accountant can save you thousands of dollars by leveraging entity selection and formation, tax deductions, cost segregations, bonus depreciation and tax planning.

I recommend finding an accountant who specializes in real estate taxation, business taxation, financial planning and tax planning.

I would also recommend looking for a accountant willing to work with you throughout the year. You want an accountant who can help you strategize and who is responsive when you want to know the consequences of the financial decisions you are making throughout the year.

Good luck.

@Tar-U-Way Bright,

Congrats on taking the leap into real estate investing! Using your LLC is a great way to structure and grow your business. Here are a few tips:

1. Asset Management: Holding your property in the LLC can protect your personal assets, but check with an attorney or CPA to ensure it's set up correctly and complies with local laws.
2. Rent Collection: Collecting rent through the LLC simplifies accounting and keeps personal and business finances separate, which is a big plus for taxes and liability.
3. Property Management: Since you're self-managing, the LLC can be used to formalize agreements, pay vendors, and manage expenses—treating it like a professional operation.

Just make sure to consult an attorney or accountant to align your setup with your goals. Starting out this way shows you’re serious about scaling your business!

Hope this helps you on your journey

@Tar-U-Way Bright, as noted above, title would be held in your name since you'd be utilizing a primarily home loan product to finance your acquisition. The LLC would essentially serve as a business checking account to collect rental payments from your roommates/tenants and potential write-offs for expenses such as property repairs/maintenance. However, it's always advised to consult with a CPA regarding this, and I'd imagine there may be some nuances since, again, title is held in your name, not your LLC's.

How far along are you in the property search/acquisition process? Which areas of metro Atlanta are you interested in targeting? 

@Tar-U-Way Bright

Be careful with Padsplit. 

Padsplit residents can cause problems with neighbors and other residents because many have substance abuse and/or criminal histories.

If your padsplit residents have vehicles that can cause parking issues. If they don't have vehicles your property will have to be near bus lines or Marta.

Also, Padsplit will want you to eliminate any dining room, den, etc to add more bedrooms. 

Once you do this conversion it will be difficult to change it back to a traditional long-term rental. 

If you decide to sell it after a Padsplit conversion, you can't sell to traditional homebuyers or long-term rental landlords. You can only sell it to landlords using the rent by room strategy. This could lower your resale value. 

You might be better off doing it yourself without Padsplit. 

Good luck. 

@Tar-U-Way Bright

I too house hack and learned everything I could ahead of time from BiggerPockets (e.g., bootcamp, forum, books). The BP forum is free and some contributors have nothing to gain and want to see others thrive. The rest is learning by doing. I recommend RentRedi as a PMS. There you will be vetted as a landlord, you can set up each bedroom as a “unit,” you can personalize prequalification questionnaires, and you can choose 2 different levels of background check. Once you move forward with someone you have vetted and feel comfortable with co-living, you can use the message templates to inform your tenant, upload your lease for e-signing, and collect a deposit and rent. The Help Desk responds quickly when you message them.

PS is for a particular type of investing, which are probably the PM, and I wonder if you are permitted to live there. I would not house hack while allowing someone else to place my housemates. You will know best by your vetting and gut with whom you could live. So, to answer your question, you are better off completing being your PM if you will house hack?

The way I made house hacking work in a HCOL area (New York) was buy a fixer upper multiunit. I was able to get in at a lower cost basis, and the property didn't cash flow while I was living there (this is a common misconception with house hacking) but I lived almost for free - Only had to kick in a few hundred bucks a month. 

Everyone gets really focused on triplex and quadplex properties, but there aren't many of them and as you've said, the numbers just won't work on something move in ready. 

Plus, its worth noting that no Retail Priced property will be at a number where you're going to get the benefits of investing (cash flow and equity)

What is working now is looking for single family with accessory units or mother-in-law suites, or duplexes. There are more of them. 

You won't get cash flow while you live there, but you'll have a much larger selection to offer on, giving you higher chances of finding something that's actually a deal from an ROI standpoint.

Then, also look for fixers so you can build equity into them, make nicer rentals that you can get top dollar for. 

You can do this with the FHA 203k or Fannie Mae Homestyle loan.