All Forum Posts by: Account Closed

@Kevin Pinkard We did this a couple of years ago for a TN property originally purchased in my name.  We used a Land Trust to side-step the due-on-sale clause and the property transfer (sales) tax.  You should check on the state's laws where your property is located, and (as always) check with an attorney.

If you use this method, the two main questions to answer are, who will be the (initial) trustee and who be the (initial) beneficiary.  There are different thoughts on that.  Feel free to DM me and I can send some your way.

@Michael S.thanks for that.  I would add that the $144/month ($1728/year) is only about an 3.43% cash-on-cash return (at 20% down).  You would do better in 30-day t-bills (right now ;-)

The hopes an investor might have (if you purchased a property like this) are: 1) inflation to drive rents up, 2) inflation to drive property appreciation, and 3) mortgage rates to drop to refi at a lower rate in a few years.

A lot depends on what someone thinks about the longer-term prospects of neighborhood they're investing in.

@Sammy Habbaz thanks. We did re-file ours and we were approved for the refund.  To anyone who hasn't done this yet, it is a multi-step process.  You must first re-file your taxes for the years you paid via section G, and must re-file using section F.  And you must do it for every year that is being considered (2020-2023), and you should re-file them in calendar order.  Whew.  Once all are approved, then you can submit the claim for a refund.  We did it ourselves on the TNTAP and the experience was positive (they made it easy and painless).

@Bette Hochberger great topic.  So many things!  As I've been learning, there are the key taxes to understand when investing into a new area or state:

- State business income tax (if you have an LLC)
- State personal income tax (if they want to tax you too, even as an out-of-state investor)
- City personal or business income taxes
- Any registration fees due the city/state
- City/state property taxes

And I'm sure more! I'm curious if anyone has pulled together a table of this type of info at the state (or major metro) area?

@Bill Bouillon  @Katie Funk I agree with Katie, talk to a (good RE lawyer or RE CPA), even if you grab just an hour of their time. But, if you are not a professional REI, one adjustment I would make to what Katie wrote is that you would report the income (and deductions) on Schedule E (for rental real estate) since it is passive income, and you wouldn't use Schedule C. The good news is that you won't need to pay social security + medicare taxes ;) but you also do not get to deduct it from any earned (W2) income. And hopefully with the proper depreciation, you'll pay no income taxes on the money you do receive from the rent.

@Michael Plaks has some great write-ups on all of this.

Check out https://www.noradarealestate.com/blog/due-on-sale-clause/

in general putting the property into a land trust should not trigger the due-on-sale because of the Garn St Germain Act. We did this with our property and had no issues with our bank. The best part is you can later (and privately) make your LLC the beneficiary of the trust if you'd like.

But always check with your lawyer 😊

One other thought. If you are living in the home as your primary residence you will probably lose the homestead exemption if you put it into a trust or LLC. Definitely check with your lawyer on that.

@Tim Hawkins Talk to a lawyer :) though my wife and I did the same in recent past and this is what we learned.  (and everything Steve V. mentioned above it true and accurate; hopefully my answers will help to clarify)

1. With my name being the only one on the LLC paperwork but all the loan and banking being in both our names, should my wife be listed as a registered agent as well?

Being the RA doesn't convey any ownership or the LLC. It only indicates the primary contact for the LLC (since some LLCs are created anonymously). In fact, I believe there is only a single RA on any LLC.

You might mean that you want to put her as a Member (Owner) of the LLC (which is different than the RA). Steve's answer is correct about how the LLC might treat spouses who each own half of an LLC.

What we did was put our family trust as the sole member of the LLC, thus it is a single entity LLC (thus a disregarded LLC), and both my wife and I are the trustees of the family trust, so we share ownership. We it all eventually flows onto our joint Schedule E. Whew!

2. If so, regarding the IRS, would that then make the LLC more than a single member LLC, and would we still be able to be considered a disregarded entity?

See previous comment.

3. Since there are no "employees" in the LLC, my understanding is that no EIN in needed, only a TIN, which would be my/our SS#'s. Is this correct?

We have an EIN for our disregarded LLC.

4. I am looking at opening up a business account in the LLC's name, the bank says I need an EIN, but the IRS says I only need a TIN (my SS#) since there are no employees.

We use the LLC's EIN and avoid using our SS#s.

5. Lastly, if the loans are in our personal names but everything else is done/moved under the LLC name, do I need to look at refinancing the property under/into the LLC, or is it still beneficial to have the LLC with the loans under our personal names?

We have kept our loan in our personal name, and the bank is good with that. They knew it was an investment purchase. The details of what we did are: we actually put the property into a land trust which avoids the loan-call and avoids property transfer taxes. And our LLC is the beneficiary of the land trust (which has the family trust as the beneficiary). Took me a while to understand this structure, but we are good to add more properties via individual land trusts which will have the LLC as the beneficiary. Whew!

6. Have I unnecessarily over-complicated things for a single rental by LLC'ing?

Yes.  We did too.  But we are planning to add more properties to our holdings in the coming year, so we're set for growth.

@Adam Jaggers We recently used https://wrgcpa.com/ and had a great experience with them.

@Carrie Gajowski I like the info from Mat's podcat/youtube channel (search for Mat Sorensen).  This is their company website https://directedira.com/

We do not have an SDIRA but we are looking at this for our kids. We do not do business with Directed IRA, though we are considering them for our kids (to move their Roth IRAs to Roth SDIRAs with Directed IRA). Matt also has a book on this https://sdirahandbook.com/about/, though I have not read it (he seems to share all the info through his youtube channel :)

@Lisa Eisenhauer I concur with @Dmitriy Fomichenko.  We use Solera National Bank and they were very easy to setup the account with.  We did have confusion regarding where the physical, blank checks would be sent to, but it all worked out.