All Forum Posts by: Thomas Castelli

Yes, you can. 

You can find out more information about this topic in this thread. https://www.biggerpockets.com/forums/104/topics/14...

It sounds like you have Joint Tenancy, which means that the surviving spouse will receive a stepped up basis on 1/2 of the property (the part inherited from the deceased spouse). 

A majority of consultants I've worked with structure their consulting entity as an LLC taxed an S-Corp. This allows them to classify part of their income as salary, which is subject to the self employment tax (15.3%), and the rest as distributions, which are not subject to the SE tax.

A C-Corp usually isn't the best structure for a self-employed consultant because it is taxed once at the corporate level (21%), and again at the individual level when dividends are distributed to the owner (usually 15-20%). They are usually better for large businesses because of the ease of transferring ownership (i.e. stocks).

As for your vacation home that will be rented, you will likely be advised to put it in an LLC for liability and tax purposes.

When it comes to offsetting your consulting income with rental income, it depends... If your vacation rental is considered a passive rental income activity then you can offset up to $25,000 in rental losses against your active (consulting) income if your AGI is less than $100,000 per year. This begins to phase out when your income is over $100,000 and completely eliminated if your AGI is $150,000 or more.

However, if you provide substantial services to renters that rent your vacation home (i.e. maid service, regular cleaning, cooking, etc.) and it becomes more of a Bed & Breakfast service, then you can classify your vacation rental as active income, subject to the SE tax. This would allow you to offset all vacation rental losses against your consulting income, regardless of income level. And because it is now active income, you may decide to also have it taxed as an S-Corp to partially avoid the SE tax as mentioned above.

Hope this helps.

What comes immediately to mind is rising interest rates. Interest rates today have been artificially kept at historic lows, and are expected to rise in the coming years. 

If you 1031 into a 2-4 unit property and lock in a 30 year fixed rate loan at today's rates, you can be less concerned with higher interest rates in the future because when the term of the loan is through, you will own the property free and clear.

However, going with a commercial loan with a 15 year term will open you up to interest rate risk. And if interest rates are too high 15 years from now and a refinance or another 1031 isn't feasible, then you will have to sell and recognize the gain. 

Other than that, it will depend largely on the timing and merits of the specific opportunities you have to choose from.

I'm not a lawyer, but from my understanding you don't need a securities license to raise capital for your OWN deals (i.e. deals where you are the principal or a general partner).

Also, the name of your title doesn't make much of a difference for anything other than marketing. For instance the title "Principal" usually just lets other people know you can make decisions on behalf of the company, which CEO/President also conveys. 

Hope that helps.

@Evan Torrens At the moment we are only looking to bring on passive investors.

@Jerryll Noorden Not at the moment but If anything it will be light snacks.

Who is this event for?

People who want to invest in real estate for cash flow and long appreciation but simply do not have the time or desire to build a team or deal with the headaches of actively managing properties.

At this event we will cover:
- Why diversify your portfolio outside of stocks, bonds, and mutual funds?
- The benefits of investing in real estate over other asset classes.
- How to invest in real estate without being actively involved.
- How to invest in real estate with your IRA and old 401(k) accounts.

Event Schedule:
6:30pm - 7:00pm - Networking
7:00pm - 8:30pm - Presentation
8:30pm - 9:00pm - Networking

Admission:
$12 per attendee

Make payment using the following link:
https://www.eventbrite.com/e/learn-how-to-build-wealth-by-becoming-a-passive-real-estate-investor-tickets-44284539249

This event is expected to sell out quickly, so do not delay in purchasing your ticket. All ticket sales are final.

It sounds like you are asking if these items are considered repairs and maintenance, or capital improvements.  Capital improvements need to be capitalized and depreciated over a number of years, whereas repairs and maintenance expenses are immediately deductible.  

Assuming the property is already placed in service, interior painting is always considered a repair and maintenance item and can be immediately deducted this year.   

As for replacing a few shingles, that appears to also be considered a repair and maintenance item. This is because repairing a few shingles isn't substantially improving or completing replacing the roof.

Here's a link that explains this a little more in depth: https://www.fsresidential.com/corporate/news-and-events/articles/maintenance-vs-capital-improvements-whats-the-d

Hope this helps! 

If you syndicate the deal investors are actually taking an ownership stake in the property, and you usually split the profits with the investor, and may even collect a few fees for your efforts.

There are a number of ways this can be structured but here is an example of a deal I invested in not to long ago... The sponsor received: 

- An Acquisition fee (1% of purchase price)

- An asset management fee (2% of gross collected rents), 

 - Cash flow and gain on sale was split 80/20, respectively between investors and sponsors. 

On smaller deals, acquisition and asset management fees may not always be feasible and you may have to just split the profits with your investors. (i.e. 70/30, 50,50, etc.)

As for returns, investors usually like deals where the IRR is in the teens (i.e. 15%). I know a group that I spoke with won't invest in a deal unless it can return at least 8% CoC return to investors based on in place numbers. That doesn't include appreciation or principal pay down, just cash flow.

But this ultimately depends on you and your investors criteria.

On the other hand, you can have a private money lender provide you a loan for a portion, or the total purchase price of the property. In exchange you will create a note where the property is the collateral for the loan and pays an interest rate. (i.e. 8%+).

The loan can be interest only or it may amortize. The lender has no equity, their return is in the form of interest. In effect, the private money lender is acting as the bank. 

Hope this helps!