All Forum Posts by: James Miller

@Abi Wegman @Alejandro Lee You'll want to check with the California franchise tax board. I believe they charge the California franchise tax if it's managed or operated by a California resident.

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Originally posted by @Hao Dinh:

Hi BP !!!

Do i need to call the city to get a permit to do a renovation ? Or if i have a contractor , do they take care of all that permits thing for me ? ( plumbing , Foundation or even drywall sheet rock , add another extra rooms etc.) Just curious .

Thank you guys :)

Each city is going to have different requirements on what needs a permit and what doesn't. Typically things like plumbing, electrical, and HVAC have to be pulled by the owner or licensed contractors in TX; other permits can be pulled by the owner or unlicensed contractors. There should be a place at city hall or your city's website that lists what permits are required for what work.

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Originally posted by @Maugno M.:

@Linda Weygant @Eamonn McElroy @James Miller So him telling me he'd put both LLC's on schedules c's is wrong? Should my rental LLC be on my schedule E and my flipping LLC on my schedule c?

It is a husband/wife llc, which should still be able to do disregarded. we both have w2 income from our jobs.

As I said before, I think you need a second opinion from another CPA.

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Originally posted by @Maugno M.:

@James Miller @Linda Weygant How are LLC's that have rentals in them suppose to do it? Last year i did my taxes on my own and it was the first time i ever had rentals, and i used turbo tax and they put my rentals on Schedule E. The CPA says he'd put each LLC on a schedule C.

If your entity was disregarded, you'd do your personal taxes as if the LLC didn't exist and you owned the rentals in your personal name. Hence "disregarded".

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Originally posted by @Maugno M.:

@James Miller @Linda Weygant I dont understand if he didnt understand me or what and he has a big practice here in my town. So i did an LLC for flips and one for rentals. One for my active side, and one for my passive side (rentals). He said either way i pay SE tax on that rentall LLC unless i had a property management company. . . He took my total profit this year on flips and total profit from rentals and added them together. It was an example of 20k on both. He then said i'd be taxed the 15.3 for total, and then on top of that my regular tax which i would fall under the 22% tax bracket. Maybe i should of had a consultation with you @Linda Weygant
I need to fully understand the Scorp thing better because maybe itll benefit me more. I plan on doing alot more flips now then rentals finishing of this year and the coming years.

I'd get a second opinion from a different CPA. Splitting up LLCs is just fine. But the rest of that doesn't make much sense to me.

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Originally posted by @Scott Smith:

@Louis Van Der Westhuizen - Many of my clients buy in their own names to securing financing, then use a land trust to secure the asset. From there it can be left in the trust or incorporated into a trust/Series LLC structure easily, depending on your needs. I've written about this subject before here in this BP article.

You're correct. LLC law is dictated at the state level. As a Cali investor, you have unique concerns. Are you aware of the Delaware Statutory Trust? That would be an asset protection option that allows you to have a way around paying CA's notoriously burdensome $800 franchise tax. There are several threads about the DST here on BP, but it functions similarly to a Series LLC and is viewed as an estate planning tool, therefore not subject to the tax.

Mr. Smith: how are you getting around Tex. Prop. Code 5.016? The land trust is fine under GSG to prevent due on sale assuming the original purchasers are beneficiaries of the land trust, but once you deed out of trust to LLC, GSG no longer applies to prevent due on sale and 5.016 requires a written notice to the lender.

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Originally posted by @Maugno M.:

@James Miller @Ashish Acharya @Lawrence Stepovich

I just had a consultation with a CPA. I just created two entities, one for my flipping side and one for my rental side. My cpa just told me that if i put my rentals into the llc i created, either way i'd be paying SE tax. Something about using depreciation so either way it comes out neutral. I didnt really understand that part. I always thought that my rentals were passive and wouldnt be charged SE. CPA thinks otherwise.

He told me not do to the scorp till my profits were over 128k or so cause then thats where id be maximizing tax benefits.

So for now, he said i'd do the LLC as a disregarded entitiy, and that all my profits from llc flow to my 1040. he said that each of my LLC's would have to be on schedule c, my flipping llc and my rental llc

Feedback ?

Huh? Rentals shouldn't have to pay SE unless you're a hotel (or some other exception applies). S-corp makes sense if you have about $30-40k in profit to pay out as part W2 and part distribution. (Gotta have enough profit to overcome the extra tax prep and payroll filings).

The main reason rentals don't go into an S-Corp is not due to SE tax; it's that S-Corps make exiting a property harder. Really any appreciating property in an S-Corp is not wise, not just rentals.

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Originally posted by @James H.:

Dumb question, but... How will this help if agents do not call with perspective tenants? When our last property was for rent, we would have been happy to offer an agent a month's rent. None ever called.

Someone here on BP tried to get me to put our listing in MLS, in addition to Zillow, Realtor.com, and every other site imaginable. The agent was going to charge for that, of course. - I have a friend/landlord who is an agent. He told me that he never gets calls from agents via MLS.

Originally posted by @James Miller:

Originally posted by @Elad Messing:

Hi Everyone!

We have a 4 bedroom single family rental in Plano, TX that have been vacant now for 90 days (!). We haven’t had any issues renting it out in the past, therefore we do not understand why we struggling this time.

It has gone through make ready repairs and looks great, the only feedback we got from relatos who showed it is that people are saying that the street is narrow. The actions we took already to try and getting it rented include price reductions (twice), new photos and lower application fee. Any advice on other things we could do? And what could be a “hidden” reason for such a long vacancy period?

Thank you…

Elad and Keren

You can try increasing the renter's agent commission to get some more traffic. I.e. offer a whole month's rent to the tenant's agent. That should get a bunch more traffic.

Are you offering a month's rent in your listing? A tenant agent isn't going to offer to bring tenants by for higher comissions; they're just going to look at the listing to see if the commission is worth their time or not.

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Dallas, Texas

Originally posted by @Kate J.:

Originally posted by @James Miller:

Originally posted by @Kate J.:

@Maugno Mora All questions you are asking now were supposed to be asked before the marriage. The outcome of your asset protection depends on your wife right now. You need a postnup agreement. Can you make her sign that, noone here can tell. Till then everything you make shares between you two, including the profit from your flip. Moreover, when you buy and sell seceral times, it would be hard to trace the original pre marriage money. It does not matter how many times you repeat in this thread that you want to protect youself, there are only 2 solutions for this: get postnup or get divorse now.

I think a divorce would be a bit harsh; marriage is a special kind of legal partnership. A post-nuptial agreement is an option; perhaps you should discuss with a family lawyer your options.

It's harsh, but what if they can't come to an agreement? It's quite possible. When I was young and somewhat stupid, Ive sensed that the divorse is coming and I've asked my husband to write a postnup. It was horrible... He demanded his full 3 year salary from me or no postnup. It was all during the time that we were in a good relationship. I ended up paying him what he wanted to secure the rest of my asset with postnup. I would rather not marry, than marry and loose my money. Besides, marriage is just a paper. This paper is supposed to simplify life and not make it complicated.

If they can't come to an agreement, then there are possible other options. The big thing I would think is to simply get spouse to confirm that the real estate remains separate even if contributed to an LLC, and to take care of any rights of reimbursement now. Half the rents produced by the separate property are the spouse's right now anyways, so there's negotiation room.

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All Forum Posts by: James Miller

James Miller has started 2 posts and replied 357 times.

Post: Do you use expenses or mileage reimbursement?

Post: LLC not needed for rental property

Post: Silly Questions Do i need to get a permit to renovate a flip?

Post: S-Corporation Tax Scenarios

Post: S-Corporation Tax Scenarios

Post: S-Corporation Tax Scenarios

Post: Using an LLC to acquire RE when the LLC has no credit history?

Post: S-Corporation Tax Scenarios

Post: over 90 days of rental being vacant - any advice?

Post: Setting up LLC'S. How should wife be involved ?