All Forum Posts by: Ebere Okoye

@Matt R, very funny. how much of that 50 hours is actual "WORK". You know there is a saying that your employer pays you for your availability not your actual time spent at work if you work as a salaried employee.

@ George, Yes, you need to spend more time in real estate than in any other active profession and you have to meet more than the 750 hour requirement (14 hours/week) If you spend time doing anything that is related to real estate and it can be properly documented, there is a chance. I am just stating that sometimes, investors do not take the time to document their hours and going through this exercise could reveal that you may spend more time in real estate than in your active profession. Given the nature of IRS audits, it boils down to the ability to make a strong case in favor of your position. There are a lot of activities out there that count towards the hours requirements that investors do not consider. I usually have my clients fill out a real estate activity log which contains at least 250 possible real estate activities that could count towards the hours requirements. With audits, business purpose and documentation and superior record keeping play a very important role

I have both but use my prepaid legal services. Most times, I have found that I just need a quick answer to a question and prepaid legal comes in handy. It's pretty affordable. I have an attorney for the bigger issues but 98% of my legal issues have been handled by prepaid legal.

I am a CPA to real estate investors. We offer tax reduction, IRS audit proofing, entity structuring, and other financial services that could also benefit you (depending on your particular situation).

I am very familiar with money-saving strategies which I love to implement all of the time, combined with my 18 years experience as a CPA/Tax Strategist and 11 years experience as a real estate investor and business owner.

I actually made a decision about 7 years ago to work with Real Estate Investors because I was running into a lot of investors at my club meetings who have had bad experiences or working with CPA's that are not RE savvy.

I have also found that "RE EXPERTISE" is more important than "PROXIMITY"

I have found that it is better to work with a CPA that is "Real Estate Investor" friendly even if they are out of state instead of with a local CPA that may not know all the deductions and tax strategies available to RE investors. Just a thought

It will be next to impossible for you to get a loan in an LLC name. What I did with my NY property was to purchase in my name and ten transfer to an LLC. Fortunately, there were no transfer taxes in NY so I only paid the attorney fees and the recordation fees to get the transfer done.

Matt, With the material participation test and the hours requirement to be a RE professional, there are several ways around this. We all know that though most people are on a 40 hour work week, you really do not put in 40 hours, look at how many hours you really put it. Could end up being a 32 hour work week. In addition, if you use your car for advertising, the time spent in your car could be considered RE time. If you do RE on your lunch break, that qualifies. Basically, at the end of the day, your full time hours may end up being as much as or less than your RE time thus giving you that qualification. Just a thought.

George, Not sure if your CPA meant that it is active income versus the fact that if you have a loss on the rental, it will not be considered passive due to your active participation. This means you get to take some of the losses against your active income (of course subject to some limits).

Adam, Did you create a separate class just for your friend in quickbooks so that you can track his income and expenses separately? When you go to categorize this, you would record the whole rental income (when it comes in) as rental income. Then when you pay the bills, you would categorize each bill into its own category. When you write him the net check, it goes to owner's withdrawal. With this you run run an income statement by class. You will not be able to run balance sheet by class because quickbooks is not set up to do this yet. But you can set up the balance sheet accounts to track separately.

Winston, since you can directly tie the expense to your personal side, this cost is added to the cost basis of your personal residence. No adjustment needed on your tax return for this year but you do need to update your cost basis schedule in anticipation of converting to a full rental down the road.

I have about 10 properties and I only escrow on 1. The rest I pay myself and it helps me with the the ups and downs of tenant vacancies sometimes and a couple of years ago, I was able to defer the tax payments more than 1 year until I had the cash reserve to pay it off. When the bank pays it, it automatically comes out every month. It's more of a cash-flow issue for me and having the cash to juggle things around if I need to.

One of my properties, I actually asked the bank to pay it and then made payment arrangements with them spread over 60 months. This worked out for my short term cash flow needs when one of my properties flooded and these crazy insurance company did not cover it because I did not have "Sump Pump" addendum in my policy