All Forum Posts by: Zhi Li

If you set up an LLC or business entity the answer is a definite Maybe. You need to make an actual profit to pay taxes.

As an individual, in addition to your federal 1040 you would need to file state returns in Illinois and California reflecting the profit and loss.

If you file business returns the same is true it just costs more in preparation fees.

I do not prepare California returns, but many states have reciprocal agreements where the taxpayer can deduct the taxes paid in one state against the income earned in another state.

Your CPA is probably right.

Having an LLC in another state will not save you taxes as Illinois wants EVERYTHING. Doesn't matter if you are a domestic (resident) company or a Foreign (out of state) entity.

Zhi,

Since I don't know your agent or the conversation that took place. Remember that multi-family values that are more than 4 units are considered commercial. These properties are valued based off more the income. So that means based off your renovations on multi family units how much can you raise the rent to justify to the bank the new value to refinance. The BRRRR method for multi family buildings is a thing and I have clients that do go that route. The major difference on it is usually you will not be able to pull out as much on the refinance as you're getting more of a return in the next x amount of years from those renovations. These projects are also more expensive due to the building costs, amount of units to renovate, and time. Technically he's right, but it's very much doable in the apartment world. I would recommend starting out in single family to get a hang of it. The larger commercial multi family buildings can come over time once you get the experience and capital. The plus side to the larger multi family buildings in my opinion is having to find less deals and you get a great cash flowing asset (of course if the numbers are right) in the end. My last thought is that if you want your original investment to last longer single family will be the way to go as you're likely to get more back in the refinance.

Good luck!

Hey @Zhi Li, welcome to the BP community!

SD is one of many hothothot markets in the U.S. right now. I don't know of any lenders doing them here in Atlanta either. So, the reason lenders are not doing 203k loans right now is they don't have to. These loans are a tonnn of work (for everyone involved) and lenders get paid based on the loan value, not the amount of work they put in. So, why do a ton of work when you can do relatively little and get paid the same, if not more since most 203k loans are generally smaller than average loans. 

If it makes you feel any better, you likely won't winning any on-market contracts with a 203k loan offer right now anyways since closing is around 60 days. Your best bet would likely be to get a hard money loan for purchase. This will make your offers much more competitive and is an easier product to find right now than 203k.

BTW this advice also goes for conventional rehab loans. 

Hope this helps a bit. Please, feel free to reach out anytime if you have other questions or just want to chat!