Reinvesting in the business (How to structure paying self)

OP

Real Estate Investor · Memphis, TN · Member since 2016 · 423 posts · 141 votes

Quote from @Michael Plaks:

The only justification for going to 10X is to snap a selfie with Uncle G and post it on Insta to "keep up" with your buddies. Otherwise a total waste of time and money.

Likewise entities, "building my team", "setting everything up correctly" and all that other fluff that benefits only people who set it up for you.

Drop trying to "think like a businessman", "reinvest in your business", "level up" etc - the fewer empty words you pollute your brain with, the clearer is your thinking.

Now, off of my weekend soap box.

The simpler your setup, the better:
- Since you already have an LLC, keep using it. One is enough.
- Wholesaling and flipping (which is what you mean by "building", I assume) in the same LLC
- Pay all business out of business, pay all personal out of personal. Transfer money between business and personal infrequently and in round numbers.
- Once it looks like you are going to clear $50k for the year - after everything is deducted! - then get with an accountant and discuss whether it makes sense to convert your LLC to an S-corp. But don't do it too early.
- Spend your time and energy on getting deals, not on imitating podcast hosts.

Good luck.

Side note:I got a photo with Tom Cummings, Prolly the only real value I gained with 7-8k invested in education that year. His story was, he failed in business 2 times and figured it out on the 3rd go around. 3billion later i got to take a picture with him.

Since then I havent went to another training, course or weekend event. only working to unpack the information that I picked up to be useful so definitely no argument there.

Thanks for the clarity.

Michael PlaksPro Member

Tax Accountant / Enrolled Agent · Houston, TX · Member since 2014 · 5k+ posts · 6k+ votes

I also failed 2 times. You can have a picture with me anytime, for FREE. :)
Travel to Houston is on you though.

5 Reply

OP

Real Estate Investor · Memphis, TN · Member since 2016 · 423 posts · 141 votes

Quote from @Michael Plaks:

I also failed 2 times. You can have a picture with me anytime, for FREE. :)
Travel to Houston is on you though.

lol!!! If I’m ever in Houston I’ll definitely buy lunch.

how is your journey now?

Josh Fugle

Investor · Dayton, OH · Member since 2020 · 15 posts · 11 votes

@Michael Plaks

Thanks for being real. I’ll take that picture opportunity too!

Dti ratio for helocs and being too “new” are my problems. Finding MFs that work great but can’t get the downpayment is frustrating as ever. Any advice for that would be appreciated

Michael PlaksPro Member

Tax Accountant / Enrolled Agent · Houston, TX · Member since 2014 · 5k+ posts · 6k+ votes

Quote from @Josh Fugle:

Dti ratio for helocs and being too “new” are my problems. Finding MFs that work great but can’t get the downpayment is frustrating as ever. Any advice for that would be appreciated

The only advice is to stay away from MFs. And I don't mean multi-family. ;)

BiggerPockets has a great Creative Financing forum.
https://www.biggerpockets.com/forums/50

Basit SiddiqiBusiness Member

Accountant · New York, NY · Member since 2015 · 8k+ posts · 3k+ votes

Quote from @Michael Plaks:

[email protected]917-280-8544

Drop trying to "think like a businessman", "reinvest in your business", "level up" etc - the fewer empty words you pollute your brain with, the clearer is your thinking.

Solid advice - I think a lot of people try to make investing more complicated than it needs to be with uncessary jargon.
Examine how you acquired property #1 and property #2
See if there is anything that you can do to acquire more properties faster.

Basit Siddiqi CPA4.979 Reviews

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3 Reply

Nina Hill

Member since 2024 · 1 post · 2 votes

Quote from @Michael Plaks:

I also failed 2 times. You can have a picture with me anytime, for FREE. :)
Travel to Houston is on you though.

I want a picture! Just got my white belt stripe yesterday so a picture with a black belt coach would be an honor!

OP

Real Estate Investor · Memphis, TN · Member since 2016 · 423 posts · 141 votes

Quote from @Basit Siddiqi:

Quote from @Michael Plaks:

Drop trying to "think like a businessman", "reinvest in your business", "level up" etc - the fewer empty words you pollute your brain with, the clearer is your thinking

Solid advice - I think a lot of people try to make investing more complicated than it needs to be with uncessary jargon.
Examine how you acquired property #1 and property #2
See if there is anything that you can do to acquire more properties faster.

I will hold to the 50K or more ideal, but I have some considerations to be made for limiting income under a particular amount. Secondly acquiring land for building isnt the much of a problem. Not having experience in new construction, the leader says I would need to partner with a builder. Because of that, the first layer of complexity could be beneficial due to an exit of 100-160k.

Tim DelaneyPro Member

Buffalo, NY · Member since 2018 · 790 posts · 530 votes

Podcast Guest on Show How to Buy Yourself a 6-Figure Income Stream

Quote from @Jamie Parker:

In my first stint in real estate, I thought reinvesting in the business was keeping the marketing engine running. At the time I was running on direct mail. I thought reinvesting in the business was partially investing in education. I justified going to the 10X Growth Con in 2017 and a couple local investor seminars. Only thing I got out of those events were I didn't understand how to get to the next level (no fault of the events, I take responsibility of my on inability to make the connections in the content). Taking notes and asking questions only got me deeper in the weeds as if I was asking the wrong question.

After purchasing my first property last year, I have resumed cold calling after purchasing a second property this year. Closed my first wholesale deal in 5 years. But now, I am more concerned with entity structure. I wholesale in LLC #1, and the 2 properties i purchased is in my name currently.

The big question for me: When I start to build, should the properties be held in an entity? I will need to partner with a builder to get financing. Secondly, should Building LLC be separate from Wholesaling LLC(currently being used for wholesaling). Who should I or do i talk to about getting things more compartmentalized. I recently ordered a survey on the two lots I own, and realized that I may be approaching this the wrong way.

For clarity, as i understand the concept of reinvesting in the business, each "Bucket" should eventually fund itself without the need for cash injections or contributions. Where or when is the point should I consider this or can just start out at any point?

Any thoughts?

Congrats on getting a few deals done! Paying to get in the right rooms can be game changing, but as you acknowledged you have to take it on yourself to make it worth your while.

As for your question, it was pretty confusing. Your title and last paragraph seem to be asking about reinvesting in your business while a lot of the middle is more of entity structure. I think as @Michael Plaks mentioned I think you need to clear your head and just focus on deals right now.

As for entities, I use one entity for active business (flipping and building) and others for holding rentals. The active business is taxed as an Corp, the others are LLCs. You'll want to discuss those options with a real estate focused accountant for your personal situation. You can also read Amanda Han and Matt McFarland's books that are available in the BP Bookstore.

As for reinvesting in your business - it really depends on your goals. If you have the other income and can afford to keep rolling your RE profits and additional money into growing your RE empire for the long term then there is no rule saying that you shouldn't or can't do that. You can also take the profit first approach and make sure you are taking profit out of your real estate on a regular basis to do with as you'd like. Those decisions are really yours to make and are dependent on your goals.

Hope that helps!

OP

Real Estate Investor · Memphis, TN · Member since 2016 · 423 posts · 141 votes

Quote from @Tim Delaney:

Quote from @Jamie Parker:

In my first stint in real estate, I thought reinvesting in the business was keeping the marketing engine running. At the time I was running on direct mail. I thought reinvesting in the business was partially investing in education. I justified going to the 10X Growth Con in 2017 and a couple local investor seminars. Only thing I got out of those events were I didn't understand how to get to the next level (no fault of the events, I take responsibility of my on inability to make the connections in the content). Taking notes and asking questions only got me deeper in the weeds as if I was asking the wrong question.

After purchasing my first property last year, I have resumed cold calling after purchasing a second property this year. Closed my first wholesale deal in 5 years. But now, I am more concerned with entity structure. I wholesale in LLC #1, and the 2 properties i purchased is in my name currently.

The big question for me: When I start to build, should the properties be held in an entity? I will need to partner with a builder to get financing. Secondly, should Building LLC be separate from Wholesaling LLC(currently being used for wholesaling). Who should I or do i talk to about getting things more compartmentalized. I recently ordered a survey on the two lots I own, and realized that I may be approaching this the wrong way.

For clarity, as i understand the concept of reinvesting in the business, each "Bucket" should eventually fund itself without the need for cash injections or contributions. Where or when is the point should I consider this or can just start out at any point?

Any thoughts?

Thanks for your reply, but also my apologies for the lack of clarity. In my first stent in real estate, I would make a withdrawal from my account, or spend out of it. Not going over a predetermined amount. However, I want to do things different. I think the technical term is distribution.

Do I write the LLC a W-9 and write a check from the LLC into a personal account for tracking purposes? The rule I plan to enact is paying myself 10% of the revenue generated from wholesaling quarterly. Since starting up, I am personally funding the marketing and lists. At this point I have not done anything yet in terms of distributions. This year, Unless I hit my goal i do not plan on taking distributions, this will be how next will start for simplicity.

My ideal is to have a system or a standard in place to maintain discipline about procedures. That way I am rewarded but not using the business account as a piggy bank.

Sean O'KeefePro Member

CPA | Accepting new clients | 50 States · Member since 2022 · 1k+ posts · 871 votes

[email protected]628-241-0888

Quote from @Jamie Parker:

Quote from @Tim Delaney:

Quote from @Jamie Parker:

In my first stint in real estate, I thought reinvesting in the business was keeping the marketing engine running. At the time I was running on direct mail. I thought reinvesting in the business was partially investing in education. I justified going to the 10X Growth Con in 2017 and a couple local investor seminars. Only thing I got out of those events were I didn't understand how to get to the next level (no fault of the events, I take responsibility of my on inability to make the connections in the content). Taking notes and asking questions only got me deeper in the weeds as if I was asking the wrong question.

After purchasing my first property last year, I have resumed cold calling after purchasing a second property this year. Closed my first wholesale deal in 5 years. But now, I am more concerned with entity structure. I wholesale in LLC #1, and the 2 properties i purchased is in my name currently.

The big question for me: When I start to build, should the properties be held in an entity? I will need to partner with a builder to get financing. Secondly, should Building LLC be separate from Wholesaling LLC(currently being used for wholesaling). Who should I or do i talk to about getting things more compartmentalized. I recently ordered a survey on the two lots I own, and realized that I may be approaching this the wrong way.

For clarity, as i understand the concept of reinvesting in the business, each "Bucket" should eventually fund itself without the need for cash injections or contributions. Where or when is the point should I consider this or can just start out at any point?

Any thoughts?

Thanks for your reply, but also my apologies for the lack of clarity. In my first stent in real estate, I would make a withdrawal from my account, or spend out of it. Not going over a predetermined amount. However, I want to do things different. I think the technical term is distribution.

Do I write the LLC a W-9 and write a check from the LLC into a personal account for tracking purposes? The rule I plan to enact is paying myself 10% of the revenue generated from wholesaling quarterly. Since starting up, I am personally funding the marketing and lists. At this point I have not done anything yet in terms of distributions. This year, Unless I hit my goal i do not plan on taking distributions, this will be how next will start for simplicity.

My ideal is to have a system or a standard in place to maintain discipline about procedures. That way I am rewarded but not using the business account as a piggy bank.

Generally, Distributions are paid from profits that have already been taxed at the personal-level since IRS Schedule K-1 flows through to personal return. As a result, you don't need a W-9 for yourself, you're a Partner, and you don't need to issue a 1099. Distribution for Partners are track on the IRS Schedule K-1 in the Partner’s Capital Account Analysis section. You can wire the distribution, pay it by check, etc. The method of payment doesn't really matter - what's important is that it is tracked in Schedule K-1 and reported to IRS.
.
.
.

*This post does not create a CPA-client relationship. The information contained in this post is not to be relied upon. Readers are advised to seek professional advice.

OP

Real Estate Investor · Memphis, TN · Member since 2016 · 423 posts · 141 votes

Quote from @Sean O'Keefe:

Quote from @Jamie Parker:

Quote from @Tim Delaney:

Quote from @Jamie Parker:

In my first stint in real estate, I thought reinvesting in the business was keeping the marketing engine running. At the time I was running on direct mail. I thought reinvesting in the business was partially investing in education. I justified going to the 10X Growth Con in 2017 and a couple local investor seminars. Only thing I got out of those events were I didn't understand how to get to the next level (no fault of the events, I take responsibility of my on inability to make the connections in the content). Taking notes and asking questions only got me deeper in the weeds as if I was asking the wrong question.

After purchasing my first property last year, I have resumed cold calling after purchasing a second property this year. Closed my first wholesale deal in 5 years. But now, I am more concerned with entity structure. I wholesale in LLC #1, and the 2 properties i purchased is in my name currently.

The big question for me: When I start to build, should the properties be held in an entity? I will need to partner with a builder to get financing. Secondly, should Building LLC be separate from Wholesaling LLC(currently being used for wholesaling). Who should I or do i talk to about getting things more compartmentalized. I recently ordered a survey on the two lots I own, and realized that I may be approaching this the wrong way.

For clarity, as i understand the concept of reinvesting in the business, each "Bucket" should eventually fund itself without the need for cash injections or contributions. Where or when is the point should I consider this or can just start out at any point?

Any thoughts?

Thanks for your reply, but also my apologies for the lack of clarity. In my first stent in real estate, I would make a withdrawal from my account, or spend out of it. Not going over a predetermined amount. However, I want to do things different. I think the technical term is distribution.

Do I write the LLC a W-9 and write a check from the LLC into a personal account for tracking purposes? The rule I plan to enact is paying myself 10% of the revenue generated from wholesaling quarterly. Since starting up, I am personally funding the marketing and lists. At this point I have not done anything yet in terms of distributions. This year, Unless I hit my goal i do not plan on taking distributions, this will be how next will start for simplicity.

My ideal is to have a system or a standard in place to maintain discipline about procedures. That way I am rewarded but not using the business account as a piggy bank.

Generally, Distributions are paid from profits that have already been taxed at the personal-level since IRS Schedule K-1 flows through to personal return. As a result, you don't need a W-9 for yourself, you're a Partner, and you don't need to issue a 1099. Distribution for Partners are track on the IRS Schedule K-1 in the Partner’s Capital Account Analysis section. You can wire the distribution, pay it by check, etc. The method of payment doesn't really matter - what's important is that it is tracked in Schedule K-1 and reported to IRS.
.
.
.

*This post does not create a CPA-client relationship. The information contained in this post is not to be relied upon. Readers are advised to seek professional advice.

Ill take that I am thinking too deep about this. To all the comments thanks for letting me know, "stick to getting deals done". Ill just do that and stop trying to do what the guys on LinkedIn are doing. Thanks to all.

Tim DelaneyPro Member

Buffalo, NY · Member since 2018 · 790 posts · 530 votes

Podcast Guest on Show How to Buy Yourself a 6-Figure Income Stream

Quote from @Jamie Parker:

Quote from @Tim Delaney:

Quote from @Jamie Parker:

In my first stint in real estate, I thought reinvesting in the business was keeping the marketing engine running. At the time I was running on direct mail. I thought reinvesting in the business was partially investing in education. I justified going to the 10X Growth Con in 2017 and a couple local investor seminars. Only thing I got out of those events were I didn't understand how to get to the next level (no fault of the events, I take responsibility of my on inability to make the connections in the content). Taking notes and asking questions only got me deeper in the weeds as if I was asking the wrong question.

After purchasing my first property last year, I have resumed cold calling after purchasing a second property this year. Closed my first wholesale deal in 5 years. But now, I am more concerned with entity structure. I wholesale in LLC #1, and the 2 properties i purchased is in my name currently.

The big question for me: When I start to build, should the properties be held in an entity? I will need to partner with a builder to get financing. Secondly, should Building LLC be separate from Wholesaling LLC(currently being used for wholesaling). Who should I or do i talk to about getting things more compartmentalized. I recently ordered a survey on the two lots I own, and realized that I may be approaching this the wrong way.

For clarity, as i understand the concept of reinvesting in the business, each "Bucket" should eventually fund itself without the need for cash injections or contributions. Where or when is the point should I consider this or can just start out at any point?

Any thoughts?

Thanks for your reply, but also my apologies for the lack of clarity. In my first stent in real estate, I would make a withdrawal from my account, or spend out of it. Not going over a predetermined amount. However, I want to do things different. I think the technical term is distribution.

Do I write the LLC a W-9 and write a check from the LLC into a personal account for tracking purposes? The rule I plan to enact is paying myself 10% of the revenue generated from wholesaling quarterly. Since starting up, I am personally funding the marketing and lists. At this point I have not done anything yet in terms of distributions. This year, Unless I hit my goal i do not plan on taking distributions, this will be how next will start for simplicity.

My ideal is to have a system or a standard in place to maintain discipline about procedures. That way I am rewarded but not using the business account as a piggy bank.

You don’t need a w-9 if you are the owner from my understanding. And having a system of distributions is a great idea. You may want to consider taking a percentage of Profits though instead of Revenue.

Tanarat Bunchom

Lender · Dallas, TX · Member since 2024 · 50 posts · 24 votes

Hello Jamie! You’re on the right track—setting up separate LLCs for wholesaling and building can simplify things and offer liability protection, plus putting properties in their own LLCs keeps assets safer as you grow. Aiming for each part of the business to eventually fund itself is a solid plan, and a real estate CPA or attorney could help fine-tune everything for taxes and structure. Congrats on all the progress!

OP

Real Estate Investor · Memphis, TN · Member since 2016 · 423 posts · 141 votes

Quote from @Tanarat Bunchom:

Hello Jamie! You’re on the right track—setting up separate LLCs for wholesaling and building can simplify things and offer liability protection, plus putting properties in their own LLCs keeps assets safer as you grow. Aiming for each part of the business to eventually fund itself is a solid plan, and a real estate CPA or attorney could help fine-tune everything for taxes and structure. Congrats on all the progress!

Thanks you for the contribution to the discussion. While I am focusing on deals remaining consolidated to 1 llc makes sense. However, once i hit my goal and preparing to break ground on new construction, having a plan seems to help me better than shooting from the hip. I did that once and it didnt work out to well. Thank you again.

Max Emory

Accountant · 100% Remote · Member since 2019 · 497 posts · 216 votes

Quote from @Michael Plaks:

The only justification for going to 10X is to snap a selfie with Uncle G and post it on Insta to "keep up" with your buddies. Otherwise a total waste of time and money.

Likewise entities, "building my team", "setting everything up correctly" and all that other fluff that benefits only people who set it up for you.

Drop trying to "think like a businessman", "reinvest in your business", "level up" etc - the fewer empty words you pollute your brain with, the clearer is your thinking.

Now, off of my weekend soap box.

The simpler your setup, the better:
- Since you already have an LLC, keep using it. One is enough.
- Wholesaling and flipping (which is what you mean by "building", I assume) in the same LLC
- Pay all business out of business, pay all personal out of personal. Transfer money between business and personal infrequently and in round numbers.
- Once it looks like you are going to clear $50k for the year - after everything is deducted! - then get with an accountant and discuss whether it makes sense to convert your LLC to an S-corp. But don't do it too early.
- Spend your time and energy on getting deals, not on imitating podcast hosts.

Good luck.

Always love reading your posts haha. So real and clear. No fluff. Some humor sprinkled in. Amazing.

@Jamie Parker, most of what you'll see in the education space of REI/business is fluff and designed to take your money. Once you've done a little educating through a $10 book and some free podcasts (the good ones), the main driver of your success is consistent daily action. That's it. The work has to get done. Not 2-hour morning routines or more education/inspiration/motivation/etc. It's just volume of work.

And, keep everything as simple as possible.

For cash flow management, I recommend Profit First. I use it for my 3 businesses and it works like a charm. Super simple and effective.

Hope it helps!