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Kennessey Foote
  • Panhandle, FL
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Advice Needed - Trusts, Companies and Income

Kennessey Foote
  • Panhandle, FL
Posted Nov 16 2018, 15:50

Hi Bigger Pockets team,

I am looking for some advice on the business 'back-end' for my investments. I would like to lay out how it currently stands and see what more experienced investors would do in my situation.

My father owns 12 rental properties, they are all in a family trust. 3 are managed by a property manager, the rest I manage for a small salary. I am in the process of making sure they all cashflow, divesting out of Oregon and into Florida where the ROI is higher.

My partner and I own 1 rental which pays the mortgage payment and will cashflow next year. We have flipped one single family and intend to do another before moving into multi-family. 

I have only just moved back to the US and so have spent most of this year trying to build credit (before October this year I didn't have a credit score). Therefore the loan above is in my fathers name. Next year I would like to refinance so that the loan will be in my name, building my credit. 

My goal is to merge the trust properties and our 'flipping' into one. By selling two houses in Oregon we can afford to buy 3/4 cheaper houses and use the BRRR strategy.

My biggest questions are:

  1. Should the 12 rentals continue to be kept under a trust?
  2. Should there be a separate company for the 'flipping or renovating business' i.e the flipping business is gifted the money by the trust, does the renovating and then sells the property back to the trust which turns around and refinances (BRRR strategy) OR should they be one company?
  3. How I should be paying myself from my investing? These are my current income streams however for many reasons I feel like they could be simplified and/or made legitimate.
    1. My 'income' from the managing of rental properties however because there is no company it's really a 'gift' from the trust so in the eyes of lenders it is not actually viewed as income (nor is it really enough to qualify for a loan). 
    2. An hourly rate paid for getting the trusts rentals ready for sale - although I'm not a contractor so I don't get any W2s. I essentially pay myself for my own time.
    3. Capital gains from flips.

Any suggestions on the situation would be helpful. All properties are cash flowing and we feel we have a good understanding of the fundamentals of flipping and BRRR however it is the messy back end of that is costing us time and money. I will talk to professionals like a CPA about putting any systems in place, I just wanted to reach out here first to see what ideas people had.

Thank you in advance.

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