Agent Commissions, rental income& flips - help with structure?

Question

All of my income is real estate related. I make real estate commissions, I have a couple rental properties, and am about to embark on my next endeavor, a flip. I'm also looking to purchase a duplex or possibly 4plex.

Right now, both rentals are just in my personal name, with no loans on them. My real estate commissions are 1099'd to me from my brokerage.

I have an S corp that I've done absolutely nothing with other than file the correct paperwork.

So my question is this - should I quit claim the rentals into the S corp? Should I put them in their own llc?

I'm completing a mini flip right now - bought a house for 18,500, selling it for 33,500, which will leave me 15k capital to be taxed on capital gains. I don't have the time to do a 1031, as I may need the cash for a personal purchase. Should I just suck it up? Or is there a way I can avoid that? I'm so overwhelmed. Help!

Wayne Brooks · Answer

@Chelsea Ziss As mentioned, you need a cpa”s advice going forward.

But...

1) do not put the rentals in the S Corp.

2) it Could be beneficial to do your flips, depending on how much you make per year with flips, in the S Corp

3) your flip profits are not capital gains, they are ordinary income and just like your commission 1099 income, subject to 15.3% ss/med self employment tax.

John Warren · Answer

@Chelsea Ziss you desperately need an accountant to advise you. When you say all of your income is 1099 but you haven't done anything with the S corp that tells me that you need an accountant yesterday. As a fellow agent, the S corp saves me thousands and thousands of dollars every year. EVERYTHING should be run through your S corp as an agent.

As for your rentals, you should consult with an attorney for sure. I think most investors put them in an LLC, but it may not make sense based on the size of the deals, etc.

This is where your network equals your net worth. It is ok to pay for your team. I work with attorneys, CPA's, inspectors, lenders and contractors who all make a lot of money, and I am happy that they are able to make money when I work with them. In turn, they help me succeed at a high level!