Putting a Business Together AFTER that Great Deal...
Before unloading my barrel of questions, let me get you all up to speed with what we've done so far...
My story begins many moons ago, but I'll skip ahead to the key points. My husband and I bought an ugly townhouse at the edge of a seedy part of Longmont, Colorado in 2013, just after I quit my "big girl" job to finish my degree in Construction Management at CSU. After graduating last May and countless all-nighters spent renovating the property, it was time to list it!
Our neighbors thought we were crazy when they saw our asking price, but because it wasn't just another bland, beige flip, we got exactly what we asked for, nearly double the original sale price. Wanting to capitalize on our profits, we bought a vintage Airstream to live in while we searched for the "right deal" in the midst of the insanity of Colorado's front range real estate market. After two months of searching we finally found our deal!
In September, we bought a house in Lakewood with a decent sized lot for the Airstream and a coach house above the garage! With my husband working as a property manager and my particular set of skills, we had always envisioned ourselves owning rental properties, but figured we would have to do several flips before we would have the capital to do so. Now, after one deal, we have a rental apartment and also plan on renting out our vintage airstream once it's been fully restored.
The only dilemma is we didn't plan for this to happen so quickly. While this is a good problem to have, we now need to backpedal and formalize our business. We have a tenant moving into the coach house in 6 weeks and renovations are well under way, so I'm somewhat scrambling to get things in order.
My vision for our business is to have several entities all working together. Either myself or my husband will eventually get our real estate license to buy and sell properties. We would have an entity responsible for acquiring distressed properties and selling them once they have been renovated, another entity responsible for overseeing and performing the renovations, and another to manage the properties we are holding on to. I can also see us eventually managing renovations and properties for others, once we've established a strong reputation. This myriad of services would allow us to use our various talents to be flexible in such a risky, fluctuating market.
Now, to my questions for all of you much more prepared investors out there...
Obviously we are a long ways from our end goal, but seeing how quickly we jumped to the next step already, I want to make decisions with our end goal in mind. That being said, I plan to form an S Corp now, but I'm not sure if I should form it for our renovation entity, our property management entity or both, since we will have expenses for both this year. Or should we just form a blanket corporation (or group) to encompass all of these aspects until we've grown large enough to split into the various entities?
Also, how can I claim expenses prior to the time the corporation was formed? If there is no way, should I wait to form the corporation at the beginning of next year and just claim the expenses on my personal taxes?
We were planning on renting the Airstream as a vacation rental, but I read vacation rentals can be taxed at a much higher rate. Should we look into doing short term leases instead? Additionally, since we've had some expenses for the trailer this year, can we claim those expenses if we don't get the restoration finished in time to rent it out this year or do we need to try and get it finished to rent it out for at least a night or two this year? Are there any other pitfalls we should worry about specifically pertaining to renting out a travel trailer on our property?
I have a million other questions, but mainly, I'm trying to figure out the basic framework of where I should put my car, now that I already have my horse! Any and all advice/feedback is both welcome and appreciated!
Cheers!!