Starting an RE investment business looking for guidance

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Starting an RE investment business looking for guidance

Justin Sellers
Atlanta, GA · Member since 2018 · 4 posts · 0 votes

Hello,

I am new here and looking for any advice you could share with me on how to start up a full scale RE investment business. I have a business partner and to begin, we are looking to flip houses in the Dallas, TX market. We have the lender and a way to locate local deals BUT want to make sure we are doing this the right way in setting up a legitimate company, so I have a few questions that I was hoping someone here could help with.

  1. -When setting up the company, should we just set up a general partnership OR an LLC S-corp designation (again, we will be beginning with flipping homes but while we await the capital back from our first project, I was looking to jump into a "buy subject-to" strategy as well that we will be marketing out for deals)
  2. -Which PM software is the most cost efficient?
  3. -I assume Quickbooks would be a good place to start for accounting purposes OR should I consult with a CPA?

I am sure these are elementary questions but just want to be sure we are doing this the right way to save headaches down the road. Also, any additional advice is welcomed and appreciated and thank you in advance.

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  • Jonathan GreeneBusiness Member
    Real Estate Consultant · Madison, NJ · Member since 2016 · 6k+ posts · 7k+ votes
    6y

    I always do LLCs, they provide the most protection for what you are doing. If you want to get regular loans as the LLC though you will need 2 years of tax returns. You don't need PM software any time soon unless you have the capital to buy a lot right away, which it did not sound like it. Quickbooks or Freshbooks is fine in the beginning as long as you keep track of everything.

    Do either of you have a background in flipping and prospecting for off-market deals?

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  • Justin Sellers
    OP
    Atlanta, GA · Member since 2018 · 4 posts · 0 votes
    6y

    Thanks for the reply Jonathan! LLC is what I was thinking as well based on the protections it provides, but also wanted to make sure I understood the tax implications going this route. I understand you are not a tax expert, but any understanding you could provide to confirm my understanding would be helpful. For instance, how the profits are taxed/passed thru would be great. Should not need any regular loans, as we have a private lender in place and will use our own capital for the buy subject-to strategy. I have some experience in flipping but again, not an expert by any means. Glad to have joined this site to bounce ideas off of, so thank you again for your time!

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  • Jake HottenrottPro Member
    CPA · Belleville, IL · Member since 2014 · 255 posts · 269 votes
    6y

    @Justin Sellers - It sounds like you've got a good start to your real estate investing with the partner, marketing and lender already set up.

    I'd recommend a conversation with an attorney and a CPA in order to figure out the best entity structure for you.  It sounds like not only will you have a lot going on but that you may have multiple real estate strategies in play as well.

    As far as the accounting system, the best system is one that you will use.  Whether that is paying someone to set it up so you can use it in the day to day or hiring someone to do it so you review the reports.  Quickbooks will typically be a good starting software as well.

    I hope that helps and keep up updated on your projects!

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  • Justin Sellers
    OP
    Atlanta, GA · Member since 2018 · 4 posts · 0 votes
    6y

    Thanks @Jake Hottenrott

    I have spent a good amount of time with this and feel we do have a good start, but always like to get a second opinion to confirm my findings to make sure my understanding is 100% accurate.  I think that is where most mistakes are made in RE investing by not taking the time to do your homework and then reconfirming.

    I think you are right though, in that I do need to consult with a professional about the structure that makes the most sense for me and my partner.  

    I am sure you will see me ask a million questions on here though and look forward to any future input you can provide!

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