Buying a property for mixed use

Buying a property for mixed use

Rental Property Investor · Phoenix · Member since 2018 · 3 posts · 0 votes

I am looking at purchasing a property that is zoned for residential and commercial, its a perfect spot to open a gift shop.  My mother will be living there and running the store, and I would be the Landlord and partner to the business.  I am trying to figure out the best pay to assemble this deal so we are maximizing our tax benefits.   Should I just be the landlord and open the gift shop in her name? Or should I put both in my name and pay her a salary as an employee?  

I picked a doozy for my first rental property!

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  • Basit SiddiqiBusiness Member
    Accountant · New York, NY · Member since 2015 · 8k+ posts · 3k+ votes
    7y

    @Julie Belton

    regarding the rental portion - You want to charge your mother market rent. Anything below market rent and the IRS can say you are not treating it as a rental and take away your deductions.

    Regarding the commercial use - I would talk with your mother in regards to how you both want to be compensated from the venture.
    If you are the owner and she is the employee; she is pretty much getting an hourly rate but doesn't benefit from the upside if the business does well. She also doesn't lose out on much if the business fails.
    I would talk with a lawyer and see how it is best to set-up the agreement.
    It is best to start the conversation now instead of later when there are disagreement over pay down the road.

  • Rental Property Investor · Phoenix · Member since 2018 · 3 posts · 0 votes
    7y

    @Basit Siddiqi Thank you so much for your advice =)

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