All Forum Posts by: Matt R.

This doesn't make a lot of sense to me.

If the desire is to load up a retirement plan your LLC will still pay SS tax, employment tax, etc. etc. (as Jeff pointed out). Wouldn't it be more efficient to take the original pot of money and stash it away in a 'plain' investment account ?
I haven't cranked the numbers but the benefit of tax-deferred compounding on that account would have to overcome all the taxes you'd be paying today.

If the desire is to fund your future selfs with the money you have today, why not re-invest in the business and have a larger, more profitable company tomorrow ?

If the desire is for her to have spending money, then she'll just take it out of your pocket. No extra steps and no extra taxes paid to anyone.

Although it is very entertaining, I agree it's so extreme that it's ridiculous.

The key point is not to allow previous owners to remain in YOUR house after you buy - simple, common sense advice.

This, this is just too over the top to be believable. I'm very impressed at how well the BP community responded to the goading but it has little long term value.
Make it go away.

Agreed, I don't see an accounting issue.

But if your employee loses his job, will it be clear that the tenant relationship is distinct and separate. As Mitch points out, that could get messy real quick.
Is there any reason not to set things up as two separate transactions ?
Employee - pay him/her
Tenant - receive rent

OK, some dollars make a round trip and it seems a little silly. But if things go bad later, having separate transactions makes it easy to distinguish and deal with each item separately.

Hi Becky,
you might want to double check on that - I think you have to have a named (real) person as well as an address.
You're dealing with Guv'ment folks who can pull the rug from under you, and who will apply all the rules. You don't want to lose the benefit of LLC protection by being too cheap.

Hi Becky,
although I live in California, I have property in Texas.
So, I set up an LLC in Texas and that requires a 'local' agent (ie in Texas).
The lawyer that I worked with for general advice and for setting up my LCC agreed to be my named agent. That would usually cost me a little extra per year for that, but since I also pay him for advice through the year I haven't seen a bill for the 'being an agent' job.
All that provides is a Texas address for official notification of paperwork etc. and what he does is just forward it to me at my 'real' address. So it's not a major task, even for friends and family to do.

Hi Joey,
read EVERYTHING you can on the BP categories related to landlording. It's a goldmine of great information.

treat all applicants the same
have everything written down, so have your application cover everything you need to know
look for approx 3X income to rent
independently verify all the information for those who seem like good candidates

Don't rush to get a body into your property because you fear losing a month of rent. The aggrevation of a bad tenant costs way more than a couple of months rent.
There's plenty of good tenants out there, be patient and get a good one.

Hi John,
for what it's worth - this is the only time I would spend money for someone with real knowledge to provide the details.
If it's done wrong you've got the IRS on your tail and the results can be very messy.
If something is clearly explained so you fully understand how it works, go for it. But I think this is more than you really need.
You mentioned in other posts that you have only 1 or 2 properties - so the taxation or asset coverage is not significant enough to really worry about. Once you get to the point of having several properties, personal assets that are substantial - pay someone for solid advice.
Note : It's a business expense !

Not to disagree with Charles, but (pedantically) it's not having high net worth that limits you - it's having income of more than $150k per year.
Real Estate professionals don't have that limit but...
you need to work at least 750 hours at it AND it needs to be your largest portion of work.
(If I wanted to claim this method I'd have to spend more hours on real estate than my 9-5 job. So, I'd have to spend 40 hours a week doing real estate to qualify 8^(

..additional point, make sure it's clear (ie in writing) that they are both liable for the WHOLE rent - not just 'their'half.
So, treat them exactly like two room-mates.

Hi,
I think a lot of your questions would be answered by having a good lease agreement in place. There's no hard and fast rules - you can have any dates and conditions you want.
Having said that

start fresh, start strong (new management, I'm just the guy doing what The Man tells me) and put the new agreement in place as soon as you can. You inherent the current lease agreement - including the verbal agreements. So get the current landlord to write them down, and get the existing tenant to sign that he agrees that what the current arrangement is. Don't wait until later when your renter suddenly remembers that the old landlord gave him every December as 'rent free' month.

Separate the maintenance from the rent to make it easier to know who's responsible for what. If your current renter wants to do the job for $100 credit onto his bill no problem. But treat it as a separate, written agreement. Are you sure you understand what he's supposed to do in Fall or Winter - or does he just stay indoors and does zero maintenance ?

Make it clear that the rent is due on the first and is late by the 3rd. This is just changing the timing so shouldn't impact the current renter. (There's a new sheriff in charge, remember.)

Next, boil the frog slowly ! Fifty bucks a month extra is nice, if he stays. But a relatively big jump can make him think about leaving. Having a vacancy for a month or two can seriously dent your cash flow so boil him slowly.
IF (big IF) you want to raise the rent and keep the existing guy then raise the rent by a small increment each year.

Summary : It's a business so make it clear from the start the you're running a fair, helpful - but rules are rules - business.