All Forum Posts by: Basit Siddiqi

I will agree with the other responders in this post. There are prolly some other items you want to do before needing to communicate with a CPA.

1) You should develop a real estate strategy based on your strengths - Will you be a buy and hold investor, fix and flipper or focus on short-term renting. Then you need to decide on the area that you want to invest in.
2) You should then connect with a real estate agent based on the areas to you decided to invest in.
3) you should also simultaneously connect with a lender to see how much you can qualify to borrow.

Feel free to connect with a CPA when you get close to closing. 

If you are still adamant on reaching out to a CPA; you can do the following

1) take the suggestions posted in this thread
2) Attend a local REIA event and network with the professionals in the event and ask who they use for a CPA.
3) create a keyword alert for "Los angeles" and "California" and see who frequently post on threads with these keywords. you will notice some of the same posters. network with these individuals and ask who they use for a CPA.
4) if you are still unable to connect with a CPA locally - feel free to find a CPA who works with clients remotely. There are many on this site that do so.

for your convenience - I also found other posts that requested local CPA's in Los Angeles. Feel free to visit these links for more suggestions.
https://www.biggerpockets.com/forums/51/topics/349...

https://www.biggerpockets.com/forums/51/topics/420...
https://www.biggerpockets.com/forums/12/topics/111...

In the meantime - feel free to reach out to me if you have any specific tax questions.

@Justin Garrett

Were the 2 properties that you sold investment properties?
If the 2 properties were investment properties - you may have benefited from doing a 1031 exchange instead of selling 2 properties and buying 2 properties. too late now but something to think about in the future.

For the property that you acquired with seller financing - please make sure to separate any payments going to the seller as principal and interest payments. principal payments decrease your liability with the seller while any interest payments are deductible on your tax return as interest expense.

Stay safe as you go overseas! 
Feel free to connect with me if you have any specific tax questions!

@Dave Mosher

You should not lie on a tax return in hopes of qualifying for a larger loan/mortgage. Doing so may be considered mortgage fraud.

You may want to consider being less aggressive on expenses relating to your farm business by doing things such as taking regular depreciation instead of bonus depreciation/section 179 expense if applicable.

@Ross Musil

Congratulations on your first property

You and your partner will be required to file a partnership return. The partnership return reports to the IRS and State the partnership's activity during the year. The partnership will then distribute a "K-1" to you and your partner. You will then report the information reported on this K-1 on your individual tax returns.

Whether this is a fix and Flip or rental property will make a huge difference on how the partnership will report the information on the tax return.

I normally suggest that beginners can track their expenses in Excel. However, since this is an LLC and the liability protection is afforded only if the books are kept proper - I would suggest getting a software to keep the books in order or to hire someone else to do it for you.

Let me know if you have any specific tax questions.

@Stephen Kunen

Providing substantial services to your hosts provide suggestions that you should report it as schedule C as opposed to schedule E.

Substantial services include but not limited to
Concierge, meals, housekeeping, cleaning, entertainment etc.

A pro of reporting it on schedule C is that losses are deductible and not subject to passive activity rules
A con is that income will also be subject to self-employment taxes in addition to income taxes.

@Ahmed Gheith

I am not an attorney but I don't see why they want their investment to be secured by the underlying property. They ultimately own the underlying property indirectly through the investment vehicle
A, B, C, D, E form Partnership ABCDE. Partnership ABCDE buys Property 123 street. Partners A, B, C, D, E indirectly own Property 123 Street.

If you are interested in networking with realtors, wholesalers and RE lawyers - try to attend local real estate networking events in NYC.
You can find them through the events section of biggerpockets or on meetup.com

https://www.biggerpockets.com/forums/521-events-an...

the link above will showcase 10 networking events in the area that are happening soon.

You may also want to speak to a portfolio/commercial lender. even though you have partners with alot of cash - some lenders might be hesitant in lending because you don't have a track record(or at least it doesn't appear so).

@Ali Qudsi
Unless you are some not-for-profit organization - you will be required to pay property taxes.
There are some instances that you buy a newly developed land/building and the county strikes a deal with you that you won't have to pay property taxes for X years but will ultimately have to pay them once the period is over.

You can decrease your taxable income related to rental properties with depreciation. Depreciation is a non-cash expense so it will allow you to cash-flow but show little to no income on your tax return.

Hello BP Members,

Tax season is approaching! I am here to help with everyone's tax needs!

Buy and Hold Investors
Basic 1040 with 1 W-2 = $200
Add Schedule E for 1 property = $75
Add State Return = $100

Flippers
Basic 1040 with 1 W-2 = $200
Schedule C with 1 Flip = $125
Add State Return = $100

I also provide bookkeeping services so please inquire.

The above pricing includes access to my personal email address and telephone number.
I am also here to provide advice year round for free.

I am a CPA based out of New York. I specialize in working with real estate investors, flippers and airbnb'ers
I work remotely with clients through email, phone, and skype.

Please add me to your team!

Thanks,

Basit

@Michael Gessner 
In regards to taxable income/deduction perspective - I am not sure if it makes a difference if you keep the the fix and flip business and contractor business separate or as one entity.

Example 1(combined) - 
You purchase a property for $40,000 where you pay $10,000 for supplies and sell for $100,000. Your ordinary income in this case is $50,000

Example 2 (Separate)
You purchase a property for $40,000 and pay your contractor business $20,000 for supplies and labor and sell it for $100,000. The fix and flip business would report $40,000 of ordinary income.
Your contractor business would report $10,000 of ordinary income($20,000 of income less $10,000 for supplies).
Total combined income of $50,000.

you brought up a good point with the licenses. Contractors need licenses and to be properly bonded(depending on state). If you have one company already bonded and licensed...it may be a hassle to get another company licensed and bonded.

I think the important thing is to keep the business that generate ordinary and rental income separate.

@Joe Maynard

Welcome to Biggerpockets!

I was also raised in Brooklyn. I am proud to say that I lived in Brooklyn for 30 years. I definitely know what you mean when you say that the area has transformed drastically over the years!

It seems like you are doing all the correct things new investors should be doing.
1) Read books
2) Listen to BP Podcasts
3) Engage in the forums

I would encourage you to come out to a real estate networking event. You can find them either through the events section of biggerpockets or on meetup.com
Here are just a couple of the following meetups happening in the near future in NYC

https://www.biggerpockets.com/forums/521-events-an...

Have you decided in an area that you want to invest in?
With the high prices in NYC - you may need to look to out of state investing or upstate New York for a lower entry point.