All Forum Posts by: Brian Schmelzlen

I would ask your neighbors if they got one as well.  It could be a new investor who is simply targeting everyone in a geographic area (an expense approach).

Originally posted by @Nicholas Aiola:

@Mike Dymski In the most updated Senate bill, the proposal for taxation of pass-through income is to keep the income taxed at ordinary rates (which were modified), but offer a special 23% deduction on qualified pass-through income. This 23% deduction, however, is limited to 50% of W-2 wages or guaranteed payments paid out of the pass-through entity.

That's a problem for buy & hold investors. Why? Because usually, rental properties are held either in the name of the owner or in an LLC and, in those cases, wages are rarely paid (wages are required to be paid for S Corps, not LLCs). So, this all but eliminates that "special" deduction for buy & hold investors.

You are aware of the exception for "small investors" making less than $500,000 on their individual return, right? 

@Thurman Schweitzer

If there was no potential change in tax rates, and you are expecting your income in 2018 to be significantly higher than in 2017, yes I would take the deduction in 2018 where it would do you the most good.

However, I would wait to see if the new tax bill becomes law.  If it does the tax rates will change, so you will have to run the numbers to see what the deduction is worth to you in 2017 versus in 2018 (also factoring in time value of money- the extra value to having the tax savings a year earlier).

Are you looking for someone specifically in North County, San Diego in general, or anywhere?

I think there might be a short-term impact upon the luxury market (houses with values over $1 million), but in the long-term I don't think it will have much of an impact.  When buying a personal residence, I think the tax impact is often an afterthought for most buyers.

In terms of how the bill will affect investors; I think it will help most.  The House and Senate bills are still being reconciled, but investors should be paying a lower tax rate and may get a deduction simply for having income.  Of course in a 400+ page bill there are a number of elements, and some might be positive and some might be negative, but overall I think it will be helpful for investors.

I would consider a reverse 1031. That way you can find your replacement property first (instead of being rushed due to the strict timelines), and make sure that it is a good deal.

If you don’t have any money, it seems like your best bets would be: 1) to find a partner, 2) wholesale (it’s a job for sure, but you don’t need much cash to start out), or 3) get a job in the real estate field to learn about investing. This option pays you to learn which is a nice bonus.

Hi Rob,

From an accounting/tax perspective, it doesn't matter too much whether you purchase the property in your name or the business's name. You can make a capital contribution to the LLC of either the money to purchase the property, or the property itself after it is purchased. In this circumstance, that is a tax-free transaction.

However, as you begin operating your business you will need to have separate bank accounts for your LLC and your personal funds. Be very careful that you do not commingle funds as that can could you your limited liability protection (the main reason to form an LLC in the first place).

It sounds like you are actually looking for a CPA, not a lawyer.

For the most part, tax attorneys prefer to focus on tax controversy issues (such as dealing with the IRS and state tax agencies), and high-end planning strategies.  This is a generalization, but that has been my experience, particularly with friends of mine who I went to law school with.

CPAs focus primarily on tax compliance (tax return preparation) and tax planning, with some controversy work when it relates to tax returns they prepared.  Again, this is a generalization.

Since the advice you are looking for has to do with how to set up your business and your options for paying yourself, I would recommend using a CPA since you would want to have the person you discuss this with also prepare your tax returns.

Every firm is different, but I would avoid any firm that would charge you because it seems like they would nickel and dime you too much.