All Forum Posts by: Costin I.

One of our rentals in Converse, TX (a suburb of San Antonio) become vacant and we need assistance with showing it to prospective tenants. At this time we don't need property management, just a trusted resource to show the property - we will do initial screening prior and handle the applications after. This will require one hour a week at the property. Please let me know if you have any recommendations/referrals. Thanks.

The purpose of this meetup is to promote financial relationships between private lenders and borrowers by networking and education. Anyone interested in Relationship Lending is welcome at this meetup. Whether you want to lend private money or borrow private money, or just learn about the process, please come build connections with others who share the same interest. Many of our members are interested in real estate, others have a variety of investments. Some of our group have self-directed IRAs, 401Ks or other trusts. Some simply have investment accounts. All share an interest in improving their financial lives through personal relationship lending or borrowing.

@Quest IRA, Inc - 100 E Anderson Ln #100 - Austin, Texas 78752 every 1st Thu of the month @ 6:30pm

The W2-RE Investing is here to provide networking and information for those who are looking to get into the world of Real Estate Investing as well as a place for networking and sharing with more seasoned real estate investors looking to partner or just discuss the local North Austin real estate scene.

We are NOT about pitch-fests where you are being asked to buy into some new Guru's video training series and classes - this is not the TV Reality Show version, but the real life version, with the good, the bad and the ugly of real estate investing, investment properties and property management. This is the Tortoise story, the slow and steady investing and wealth generation, and not about the get rich quick schemes, one time lucky deal, or replacing a W2 job with another job (flipping). We ARE about networking, sharing ideas and learning from each other.

We look forward to networking with you soon at the next meetup! Meet fellow investors who are dealing with the same issues you are. Come with an open mind and be prepared to learn!

See you soon! Bring a friend and don't forget to RSVP!

@Quest IRA, Inc - 100 E Anderson Ln #100 - Austin, Texas 78752 6:30pm

@Rocky Gibson Your question is not a "quick question" whatsoever. Nobody is going to go through all that posted and try to figure out what answer you are looking for. Simplify your post and questions. Divide and conquer.

@David Shiling - make sure you need that level of protection prior to complicating your life with implementing and maintaing (!) such legal structures and expenses. The mortgage note itself is a form of asset protection.

My 2¢ only. Talk with a specialist, like @Scott Smith if you are convinced you need it.

@Dennis M. - that is very bad advice and grossly mistaken. Land trusts do NOT offer any liability protection (@Daniel Smyth, @Account Closed). Trusts are a form of ownership allowing control of the asset while providing a layer of anonymity/privacy (that's why they are used and recommended). They are usually paired with an LLC or other legal entity. By themselves they do NO give you any liability protection.

@Nathan Shankles - make sure you need that level of protection prior to complicating your life with implementing and maintaing (!) such legal structures and expenses. The mortgage note itself is a form of asset protection. 

Here is a diagram to help you:

As someone from CA, you should look into a DST - talk with a specialist like @Scott Smith.

Wow @Aaron W. - 9K to 15K for all this, huh?  You better make sure you have a lot of assets/equity/cashflow to protect for that kind of setup and ongoing maintenance hassle and cost.

Do you own them free and clear? The mortgage note itself is a form of asset protection.

Have you implemented and exhausted all the other risk mitigation procedures necessary and available to you?

Just because you create an LLC (which is a legal entity, with little bearing on taxation) it doesn't necessary mean you'll be able to cut your taxes. Home office expenses are deductible regardless you have an LLC or not. Same for rental property insurance. Taking advantage of 280A and 199A requires specific conditions (like contemporary documented number of hours in business), do you meet them?

How much will be the ongoing legal and accounting services charges, and how much of your cash flow percentage will eat?

You don’t want to own properties in a S- or C- corp. (Owning Rentals in an S Corporation Might Be a Costly Mistake https://www.biggerpockets.com/renewsblog/2016/02/25/owning-rentals-s-corporation/). And if you rely on losses from your rentals to deduct (are you aware how much in what conditions?) from your W2 income taxes you should reevaluate your investing plan.

Here, some diagrams to help you in your quest for answers:

My 2¢, don't consider this legal advice - consult a specialist like @Scott Smith for that.

@Heather H. @Simon Stahl Caution: might lose the forest for the trees - if you have to put down 40%-50% to be in the black, your CoC ROI will be in the 1% range, comparable with leaving the money in the bank and not taking on any of the associated risks. You might get better investing results in other places (stocks, index funds, private lending, etc).

@Account Closed - San Antonio is NOT a city with a high rental demand - it is a city of rentals. It has 5+ military bases around and the density of rentals is 3 times higher than other cities, like Austin MSA. As such, while the property prices are depressed and attractive (but the property tax are still high, eating ~30%+ of your annual rental income), so are the rentals - go checkout how many available rentals are currently active on the market in any area of SAN. Zillow rent estimates are about 10% higher than actuals. 

As I mentioned above, you will not cashflow with all expenses considered (for what and how to calculate the expenses, look here: https://www.biggerpockets.com/forums/12/topics/746081-estimating-capital-expenditures) unless you put a large down payment (30%+) at which point the ROI will be minimal.

• @Russ Loven @Tyler Santos @Sher J.  - Here is my "starting up" collection:
  
  Read http://greeneincome.com/index....
  Read Dave Ramsey book "The Total Money Makeover: Classic Edition: A Proven Plan for Financial Fitness." and complete the baby steps there.
  Read Scott Trench’s book “Set for Life.”
  Finish the school and get your degree - you'll need it later, especially if it's business management.
  Get a job first where you have W2 income. Save 50 percent after tax income. Find deals in your market. Buy at discounted prices. Rehab. Rent. Refinance. Repeat.
  Work slave job with W-2 documentation for 2 years to gain favor with banks. Freddy/Fannie conventional loans want to see those 2 years. Keep same job no matter how crappy. It's only a stepping stone to break free.
  While you are slaving, eat ramen, roommate up or live in trailer, avoid Starbucks and tuck every dollar you can squeeze out into a bank account. need 20% down and money for materials. so for 80K home (trashed), you will want 35K banked to get started, just a rough idea.
  Then, get pre-approved. Buy property. Buy another and another until you have enough equity to refinance one for large amount of cash. Take cash and start BRRRRR process (read up all you can on BRRRRR). Give boss notice. (sorry about all the school time you invested). Your free. Done.
  Find a mentor to help with the process.
  Doing an internship with someone that is serious about their business, and then making sure that you're just as serious about their business as they are, is an awesome way to gain invaluable experience and support for yourself in the long run.
  Intern with a flipper. Intern with a wholesaler. Intern with Rental Investor. Then decide what you want to do long term. You have a long journey ahead.
  Aggressively save money and buy a Multifamily 2-4 units with 3.5% FHA loan and house hack. Find a duplex/triplex that needs a little work, live in one unit rent out the rest. Raise the rents to market values and rehab to force equity and sell in 2 years to avoid capital gains. If you decide to keep the property you can refinance into a conventional loan and hopefully you have enough equity to eliminate the PMI/MIP. Then move out and repeat the process. Repeat. Do this four or five times and you'll never have to work again if you choose. [Beware = https://www.biggerpockets.com/renewsblog/house-hacking-drawbacks/]
  I would look for a 2-4 unit too house hack. You can get into these with 3.5% down for an owner occupied FHA loan. Great way to get started FHA makes sure its a cash flowing deal before they allow you to buy. And house hacking allows you to make a little off the property, and seriously subsidize your rent. And lastly, you gotta live like a college kid. Rent out rooms, go the cheap route. Having those cheap expenses will really catapult you forward financially!
  Income from RE investing is slow and boring (in a good way). The RE investing that makes fast money is not really “investing” - it’s a self-employed RE business. For example, flipping, deal finding, wholesaling, syndicating.
  Boosting your credit score is the no-brainer investment. Go on My Fico and learn the credit hacks. Do them!!!
  [Biggerpockets] is notorious for the no and no money down niche, but you really need to have a good financial runway prior to investing otherwise you will lose your bottom when it goes sideways.
  Read all the usual books. But to be honest with you, If you do not learn some construction skills, your progress will be a lot slower as contractors will be raking in the majority of your profits.
  Get a pro account on this site so you can access the PRO only blogs and avoid all the goofy stuff that can confuse you sometimes.
  Take NO advice from salesmen such as realtors/brokers. Not because they are wrong, but because they are salesmen.
  Take NO advice from anyone who does not own more real estate than you do. Why chance it.
  Just keep reading, saving, researching your target area. Know the rents! Know the values.
  Do all this and you'll be on a very good path. Just remember, there are no secrets and shortcuts in real estate investing, just slow and steady progress. You want fast, you are closer to speculating than investing and your risk skyrockets​.
  "Ignorance is bliss. Knowledge is power, but also a burden, leading to analysis paralysis. The cure to both - the 4 ions: education, action, progress(ion), not perfection".
  
  Learn to use BP to its whole potential:
  Subscribe to BP blog and podcasts and start reading posts and listening to their podcasts collection.
  Find and connect with other BP members that are in your area: http://www.biggerpockets.com/m...
  Set up keyword alerts to be notified of the topics that interest you: http://www.biggerpockets.com/a...
  Read Beginner’s Guide: Real-estate-investing (http://www.biggerpockets.com/real-estate-investing)
  + Actionable-steps-to- reach-investing-goals (https://www.biggerpockets.com/renewsblog/2015/12/17/actionable-steps-reach-investing-goals)
  
  You can find a glossary of some acronyms here: https://www.biggerpockets.com/...
  
  You might also want to read: The Ultimate Beginner’s Guide - https://assets2.biggerpockets....
  ...actually the entire section on Guides - https://www.biggerpockets.com/...
  
  BP has a whole section dedicated to education and starting up - https://www.biggerpockets.com/...
  
  Get busy with the entire Education section on BP:
  property-types (https://www.biggerpockets.com/hubs/property-types)
  finance (https://www.biggerpockets.com/hubs/finance)
  strategy (https://www.biggerpockets.com/hubs/strategy)
  analyze-deals (https://www.biggerpockets.com/hubs/finding-deals/analyze-deals)
  property-management (https://www.biggerpockets.com/hubs/property-management) (including TENANTS MAINTENANCE)
  business-operations (https://www.biggerpockets.com/hubs/business-operations) (and the sub section on REAL ESTATE MARKETING TOOLS & TECHNOLOGY TAXES & ACCOUNTING LEGAL TEAM)
  
  One way or another you will pay your "real estate tuition" - either in time, effort or money. My suggestion - better in time and effort, and money (through the mistakes you going to make), than paying a guru.
  
  Between BP and books and all the other podcasts and blogs available for free, you shouldn't need any paid training - don't fall for that. Just find a good mentor to shadow, someone willing to impart from his/her experience, take them to lunch and make yourself useful to them, and they will teach you.
  
  Here some recent articles good for starters:
  - one to raise you up: 3-important-questions-starting-investing-real-estate https://www.biggerpockets.com/...
  - one to bring you back down to earth: dont-just-dabble-in-real-estate-investing https://www.biggerpockets.com/...
  - one in the middle: cheap-free-steps-today-pro https://www.biggerpockets.com/...
  - 10-lethal-mistakes-avoid-real-estate-investment https://www.biggerpockets.com/...
  - telltale-signs-youre-not-ready-to-invest https://www.biggerpockets.com/...
  - vital-importance-mentor https://www.biggerpockets.com/...
  - get-ready-to-invest https://www.biggerpockets.com/...
  - get-your-head-in-the-game https://royallegalsolutions.co...
  
  You might want to read and follow these threads:
  advice-to-your-20-year-old-self https://www.biggerpockets.com/...
  financial-advise-for-getting-started https://www.biggerpockets.com/...
  how-to-prepare-for-a-career-as-a-flipper https://www.biggerpockets.com/...
  new-to-wholesale-real-estate https://www.biggerpockets.com/...
  what-is-the-best-re-related-9-to-5-job https://www.biggerpockets.com/...
  
  Bonus for the weekend, my collection for starters (read the comments too, and then if you like the author, go check out what else they wrote):
  - stages-of-investing https://www.biggerpockets.com/...
  - newbies-learn-real-estate-investing https://www.biggerpockets.com/...
  - 5-ways-to-know-youre-not-ready-to-invest https://www.biggerpockets.com/...
  - ideal-vs-desperate-investor https://www.biggerpockets.com/...
  - how-much-to-offer-property https://www.biggerpockets.com/...
  - hazardous-attitudes-of-investors https://www.biggerpockets.com/...
  - 21-traits-scammy-real-estate-investment-guru https://www.biggerpockets.com/...
  - youre-not-cut-out-to-be-real-estate-investor https://www.biggerpockets.com/...
  - questions-new-investors-should-ask https://www.biggerpockets.com/...
  - real-estate-books-beginner-investors https://www.biggerpockets.com/...
  - what-separates-those-who-succeed-from-those-who-fail https://www.biggerpockets.com/...
  
  If that's not enough, ping me and I'll give you a whole collection of blogs and podcasts to follow.
  
  Bonus 2:
  1) Read at least one hour per day every single day.
  2) Remember the quote by Jim Rohn "You are the average of the five people that you spend the most time with."
  3) Check for toilet paper before sitting down.

"Ignorance is bliss. Knowledge is power, but also a burden, leading to analysis paralysis. The cure to both - the 4 ions: education, action, progress(ion), not perfection".

@Ram Peruml Here is some unqualified advice - talk with a specialist like @Scott Smith for professional legal advice.

1. It might not be a wise idea to own real estate in a S-corp or C-corp (https://www.biggerpockets.com/renewsblog/2016/02/25/owning-rentals-s-corporation/) and I'm not sure how putting the S-corp at the top is going to affect the ownership of the LLC and further of the properties. You can make for sure the shell entity (the one not owning any assets) an S-corp.

2. If you plan on using a quit-claim deed for the transfer, double check on the transfer of title insurance (you might lose it). Use a warranty deed is better. Whether title insurance terminates by transferring real property depends on the type of policy, and how “insured” is defined in the policy. You take a risk which could result in cancellation of your title insurance and complete loss of your real property without compensation in the event that a title issue regarding your real property arises. Contact your title insurance company to determine coverage and if your policy does cover transfers , and when or how.

3. See if a Series-LLC is an option for you. Might work better than having to create and maintain an LLC per property. Talk with @Scott Smith.

4. Sounds good.

5. Sounds good.

6. Sounds good.

7. See #1. Mortgage could be paid from the management company or asset holding entity.

8. I think insurance needs to have owner (the asset holding entity) and trust (as additional insured), not the top holder. Speak with @Jason Bott for expert advice on insurance.

9. If you pass your income through the Wyoming S-corp, it might be considered active income and you’ll have to pay self-employment taxes on that income, losing the whole idea of rentals generating passive income. Check with @Nicholas Aiola on tax considerations.

10. You can have the Property Management Shell LLC charge property management fees and establish Solo 401K plans based on that generated income. You will have to pay self-employment tax on that income though. But it would also allow you to rollover other IRA funds and invest them in other RE or lending.

11. I don’t see how any of these legal structures will allow you to save from taxes or lower your tax bracket. You might be able to get the 20% business deduction from your rental income if you log and document properly 250 hours of activity in your rentals. If you have losses (and you might lower your rental income using depreciation, and/or accelerating that depreciation by doing cost segregation study on your properties), you might be able to use them to deduct up to 25K from your active side if your AGI is under 100K, prorated to 150K. Since it’s above that, you might be able to deduct it if you (or your wife) qualify as a real estate professional (log and document properly 750 hours of activity in your RE/rental business and this is your primary source of income).

Here are some diagrams to help you on your quest:

Asset-protection-onion-diagram-v2

Asset-protection-decision-diagram

Asset-protection-structures