All Forum Posts by: George Skidis

I have worked as both an adjuster and a public adjuster. There are good and bad on both sides.

My first question is did you call the roofer or did they find you while driving around knocking on doors? If you called that is a plus.

My second question is have you gotten two other roofers to come out and look at your roof?

How to pick a roofer. Find the oldest phone book you can. Start calling roofers. If they are still in business that is a great place to start. However, fly by night roofers will come into your town and buy an older existing business to get access to the phone lines. What state is the license plate on the guys truck from. Talk to your neighbors see who they used.

OLD HAIL: The granules were knocked off the shingles exposing the underlying felt. The felt is exposed to UV Rays over a year or two and the felt changes from black in color to light brown and becomes paper like in both appearance and texture.

If the felt is still black and shiny the hail damage is new.

Research both the roofer and the PA they are recommending. You are spending your money after all. Due diligence is your responsibility. 

Warning: Your FIRST LLC Tax Return is due March 15th the year after it is set up. So if you set it up in 2021 your first tax return is due March 15th 2022 - EVEN IF YOU DIDN"T MAKE A DIME! The late filing penalty is $290 per month per member. 4 months late with 5 members the penalty is $5,800. Make sure you file on time.

I prepare almost 200 tax returns a year. When it comes to an LLC the IRS will let you choose how you wish to be taxed. As a Multi Member LLC you can be taxed as a Partnership. Not a way to save any money. You can choose C-Corp, also not a great choice. However without looking at anyone's tax returns I would think an S-Corp would be your best choice. It allows principals to receive a distribution which is not subject to self employment tax only passive income tax.

Example: The LLC makes a profit after expenses of $100,000 and there are two members. If the LLC issues paychecks to each member of $30,000 ($60,000 total) that leaves $40,000 not subject to self employment tax. Each member then receives a distribution of $20,000. That saves around 15.3% self employment tax or $3,060 per member. They will still pay income tax depending on their individual income tax bracket but they saved $3,060 each on self employment taxes.

Each of you should purchase "The Tax and Legal Playbook" by Mark J. Kohler and study this topic in more detail.

Your LLC also needs an operating agreement to holdup in court. If you treat it just like a C-Corporation when it comes to maintaining meetings, minutes and record keeping it will protect you. Failure to do so can end up with the LLC being set aside. This works just like a when a judge allows a plaintiff to pierce the corporate veil and pursue each officer individually. Lee Phillips at LegalLees.com has a great course on LLCs. Let me know if I can help you with that.

Good Luck and Good Investing

California will tax you no matter where the LLC is located. So if you form a DE or WY LLC you will pay registered agent fees ($250 - $600 per year), franchise tax in that state (at least $100 per year) plus any other obligations imposed by the state of Domicile.

PLUS You will need to pay a registered agent in Illinois and file an IL tax return as a foreign entity (Not domiciled in Illinois) Even if you do not make a profit.

Liability - IL Courts will not recognize the privacy or protection you hope to get by setting up in another state. Illinois is not a "Charging Order Protection Entity" (C.O.P.E.) state. Forget everything you learned at the $25,000 Fortune Busters seminar it sounds like you just attended. In my opinion the $6,000 LLC they are selling you is almost useless and an annual waste of money. LLC's are great tools for separating assets, providing a modicum of privacy and avoiding probate. Anybody tells you anything else is selling snake oil. But again this is Illinois.

Anyone can go to the IL Secretary of State's web site and set up an LLC for under $200.00. The same is true in most states.

Home RULE: Illinois is a Home Rule state. Any municipality with a population over 25,000 can vote in home rule. That means the local city can pass additional laws that will and do violate your rights. Granite City Illinois is now attacking the privacy of LLCs and forcing disclosure of owners or in town office location for public record in order to get a rental license. Do you have enough money to fight city hall.

Get a good attorney, licensed and located IN the state of Illinois that practices Bus and Tax law. Need a referral PM me.

Go to U-Tube and check out Mark J. Kohler and Lee Phillips. They are both very knowledgeable in this stuff. Phillips sells an LLC management agreement kit that is very well done. Kohler's books are an investors guideline. His best book "Lawyers are Liars" is out of print. Buy it used if you can find it.

You are over complicating things. Start simple and build better.

Need anything else, call my number below.

Good Luck and Good Investing 

If you set up an LLC or business entity the answer is a definite Maybe. You need to make an actual profit to pay taxes.

As an individual, in addition to your federal 1040 you would need to file state returns in Illinois and California reflecting the profit and loss.

If you file business returns the same is true it just costs more in preparation fees.

I do not prepare California returns, but many states have reciprocal agreements where the taxpayer can deduct the taxes paid in one state against the income earned in another state.

Your CPA is probably right.

Having an LLC in another state will not save you taxes as Illinois wants EVERYTHING. Doesn't matter if you are a domestic (resident) company or a Foreign (out of state) entity.

As a registered tax preparer with the IRS I can offer the following insights.

With an LLC you can choose to be taxed as a Sole Proprietorship (Single member LLC or two spouses), Partnership, S Corp or C Corp (Muliti member options). The IRS doesn't care but you must choose according to single or multi member. What you choose determines if it is part of your personal return (Sole Proprietorship) or if you need to file a separate return anything else.

If you choose a sole proprietorship the LLC can be treated as a disregarded entity. With this the property income or loss is reported on schedule E of your personal 1040. If you make a profit the income is not subject to self employment tax.

Everything else requires a separate business tax return. 

It depends on how expensive the home and what client base you are looking for.

For lower income neighborhoods we always buy slab homes and install commercial grade floor tile. However, I am wondering if a spray floor with area rugs might also be acceptable.

For mid grade homes LVP is great.

For the $200,000 plus homes a mix of surfaces such as Vinyl, LVP, Carpet and even hardwood could be appropriate.

Downside to carpet. Children, mud, pets and urine from pets, children and in some cases the elderly. You almost always have to replace the carpet after a tenant moves out. 

My preference is non fabric.

Good Luck and Good Investing

First thing you need to learn is how you can be a Realtor Friendly Investor.

I have been running real estate investor associations for over 20 years. Most realtors are tired of being abused by new and wanna be investors. Why" Because they waste the realtors time. New investors suffer from that pesky old "Analysis of Paralysis" and cannot make a decision to save their life. It is not the realtors job to train you and hold your hand. They also don't want to waste their time to figure out you cannot get a loan because you have too many video streaming accounts. Here are some tips to help you be someone they enjoy working with.

Rule #1: Fix you First. Start paying off everything you can. Sell everything you don't need on e-bay, craigslist or whatever. Fix your credit. Make sure all your loans are current. Get your 20% down payment together while maintaining your credit score. Unpaid student loans have destroyed many opportunities. Listen to Dave Ramsey and learn about paying off the debt snowball. Make yourself someone who can actually get a loan.

George's Top 10 Rules for Befriending Realtors.

1. When you meet a realtor be honest with them and let them know you are a first or second time tire kicker.

2. Ask for permission to come to their office and use their computer to scan through the MLS and make notes on the properties that fit your criteria. Learn the system and leave them alone while you explore this brave new world.

3. Write down 25 or 30 properties you would like to look at. Give a copy of that list to the realtor and let them know you are going to drive by them on your own so you don't waste their time. 

4. Inspect the properties. Drive the worst and ugliest vehicle you own. Take your camera, a clip board and any supplies you may need. Do not knock on any doors. Try to avoid any interaction with the residents. Perform an outside only survey.

5. Never dress up. Wear clothes you don't mind getting dirty.  Remove your jewelry and Rolex. Try to avoid contact with any residents. Carry a clip board and if you are approached answer all questions as follows: My name is __________ I am with the  _____________ real estate investment company. Today's assignment is to perform an exterior survey to see if the company wishes to perform an interior inspection.

6. Drive by every one of them. Take Photos, make notes and whittle your list down to the top 5 properties.

7. Make sure to check out the neighborhoods. If you don't feel safe take that property off the list.

8. Go back to the realtor and tell them which houses you would like to look inside of and what you are considering offering.

9. Be on time for the appointment. An go see those properties. Don't forget your clip board.

10. Make at least one offer before the day is over.

Why do I insist on clipboards. Because clip boards, hardhats and name badges make us invisible to the public. I also drive an older white pick up truck the most common and overlooked vehicle on the street. Every utility company owns thousands of them. My goal is to NEVER stand out from the crowd. Always try to blend in and be inconspicuous when inspecting properties. 

Good Luck and Good Investing.

CAN I CALL MYSELF A PROPERTY MANAGER? Was posted on May 11th a couple of years ago.

Victoria:

I am not an attorney and I don't play one on television.

You did not specify what state you are in, or where you plan to invest. That can make a HUGE difference. In Wyoming the home of the LLC, I would say go that route. In Illinois the original Land Trust State I would recommend using Land Trusts to own the properties. Then either an LLC or S-Corp for management. In either case if the properties are owned by an entity and are not in your name you MUST hire an attorney every time you go to court.

There are a few Land Trust ownership options. The trust OWNS the property. But who owns the trust? The Trustee technically "OWNS" it as they can sell or mortgage the property on behalf of the beneficial interest. The Trustee holds title for the benefit or the beneficial interest. The beneficial interest can be another type of trust, a partnership, corporation, an individual or several individuals.

So, if you are doing business in Illinois buy the property in a land trust. You can add an LLC or S-Corp later.

A single member LLC and an S-Corp can be included on Schedule E of your personal return. A C -Corp or Partnership must file separate returns from yours.

In Illinois the Owner can file a real estate tax appeal at the courthouse. If the purchase is an "Arms length transaction", the purchase contract might be enough evidence to win the appeal. Frequently short sales are denied this opportunity. Most tax appeals must be filed no earlier than August and no later that Sept or Oct. If not submitted in the right time frame they cannot be submitted until the next window of opportunity. 

Homestead, Veterans and Senior exemptions must be on file no later than January to be eligible in that year. Veteran and Senior exemptions must be filed annually to be received.

 The reason for it's current value on the tax role could be one of any number of things:

My experience is mostly Saint Clair and Madison Counties in Illinois.

1. A percentage of the properties in a county are inspected every year. This means that most properties are seen about once every 4 years by the assessors office. If they can't see any issues from the outside the assessed value can remain the same but frequently they are increased.

2. The previous owner has never appealed the taxes.

3. The property is shown as demised, but has lost the owner occupied exemption.

4. The regional county multiplier is sky high and nobody cares.

5. The county knows there is a problem, but to keep the tax roles fat they took no action since none was initiated.

6. The current owner has appealed the taxes but no filed the paperwork to receive the Homestead exemption.

7. Something else went wrong. You ARE dealing with the government after all.