All Forum Posts by: Account Closed

@Steven Hamilton II Thanks for your support!

Jeff S Na

Thanks for the info. It appears there are ways to avoid the california franchise tax but it all seem to be a lot of hassle or could be seen as tax evasion.

@David Krulac

Yup thats the plan for now to keep things simple.

-Steve

@ Tom Goans

Sure thing I plan to seek legal professional advice before making the decision. Thanks for you advice.

@Steven Hamilton II

I see that you are from Illinois and know your local tax laws. I will most likely form a LLC in state of Illinois to keep things simple for now. I really appreciate your advice.

@Terry Portier

Thanks for the article comparing the benefits forming LLC in DE, NV and WY. I see WY is up there and seems to be the most "incorporation friendly" state. This insight will help me evaluating deals out of states going forward.

-Steve

Hello BP,

I'm planning to build 10+ spec homes in state of Illinois over next a couple of years. The plan is to build and rent and perhaps sell off a few as we go along. I have a partner who lives locally and will be handling the construction side. I will be taking care of the business side. As for the equity, I will be providing 75% and my partner 25% and we will be splitting the profit 50/50.

Whats would be the best way to structure the partnership?

My main concerns are:

- Tax planning

- Asset protection

- Flexibility to add more equity partners later on.

I would like to set up the business correctly at the beginning. I am sure I need to consult with an attorney but would like to get some feedback.

A REI friend advised me forming a LLC in Nevada and make it operating out of state of Illinois may be the way to go for the tax benefits and asset protection. Has anyone done similar?

Thanks,

-Steve

Thanks for your advise @J Scott,

I don't disagree. My partner and I have a full time job and won't want to spend a lot of time and effort only to produce a 10% return on a single property. We actually think building new is easier than rehabbing. The LOTs are already zoned and have all the permits. We have a few builders lined up who are very motivated. They have provided us several types of houses we can build. Once the first house is built successfully, we can systematize the process which should bring down the cost, time and effort for next houses. The goal is to build at least 10+ SFH rental.

There are deals out there that can produce a 10% cap rate but It seems most of the good deals need a gut job and requires some real expertise evaluating rehab cost and time. Also its very hard to find good deals in the same area so property management can be a big headache..

Hello,

I'm working a new home construction project in the state of Illinois.

Here is the quick break down of the deal:

Property type: SFM

Size of Property/Lot: 1600sq/10,000sq

Total cost (including lot, building cost and impact fees/permits): 150k

Appoximate sale value: 180K

Cash flow before TAX: $681 per month

CAP rate: 10%

The plan is to build something basic without bells and wistles and hold for rental. There are more lots in the sub-division so this would be a proof of concept and if it works we will build more. According to local realtors, the rental market has been very strong. However my concern is that the property value of the area we are trying to build hasn't been going up yet. The comps around the area are between 150 to 200k. I'm fairly new in RE investing and not sure if it make sense to build if the market price of a property is close to the build cost..

Thanks,

-Steve