All Forum Posts by: James Triano

@Dave Holman

My partner and I actually ran into this situation as well. We have captured all of these expenses as business expenses and had the LLC reimburse us for them. This is our attempt at keeping everything in the LLC and make sure it's well documented. However, we tried to delay as much as possible the expenses we had to pay out of pocket initially.

I'd talk with your accountant on this one but my guess is that they'd be 2017 expenses.  One thought though is that these really aren't expenses if they're wrapped up in the purchase.  These should actually be added to the cost basis of the property and depreciated/amortized over time. 

@Alexander Price

Yes, I would definitely still keep track of your own properties through Excel or some other means.  I've developed a fairly straightforward and easy sheet that just helps me keep track payments and expenses.  Makes my tax return take about 10 minutes as well which is always helpful.

@Claudia Hayek

These general & administrative expenses can be reserved for like any other expense reserve.  However, they shouldn't be more than 1-3% of gross rents for the year. Aside from any serious legal issue those should be minimal and wrapped up in the costs of purchase. Accounting and CPA work shouldn't be more than $100-$400 depending on the complexity of your return and how much bookkeeping you need. Certainly this can vary but a quality estimate of these expenses and a small reserve each month will have you covered. 

@Rich Hupper

You can really do either.  You can re-invest your dividends into the companies that produced them (easiest) or re-invest into other assets.  I would recommend just re-investing into the companies that paid you dividends because this can just be automated through your broker.  It will make your life easier as your portfolio grows. 

@Dave Holman

I would actually think this would just make things more complex for you to track everything by project and then bill your other LLCs.  There's really no harm in doing so.  

The only reason I would suggest doing it is if you were planning on doing Property Management for other customers other than just your own businesses. If that's the case it would make sense just to separate it all now. Otherwise, I'd just keep it simple and do everything within the LLC's you already have.

@Rich Hupper

Question 1) The point of an IRA is to use tax advantages offered by the government in two types of vehicles:

1) Traditional IRA - Tax deferred growth (save taxes now, pay them when you withdraw)

2) Roth IRA - Tax-free growth (pay taxes now, investments grow tax-free into the future)

Two things about your contribution amounts. Yes, you can only invest $5,500 total into IRA's over the next 29.5 years (you can still contribute to 2016's tax year now though). However, this maximum contribution increases with inflation. It used to be $5,000 per year, now it's $5,500 per year and will be increased in the future so your contributions won't be $5,500 per year forever. I agree with you though, it's not an amount to write home about in the grand scheme of things.

Question 2) If the money in your roll-over IRA is what you plan to invest with, you can't add that to your monthly income. That money is locked away in your IRA account unless you want to pay the 10% penalty and pay income tax on that amount. If you want to start generating monthly income from dividend paying stocks, you'll need to open a general brokerage (on E-Trade, Vanguard, Fidelity, etc.) account which you will pay taxes on the earnings/capital gains. This income won't kill you from a tax perspective but you'd be wise to just reinvest your dividends for now until you're a bit older as those dividends can continue to grow your portfolio vs. fund your lifestyle now.

@Andy Krzanowsky

Yep, I have separate accounts for my properties.  This is really just due to ease than anything else and Vanguard doesn't charge you for each individual account.  I may combine them as my money grows because they offer lower costs funds if you meet certain account value thresholds. 

Municipal bonds are a great source as they are federal tax free if you can get a solid rate of return.  Just some ideas. 

@Will Jones

Your rental income will be taxed at your personal income tax rate.  The only exception would be if your rental property is in a C-corporation which it most likely is not as that is not a typical structure for real estate investors. 

The best strategy for this is to diligently document all of your expenses, mileage, and depreciation.  If you keep very accurate books and work on tax planning early in the year, you will be just fine. 

@Eric Hamilton

Most likely you will need to use conventional financing on the house you're planning to purchase if going the bank route (excluding private/hard money). I'm not sure what the rules are about having BOTH a VA and an FHA mortgage or you may be able to get an FHA on the new home purchase.

Another option would be refinancing out of your VA loan on your current home then using a VA/FHA mortgage on the next property. Ideally, you would want to use a VA loan because the fees are a bit lower than FHA.

@Zachary Taylor

Ideally, you would have 3 accounts or 3 ways of separating funds.  First, an account for security deposits since these funds legally need to be separated.  Second, you should have an account for your capital and expense reserves.  Third, you'd have your operating account with all of your normal funds for paying your mortgage, taxes, insurance, recurring monthly expenses, etc.  In this third account, I keep 3 months of operating expenses just so I know there's always enough money in there to cover anything in expected quickly.