All Forum Posts by: Jerry W.

Yes you should register your WY LLC in any state it is doing business in. No you are not required to have a bank account here in WY. What makes you think you need a bank account in WY?

@Becca F., the Sub S is an election you can file with the IRS to give pass through status to a corporation or even an LLC. It allows you to claim part of income as passive and part as wages. It is usually only used for things like flips that generate a lot of active taxable income. Do not do it for regular rentals.

@Steve Bell, I have a slightly different point of view. First, what are you looking at in cash flow? Will it cash flow now, and will it cash flow if you finance more out at a higher rate? It is always tempting to take a profit now, but what will the value be in one more year or ten more years? If this is your first STR what better way to safely proceed than with a lower amount of payments. Maybe you can use some of your income to pay down your HELOC or at least cover the interest? Another point is short term versus long term capital gains. It is not what you make that counts, it what you keep! The taxes are often a LOT higher on short term capital gains versus long term capital gains. By holding it for another 6 months or 1 year your loan will be seasoned so that you use the value of the property, not what you paid for it plus improvements. Maybe try operating a STR is to see if you like it or how much money you make before jumping in to add another one. As a final consideration if you have it operating as a successful STR you might be able to really increase the sales price as an ongoing business. I am big time into buy and hold, that is really how you accumulate long term wealth, not temporary income.

I often regret the ones I sold as much as I regret the ones I didn't buy.

@Magi Sempai, welcome to Bigger Pockets.  You have received a lot of great advice here.  It would be hard for me to improve on most of it so I will take another avenue.  You first need to learn, which you are doing.  Knowing the market, rates of return, etc. are key to buying.  Next you need to learn how to manage or how to hire managers, then you need to develop the courage to take the first step,  Overcoming fear is one of the hardest things to do.  Then you need to develop the grit to hang in there even when it is scary, even if it gets boring, even when you just want left alone, you keep on going.  Most importantly you need to let yourself dream.  You need to tell yourself that you can do this and that you deserve to do this.  One of the biggest factors I had to overcome was gaining faith in myself, and give myself permission to succeed.

So get educated, work hard overcome your fear, hang in there, and believe in yourself!

@Eddie Gonzalez, you should give at least a vote to @Susan Walsh for her detailed answer, it was really spot on.

@Alexandra Jimenez, for mid term rentals I also leave a large box of dishwasher tablets, a very large scent free detergent jug, large bottles of shampoo, body wash, hand wash, a large box of kitchen trash bags, and a large bag of toilet paper and paper towels.  The extra $35 bucks I spend on that is nominal, but it makes a huge difference to the guest.

@Becca F., you REALLY need to talk to a CPA about this, not an attorney unless they do tax law.  I am not an expert, but if a property has appreciated $2.5 Million, I WOULD NOT gift it to my children.  If an attorney recommended to them to do that I would file a grievance against him for incompetence.

When you gift a property during your lifetime the basis of the gift to your children is what you paid for it. If you die and they inherit it from your estate, a trust, or most forms of an LLC they get a free stepped up basis. Free stepped up basis is entirely different from inheritance tax, which is set at over $11 Million currently, but is likely to drop to $5 Million is 2025 with a 40% tax for amounts over that amount. The rationale behind the free stepped up basis is that it is not fair to pay a 40% tax on capital gains and a 40% inheritance tax. The Biden administration had tried to do away with the free stepped up basis but it gained no traction. We lost a lot of family farms and businesses in the 1970s and 80s because of inheritance taxes starting at $125K and being at 30% and going up to 70%. The outcry from that led to many of the changes we are enjoying today.

TALK TO YOUR CPA.  Do not put long term holds into Sub S elected LLCs or corporations.  Those do NOT get the stepped up basis.  Actually corporations do not get a free stepped up basis, only the stock would if you sold the stock.

Despite having rental houses for 30 years I have filed my taxes on time up until 2020.  Since then regardless of when we turn in paperwork out taxes are done late.  The records were turned in by late February but taxes were not done until late July.  I switched accountants this year, but taxes again have not been completed.  I know that there was simply too much work for the local accountants to handle.  I went with a younger Accountant who is probably not quite as good as the prior accountant, but my prior accountant lost 2 CPAs last year and was only able to hire one back.  Like plumbers and electricians and even lawyers, there are simply not enough to go around.  Expect delays, be reasonable, and if the service gets too bad look for another one, but you may not find one locally.

@Diane Tycangco, I do believe in the benefit to owning property in an LLC. They do provide a lot of protection if run properly. An LLC only protects your other assets, not the property that is the subject of the lawsuit. Any property owned by the LLC is at risk if you lose. LLCs do not protect you from personal things you do. If you drive the LLC car to do LLC business and run a stop sign and hit someone they will sue you as well as the LLC. It probably would protect you if it was an employee driving the car unless you had reason to believe they were not a safe driver.

@Gary Fraser-Lee, you are getting mixed advice and not all of it is correct.  First the lender can call the loan due if you transfer the ownership through the due on sale clause.  Not all loans are Fannie or Freddie, I get all of my loans through smaller local banks.  Will the lender learn of it?  Who knows, maybe, maybe not.  If you don't change the name on your insurance policy it might not be any good if you have to file a claim.  The owner and name on the policy should be the same in most cases.  The banks in my area are most likely to see the insurance change when they get their copy of the annual insurance renewal.  In my town they publish the deeds which might tip the bank off.  I have seen banks send a compliance violation letter to someone who changed the name on the deed, but they allowed the borrower to change the property back into the name the mortgage was in.

As to the video linked by @Sarah Kensinger, that was made 2 years ago.  Interest rates have spiked since then.  If a local bank can call a note due that is earning 3% and issue a new note that is 8% there is a huge incentive to do so.  There are FEDERAL laws that prohibit activating the due on sale clause under certain circumstances.  My recollection is it is the St. Germain act.  States have their own banking laws, but banks must also follow all Federal banking laws.  The federal laws apply to all states.

I disagree that single member LLCs offer no protection.  They do offer protection in all 50 states I believe.  They often provide less protection in some states on things like charging order issues.  However they give the same protection as Corporations as long as you run them correctly.  I am perhaps biased because my state recognizes the protection of single member LLCs.  The protection is the same as for multimember LLCs.  However some of the tests for piercing the veil include evaluating separating the business from the individual, and with one owner it is harder to show.

So can the bank call your loan if you transfer title?  The answer is yes.  Will they call the note?  The answer is probably not, but maybe they will.

It's funny but the video linked above talks about how rare calling the note is.  It is also rare to be sued as a Landlord if you truly run your business correctly.  Even then most lawsuits do not end up with massive settlements, the vast majority that do happen settle for less than than the insurance coverage.  I understand that Anderson does offer a good service, but they are massively more expensive than even most other lawyers.  You have to be careful to not pay so much out in legal fees that your business becomes unprofitable.  

I believe on LLC protections, but you have to run them correctly. I also believe in insurance and running the business correctly.

There is no perfect answer, I am pretty confidant 3 years ago if I transferred a property in my name to an LLC they would not have cared even if they found out. If I did it now I think the odds are they might actually call they note. Interest rates for me would go up nearly 5%.

Good luck however you decide to go.