All Forum Posts by: Johann Jells

Bump. No one?

Bump!

This is like my 4th time diving into this issue and my head is exploding once again. Can anyone explain the difference between being an S-corp and being an LLC filing as an S-Corp? My new accountant is recommending I do a C-corp, but I'm not sure about that either. The plan is incorporate and transfer the properties in the 1st week of 2015.

Here's the story: My wife and I have three 100 year old properties w 13 doors, one of which is ours. I actively manage, maintain and reno them, in addition to my part time consulting business reported on a form C.  I qualify as a RE pro by the IRS criteria.  My motivating interest in incorporating is to "de-passive" the RE business, so it shows up on the FAFSA & CSS college forms several years from now as the small business it is and excluded from liquid assets, and not a passive rental business they could force us to sell off. 

It sounds like a C-Corp has benefits to me besides the one the accnt touted, being opaque to the colleges. We have tended to keep profits in the business and reinvest, so we would pay 15% for less than $50k rather than our personal rate. And it sounds like excess can be directed to retirement accounts, which is really the whole purpose of our RE empire, funding retirement. Her job, my business, and living rent free takes care of our normal expenses. We do not have much in retirement accounts at all, which ironically would be automatically excluded from consideration as assets. When all the units are renovated and producing to their fullest we could be $50-75k positive a year, and in 13 years when they're paid off we'll see another $50k. Will that cashflow be very expensive to tap at that point? Or is it easy to dissolve the C-corp into an LLC after the kids are through college in 10 years?

But what was this about appreciation being problematic in a C? My places are in a gentrifying area, and hopefully will rise dramatically, one has already done so :)

So, back to the top: since Steve says holding RE in a corp is criminal, what are our other options? Does LLC filing as S have a benefit for us? Is it the best of both worlds? Or is LLC in any form just not good enough to not be questioned by colleges.

I want this structuring to be above questioning.  I know the above is a lot, but from my searching and previous questions I see I'm not the only one asking this and not finding clarity. Perhaps eventually there can be an article or FAQ. I suspect there's a lot more buy and hold types out there than wholesalers or flippers.

I just installed under cabinet LED in a unit for absurdly cheap. This roll of LED tape and a plug-in supply for $18, plus a couple of strips of 1"x 1/16" aluminum to put the LED tape on in a double row.

http://www.amazon.com/gp/product/B005GL5UG2/ref=oh...

http://www.amazon.com/gp/product/B007ME2HMQ/ref=oh...

A little soldering and wiring, plus the foresight to have put inside a cabinet an outlet wired to the overhead light, and it looks great.  By comparison, to replace the crappy halogen Seagull Lighting bulbs in my own home undercab with LED's would be $20 per bulb. 

 Fact is, I'm don't think this Chinese "oak" is actually oak, it doesn't have the same strong grain of American oak. I suspect it's an Asian wood they decided was close enough when given a medium finish. And that's OK with me at that price point. FWIW, I compare cab prices by asking for a 30" sink base. That way there's no variables like drawer construction or glides to mess up the comparison. These cabs are $140 for that base.

Here's a crop of the grain:

Reading a thread about finishes in new or reno sale properties had me wondering if my approach is fuddy duddy. In my century old buildings I try to go classic and timeless, give the renters what they expect in the place. My rents are $1200-1700 depending on size and location.

I use oak cabinets not only because I can get all wood chinese imports as cheap as the particle board crap from the home center, but because its classic, no one is going to respond strongly like they might to painted, or dark. Same when I use laminate, oak gets no special attention, just registers as "oak floor", where some exotic pattern might get more scrutiny and register as the fake it is. Kinda like wearing too big a fake diamond. Sadly Cosco has discontinued their oak pattern.

It's usually oil rubbed bronze lighting (doesn't show dirt and dust much), antique brass door hardware, stainless and brushed nickel in the kitchen and bath.  Baths are the classic pre-war B&W.

I was reading that granite is over in the trendy crowd. That's crazy, granite is insanely practical and indestructible compared to previous things like Corian or Formica, and now relatively cheap. I do my own granite tile counters, but I may give that up. They're easily repairable, but I've yet to have one damaged.  Another sign I'm a fuddy duddy is a refuse to take the stainless cool-aid for rentals. Black appliances are more durable and lower maintenance. I just had a tenant move out a year after I bought a new fridge, and it was scratched and scraped. I shudder to think what it would have looked like if it was stainless.

Here's my latest.  Funny story about the porcelain floor, I didn't intend it to be bicolor. I had boxes of 6" in tan for the pattern, but the contractor saw the boxes of slate color I had for the backsplash and assumed I wanted it this way! I sputtered when I saw it, but calmed down, returned the tan for more slate, and got used to it.  The "tin" in the bath is plastic, $2.50/ft. No more stained and crumbling drop ceiling panels from leaks.

The bank we borrowed from last a decade ago has in the last few years after they were acquired started sending us a packet of intrusive info requests, like wanting 1040's and other stuff. We've ignored them. We've paid them on time for 17 years, our credit ratings are in the 700's, why are they hassling us? My theory is they want it either to sell the info or sell the loans. Any insight? Is this new post crash law?

 But pine is what was there and the realtor says the gentrifyer types love it these old pine floors. Ignoring the reality of a relatively fragile floor is idiotic. I can't control stiletto heels, but I can control whether or not there's a dog.

Just waded through the thread. I think I got my answer: to stick with my longstanding "no dog" policy and say no to the applicants with a 50 lb pit mix. They say she's sweet, lazy and inactive, and have offered to let me see their current place. The unit is newly renovated in a 4 family with newly finished old pine floors. I couldn't even get the wood to repair it if I wanted, I had to salvage wood to fix it up from the kitchen before it was tiled.  Besides that there's lots of gaps where liquid could seep through. So between claws on softwood and potential accidents it seems a bad idea.

This unit is not moving as the holiday season is bad and I'm told there's a bit of a inventory glut, I've already dropped it 5%. I'd really like to rent it,  but can't shoot myself in the foot.

When I try to find my listing using maps I have to put in pretty specific terms to get it to show up. It's weird. Like "Jersey city" won't do it, but Jersey City Heights" will. And zip won't. not specify area I have to put in like 3 parameter to get it to show up. Why are they only showing a certain percentage of hits?

I favor the cheaper Cadet 3, but I agree the American Standard line has enormous performance for the buck. I have 2 in my home, and like 8 in mt rentals with no problems whatsoever, never need 2 flushes. And I have old cast iron pipes that aren't slick like new PVC. I think the early low flows gave them a bad rap. 

Also agree that changing them out is the better plan, the labor cost is the same as a rebuild, and a Cadet 3 is ~$140 at the Depot.