All Forum Posts by: Jeremy Suffel

@Jeremy Suffel

Sounds like there is more to this, but on the surface it sounds pretty good... almost too good...

Cheers!

@Jeremy Suffel,

Have to admit that I'm not familiar with "Core 4". Care to share on what that is?

@Jeremy Suffel

You said you were trying to separate your personal and business. Legal entities such as LLC's don't provide any tax advantages unless you are investing with a non-spousal partners. Electing to be taxed as a S-corp only helps to avoid SOME self-employment taxes. However, rental income is passive and not subject to SE tax, so that is just silly. Also, there are more costs involved in maintaining a S-Corp.

So, you are one of the last CSRS pension plans?  Or perhaps a different segment?  Anyway, for tax issues, you'll be fine with using your personal name, maintain your properties, have insurance including an umbrella policy.  The deductions are all the same and you'll save on legal, registration, and accounting/cpa fees.  I guess sort of NOT like the Gov't:  do NOT fix it until its broken.  So, don't over complicate things, and don't "buy" what you don't need.

I hope this helps.  If you ever want to chat let me know.  I'd be happy.

@Jeremy Suffel welcome to BP.  I'm outside of Pittsburgh - not too far from you in the grand scheme of things.  I saw your other post as well, and decided to do a joint reply here to both posts.  Some very miscellaneous thoughts and responses:

-I think getting started in flipping is very tough.  The best flippers are the professional flippers who have big operations.  One-offs are difficult.  And at the end you don't own anything.

-I saw in your other post that you can't house hack / live in flip.  That's fine.  Lots of other ways to invest.

-As others have said in this thread, setting up an LLC or corporation generally isn't all that important when you're getting started. But, if it's important to you, that's great. Talk to some professionals in your area and see what they think.

-You can use passive losses from real estate to offset W2 income even without any kind of sophisticated setup / having a corporation.  You just report the loss when you file your taxes.  There is a cap and it starts to phase out at $100K.  You can look up the IRS rules online or ask a CPA.

-Are you looking to buy and hold?  Do you have funds for a down payment for something + reserves?

-Are you working on a Core 4?  Are you attending meetups?

Hope this is helpful

@Jeremy Suffel,

You're on the right track.

You want to build your entity structure starting from a trust. You can be the beneficiary, but delegate someone you trust - an attorney, maybe - as the trustee. The trustee's identity is pubic knowledge. The beneficiary's is not. So, that's where your anonymity and protection begins.

The trust should then form an S-Corp. This is where you'll channel all your rental income. As you build an income stream, you can take a W2 draw from the S-corp known as a "salary / dividend split". Roughly 30% salary (minimizes your tax liability) and 70% dividend. Be advised, however, that reducing your Social Security deductions this way can have an impact when you reach retirement age. SUTA, FUTA and FICA all come out of the 30%. Taking this draw allows you to still have personal credit since you have documentable income.

The S-Corp and trust then form multi-member LLCs (for better protection).

Properties are acquired in the LLCs."Control everything, own nothing." 

No human owns any of the entities when you build it this way. This begins good protection for your personal possessions from the risks associated with your RE business.

That's only a thumb-nail sketch, of course. there's a lot of details along the way.

Note that this is not legal advice, nor am I a legal professional. I can steer you onto a source for complete information, if you need it.

First element of risk is to identify what is at risk...which is always the cash, which in the case of REI includes the equity in a house. The more equity you have, the more you have at risk. So, the more debt you have on a property, the less you have at risk.