All Forum Posts by: John Morgan

I formed an LLC in Texas for my 6 rental properties last year. A letter from the Texas Comptroller of Public Accounts says my company's first franchise tax report is due in May. What is this and do I need to file it for my LLC? Are there any other annual fees with having an LLC? I'm new to this obviously so thank you for any info!

Also, one of my properties is a vacation nightly rental in Missouri. Do I need to file anything with MO for my one property there..like a foreign entity or any other annual permit? My attorney says I don't. Only if it generates a lot of money..like over a million. And he says I don't need to pay any annual fees or permit for my Texas LLC. He said once he set it up for me, we're good to go and nothing further needs to ever be done with keeping it registered. Just wanted to double check since he's not a CPA.

@Tyler Hogan

That is correct. Once you pull out the money you’ve put into it over the years, you can’t put it back. You can still put in the max per year if your income isn’t too high. And I think you might need to have a Roth for at least 5 years to be able to pull money out like this tax free so double check on that. 

Here’s why I did this. I knew it would take a few years to build up enough money to use it for a big purchase in real estate. So I was patient and would rather have my money work for me and grow tax free while I waited. I bought and sold several stocks and built up a nice nest egg in our Roths. I put in a total of 92k over the years and it grew to 320k. I also wanted it for emergency money in case something happened and I needed money right away without any tax hits. You never know if something like that comes up! So I didn’t have much of a personal savings account for emergencies earning only 1% in a taxable savings account  I let my money multiply in our Roths buying stocks instead.

I pulled out 62k for my first real estate investment four years ago tax free and it took only two or three days to be wired into my bank account. This helped me get started in real estate. Making a cash purchase for your first property gives you a lot of options. Then it snow balls from there.

I’m up to 6 SFRs now generating 3k/month in passive income. Some people may argue and say never touch your retirement investments until you retire. I disagree. As long as you have a 401k or something else other than real estate, you’ll be fine as far as diversification. And our Roth’s still have about 300k in them today (from our original 92k that we put in over the years minus the 62k we pulled out) which is better than nothing. We haven’t been able to contribute to them in five years due to income level being too high. But I’m guessing it’ll be worth 1.5 million tax free when I retire, so it’ll still help in retirement when that happens. 

@Tyler Hogan

I would stash away as much in your Roth right now. That's what I did until I found a good deal on a property I really wanted. I took out 62k worth of principle from my Roth to snag a good all cash deal. I wasn't taxed a penny because it was just the principle I had put in over the years for my wife and my Roth's. I have no regrets at all for doing this. I took out a HELOC for the remainder of the cash I needed for this deal. You've got a 401k and you're young. I would keep stashing away with the intent of using that money in bulk for an investment property. Good luck.

@Makala Lee-Norwood

Here's what I did with 5k to get into real estate investing. I put it in a Roth IRA. Within the Roth I bought and sold stocks over the years. I tried to put in 4 or 5k a year in my Roth as well as my wife's Roth. You can always take out what you put in without paying any tax. You just can't take out anything above what you put in (the basis). Four years ago I pulled out 62k from our Roths to buy my first investment property. I knew only 5k wouldn't be nearly enough so I kept saving all I could to accumulate more in my Roth so I could snag a property with a cash offer some day. It's all about delayed gratification. Be patient and don't give up on your goal. I now have 6 rental properties. It doesn't happen over night so be patient and keep spending less today so you can have a big cash pile to make and offer some day. Once you get that first one under your belt it gets easier. You refinance that property and buy another. And keep going.

@Rose Backlin

It’s a two bedroom cabin at stonebridge that sunset nightly rentals manages for me. 

@Jeff Johnson

Pull up that long www.bigger pocket forum topic link I posted and you’ll find the 800 page legal brief on it. Someone else posted this and I got it from them. 

@Terrell Garren

Haha! Glad I’m not the only one with a wife not on board at first. I would love to pick up a few more properties but there’s no way she’ll let me. Lol 

@Steve Emling

I’m old school. Checks, money orders, PayPal and cash. I actually like cash because my wife finally feels like these rentals are producing. She hates that I bought 6 SFRs over the last few years as a hobby/investment.

@Josue Vargas

I have four SFR in class C hoods. I manage 3 of them and the one I just bought for 48k with a sec 8 tenant I'm using a management company. Try to find an off market deal. I look for homes that are run down with tenants in place. I can slowly rehab them while still collecting rent and not having them vacant. Then raise rent to market rate once you rehab them. Ask realtors and other leads for occupied homes that need some work. You can snag deals cheap. Then hire people to fix them up. Then once the home is worth market rate, refinance it and pull 75% equity out and look for your next cash property. Then repeat and repeat.

@Josue Vargas

Stay away from class A properties. The numbers don't add up. I go for class C properties which give you a much better ROI. Appreciation rate is actually higher in Texas in these cheaper properties because there's a bigger demand for them. Crunch the numbers on properties under 100k and you'll be pleasently surprised. I find properties I have in the $1,200/month range in TX have the biggest demand and lowest turnover rate.