All Forum Posts by: Josh Bauerle

I’m a CPA that has built and sold two pretty successful tax practices. I’m regularly on pretty “big name” podcasts answering tax questions, have appeared on National TV answering tax questions, have an Amazon best seller accounting book and was featured in one of Brandon Turners books. 

I point all this out, because even though I have a pretty strong tax background, when I have questions about real estate related tax issues, Natalie is the one I go to. She is far and away the most qualified real estate tax professional I know. And I know quite a few. And in case this seems like someone trying to help a friend, I came to know Natalie because I was seeking out her knowledge in this area, I wasn’t friends with her first and then decided she was good at this stuff. 

So without knowing the specifics of these complaints, here’s a few general obeservations:

- The last two tax seasons were insanely difficult for tax preparers. The IRS has created a nightmare in the tax prep world. So all preparers should be given a bit more grace than usual. 

- Your claims that two CPAs told you she made big mistakes is a little meaningless. First because we have no idea who these CPAs are and if they are actually accurate, but most importantly because they are judging a DRAFT return. Draft returns often have errors. Especially draft returns completed right near the deadline. This is the period where errors are generally caught and corrected. 

- I can’t begin to tell you how ridiculous it is that you are complaining she wouldn’t cancel an out of country vacation for you. 

- Yet what was even more ridiculous is you attempting to call her out for “not even being a CPA” and just getting a PTIN to be able to sign tax returns. First of all, all tax preparers have to acquire PTINs to sign returns, what are you even thinking you are calling out here? Second of all, a CPA designation has absolutely nothing, zero, to do with competence in tax work. And again, I say that as a CPA myself. It’s a nice designation that gives people a baseline confidence in your abilities, but completely meaningless in actual tax work. Natalie is an enrolled agent, an IRS designation specifically for tax preparers. To the best of my knowledge she’s never tried to trick people into thinking she was a CPA, nor should she, since again it’s not anything worth tricking people over. 

You may very well have had a bad experience with Natalie. All tax preparers (and every professional in any field) have it happen. But you trying to publicly shame her while bringing up ridiculous things like “she went on a planned vacation” and “she’s not even a CPA” is frankly pathetic. You sound like the type of client all of us in the tax field are immensely relieved when they decide to go elsewhere. 

@Bobby Kumar I can pretty much guarantee the structure you start with won’t be the structure you stick with as you grow.

In my experience trying to “optimize” these things before you start lead to delayed or never starting.  Get started and talk to your attorney/cpa/insurance broker as you grow to make sure your current structure continues to work. 

As a CPA I will say this isn’t overly important. 

If your loan allows, buy the property in an LLC. If it doesn't, buy it in your name personally and make sure you have plenty of umbrella coverage.

The structure will make no difference for tax purposes so the only thing to worry about is legal liability. 

@Matt McConkey Thanks!  I told Light House I was using the money to buy a house.  I simply gave them the listing for one of the ten houses I bought that was on the market and they approved it.

They are incredibly easy to work with.  It was so easy in fact I actually worried it was a scam at first.  I will be using them again for sure.

 Guts in the tank exploded and sent water gushing out for about five days straight.  It was crazy.

Last week I finally completed the final step in a BRRRR purchase of ten properties at once from a single seller, the refinance (I guess that's technically the second to last step, now I have to "repeat"). It was a crazy deal that I was able to do without ever putting a single dollar of my own money into. Since so many people here ask how they can get started in real estate with no money down I figured I would share the details here.

The deal was a purchase of ten properties, 13 total units, from a single seller without putting any of my own money into the deal. I got a non-collateralized personal loan from Light Stream for $45,000, put $30,000 of that down on the purchase (kept the rest in the business account to cover expenses, etc) and convinced the seller to finance the rest. They cash flowed enough to make several major improvements during the last year using only cash flow. I also had a toilet explode while a tenant was on vacation which caused the bathroom and kitchen the flood. Insurance then bought me a brand new kitchen and bathroom. I painted three exteriors and put on two new roofs. I put in two new kitchens, new flooring in several and a few other minor changes in several more. And again, all of this was done using cash flow from the properties. As part of the financing, the seller agreed to wait one month for first payment and then do interest only for the first two actual payments. So that gave me time to build up a very large cash cushion to do all this.

It was a very long process, over a year from the time I purchased and at times felt like the refinance would never happen. Here's how the final numbers worked out (keep in mind this is rural Ohio, prices are probably much lower than most here are used to!):

Purchase Price For 10 Properties: $341,000 Appraised Value as of Last Week: $550,000 Refinanced amount: $347,000 Monthly Rent: $7,000 Mortgage Payment: $2,503 Insurance and Property Taxes Monthly: About $900 Cash Flow Before Repairs: About $3,600

At the time of refinance I owed the seller about $286,000 and Light Stream about $36,000 and paid about $8,000 in closing costs for a total of $330,000, which meant I got to cash out $17,000 into my pocket. Plus the other $15,000 from the Light Stream loan I never had to use. So total cash in my pocket from the deal was about $33,000.

Bigger Pockets was absolutely HUGE in my ability to complete this deal. The only reason I was able to talk the seller into the terms I wanted was because of the due diligence I was able to do using the BP calculators and other resources. I used the forums to get answers to my questions along the way, such as if a land contract would even allow me to do a cash out refi. I honestly can't think this site and community enough for helping me get this done.

If you are looking to get started with little or none of your own money, I can definitely attest that it is possible. But it will take a lot of creativity, homework and finding the right seller in the right market!

Definitely do an LLC taxed as an S Corp. You will be an S Corp for all of 2018.

You still need to do salary. There’s no S Corp scenario where that isn’t a requirement.  It’s how they get back a portion of the taxes you are saving. You do avoid the necessity for corporate meetings, etc. 

As someone else said above you absolutely want to use a payroll company for salary. Don’t try and do that yourself. 

When you say online retail are you talking ecommerce?

I see, you are saying other forms of real estate could be included besides rentals.  Fair enough.

An LLC would still have zero tax consequences.

@Martinis Jackson The OP...

"but can anyone help me understand the llc aspect of real estate?"

Regardless, an LLC still has no tax consequences in any type of business. Yes, if you elect to be taxed NOT as an LLC there could be a difference. But you don't need an LLC to do that. So the point remains, and this is a very clear fact, an LLC has no tax impact.

@Martinis Jackson An S Corp is taxed the same as a sole prop under both the new and old plans.  A Corp is taxed differently than a sole prop under both plans.  Neither an S Corp or a C Corp would be a proper entity for a rental business under either plan.

And you don't need an LLC to be taxed as either an S Corp or a C Corp.