All Forum Posts by: Joshuam R.
Joshuam R. has started 40 posts and replied 257 times.
Post: Getting Out of Paralysis and Searching for a Property
- Specialist
- Florida
- Posts 270
- Votes 91
Take action, example, if any down payment money that you may fear to lose for making wrong decisions, do just that. (suggest if 22yrs old, single go for SFH, and house hack it, year 2 go to the next)
The secret sauce is go do what you fear not to do. You will see the bigger picture in few months or years down the line, and when you do you will still realize oh snap! glad I did those mistakes and still have time for profitable decisions moving forward.
Action! Move! Get going! Just do it! Yesterday you said tomorrow! and tomorrow is Today!!!!
Post: SFH personal rental transfer into SMLLC
- Specialist
- Florida
- Posts 270
- Votes 91
What is your experience in doing so for the following areas:
- Landlord insurance policy (I learned and confirmed with agents that my name would remain, and we just go ahead and add the LLC into it also) (This will also be under an umbrella policy)
- Loan (I learned that as long as the LLC is owned by the original primary loan holder, they will not need to call on the loan)
- What are the TAX advantages/disadvantage of doing this (my status is not full-time investor, still hold full time W2 job, and a SMLLC)
Thank you very much BPeers!
Post: SFH personal rental transfer into SMLLC
- Specialist
- Florida
- Posts 270
- Votes 91
What is your experience in doing so for the following areas:
- Landlord insurance policy (I learned and confirmed with agents that my name would remain, and we just go ahead and add the LLC into it also) (This will also be under an umbrella policy)
- Loan (I learned that as long as the LLC is owned by the original primary loan holder, they will not need to call on the loan)
- What are the TAX advantages/disadvantage of doing this (my status is not full-time investor, still hold full time W2 job, and a SMLLC)
Thank you very much BPeers!
Quote from @Mitch Kronowit:
Received a reply from one of my attorney's regarding the insurance (and mortgage) issue.
First off, the more names you can place on your insurance policy, the better. So no problems there. Having your name appear along side your entity does not prove "alter ego".
Regarding the other issue, which is actually discussed in another thread (hey, why not kill two birds with one stone?), I asked about transferring a rental property into an LLC while keeping the mortgage in your own name. He advised to keep it quiet. There is no reason to inform the lender because they may exercise the "due on sale" clause. As long as the LLC is on title and the deed has been recorded as a public record, it shouldn't matter who holds the note.
He also went on to say the courts look at a wide spectrum of factors when trying to determine "alter ego". The important thing is to maintain your entity as best you can, observing as many policies, practices, and formalities as possible. He said some attorney's may try and build a huge case out of several trivial matters, but all that usually results in is a large legal bill for their client. :mrgreen:
Another law firm, Drosman & Percival, LLP (Irvine, CA) state that setting aside the corporate veil and enforcing the Alter Ego doctrine has been regarded as an "extreme remedy" by the courts and rarely used. Even my own father, who attempted to have corporate shields set aside in court while working for the State of California, said it was a very difficult thing to accomplish.
The one thing I learned is this due on sale clause will not occur if,
phase one: you buy property title and loan in your name.
phase two: you transfer title to Single Member LLC own by you
any other way of structure it may.
Post: FL SMLLC > EIN > AS INDIVIDUAL OR CORPORATION
- Specialist
- Florida
- Posts 270
- Votes 91
Quote from @Ash Hegde:
Quote from @Joshuam R.:
Quote from @Ash Hegde:
Agree. S-Corp is used more often for self employed people who want to avoid some of the self employment tax. If it's just for holding property, you'll be fine leaving it disregarded, which is the default, meaning you won't have to file an 8832 election.
Yes, can pass through some gains as income to members/employee, and non-taxed distribution paid to owners. I believe more play for the CPAs to flex their strategies.
Sorry, is this for a side business? If so, an S-corp can be the right move. I was assuming it was to hold a property.
LLC (holding company / Parent company)
Children:
-other temporary LLCs for assignment contracts to transfer ownership to the final buyer (this can be under holding or not at all, probably separate)
-dba for the wholesaling brand and marketing, expenses, etc
-permanent llc for the rental management side, expenses, etc.
Post: FL SMLLC > EIN > AS INDIVIDUAL OR CORPORATION
- Specialist
- Florida
- Posts 270
- Votes 91
Quote from @Ash Hegde:
Agree. S-Corp is used more often for self employed people who want to avoid some of the self employment tax. If it's just for holding property, you'll be fine leaving it disregarded, which is the default, meaning you won't have to file an 8832 election.
Yes, can pass through some gains as income to members/employee, and non-taxed distribution paid to owners. I believe more play for the CPAs to flex their strategies.
Post: FL SMLLC > EIN > AS INDIVIDUAL OR CORPORATION
- Specialist
- Florida
- Posts 270
- Votes 91
Quote from @Chris McCormack:
S-corp is not the strategy for holding property. A couple reasons why:
1. S-corps are limited to 100 shareholders. If you go the route of raising capital and investing in commercial real estate, you will be left disappointed when you can only get money from the first hundred people who commit.
2. S-corps have strict guidelines on taxable events. Specifically contribution of property and sales of interest are both taxable events within the s-corp. If you refinance a property or contribute another, it will trigger a taxable event which defeats the purpose of a refi.
3. S-corps are created to mitigate the self-employment tax that comes with LLC. You rarely see this with the ability to generate losses with real estate and therefore a loss in the s-corp would defeat its purpose AND restrict the amount that some of your owners could deduct.
Feel free to reach out to me directly with specific questions but it helps to know S-corp is not the move for holding property.
Understood.
But on the surface, S-corp is best, unless you are raising capital /syndicating as you mentioned.
Post: NAVY FEDERAL INVESTEMENT LOANS
- Specialist
- Florida
- Posts 270
- Votes 91
Quote from @Kevin Cespedes:
Hello josh do they finance 3-4 units? Or is it only duplexes im Also a member of navy federal
Up to only duplex. Yeap, sucks.
But they do commercial loans so if you are a member, you can call and learn from what they offer. Regardless of if you are not ready or even have a business. This will serve you well when time comes correct in your journey.
Post: Stupid Cash flow on First Property
- Specialist
- Florida
- Posts 270
- Votes 91
Keep milking it as long as you stay of the radar with the airbnb vs rules regulations of the county and condo association. So I say run your worst-case scenario to know the real picture once shyt hits someone's fan and you don't end up shocking your current cashflow habit. Grab and Go!
Post: SMLLC in FL > EIN > AS INDIVIDUAL OR CORPORATION
- Specialist
- Florida
- Posts 270
- Votes 91
Hello all, will be continued full time W2 employee but also starting new LLC single member.
Next hour or so will register EIN with IRS, best selection I have found during discovery is to establish it as either 8832 or 2553 instead of individual/disregarded entity.
Between the two found that S-Corp may be the best route vs Corp since it is definitely considered Small Business.
I appreciate you sharing some color to this monochrome current position I am in.
Thank you all dear BPeers!