All Forum Posts by: Jeremy Salvador

Thanks! Any recommendations on good tried and true training programs?

Has anyone heard of http://cashflowcommanders.com/

I'm interested in getting involved in purchasing tax liens and I heard about this program - I'd like to get a program that would provide a system and information to jump in with this strategy.

Thanks everyone for the constructive input. Sounds like for the amount of income here the personal ownership route is the way to go.

At what point should I consider an LLC?

If I'm considering growth, additional acquisitions, and possible buy/flip deals when should I start to consider a C-Corp? (for corporate credit purposes)

I'm providing my profitability estimate to hopefully answer any other questions about the deal. But again, I'm not interested in whether you think it's a good deal or not - I'm interested in legal entities.

479,000 price
16,765 amount down
Interest rate 4.5% 30 year fixed

4,946.00 gross rents (2x 5bd 3br rents vary slightly from http://hacla.org/vchr/)
(2411.24) monthly payment
(498.96) taxes
(52.91) insurance
(242.98) PMI
(247.30) property management
--------
1,492.61 estimated net profit
(35.00) trash
(50.00) grass maintenance
--------
1,407.61 estimated profits (less monthly + ops expenses)

Yes, I'm renting to section 8 tenants.
Yes, I understand the risk.
Property is brand new - never been occupied
Historic vacancy rate for similar deals is less than 1% since these tenants are racing to get into a new property like mine.
Property is covered under builder's 2/10 warranty.
Because of the warranty maintenance will be minimal.
Heating unit is covered under warranty. No AC unit.

Thanks Loc - I've never heard of doing a Land Trust with your LLC as the beneficiary. I'm going to have to look into this. It seems that solution would provide both liability protection and keep profits off my personal return.

Property is brand new never been occupied and covered under builders 2/10 warranty
Because of the warranty maintenance will be minimal.
Heating unit is covered under warranty.
No AC unit.
Both tenants sign a 12 month lease and pay for utilities.

BTW - Thanks for the input, but I'm not interested in arguing about cash flow and the specifics on figures. I don't mean that in a harsh way. I'm just interested in opinions on the best legal entity/legal structure for this investment property and future growth.

I'm aware of the overall benefits of an LLC
- easy of operation
- basis for depreciation
- no double taxation

However, double taxation only occurs in a c-corp when distributions are paid to share holders. I want to retain the earnings in the entity for future growth and acquisitions.

Since this property will positively cashflow, and my wife and I already make average incomes - using a C-Corp to separate rental earnings would appear to be beneficial.

Additionally, in my experience if you're working with a lending company and they see a K-1 reported on your 1040 tax return, they start asking for financial statements, corporate tax returns, etc. etc. etc. Since an LLC is a pass through entity, I would have to go through the head ache.

The problem I see with a C-Corp is:
- I may not be able to do do a 1030-exchange in it
- Any transfer of assets is will be taxed as capital gains
- There may be no basis for depreciation
- Mandatory shareholder meetings
- I don't think that the current earnings level could substantiate the amount of maintenance needed for this entity

I'm just starting out in real estate investing so any input would be appreciated. In your experience are my assertions about C-Corps correct?

Knowing more about my situation what legal structure would be most beneficial for now and future growth?

This is before income taxes but after property tax. Property was financed.

Gross rent is $4,946
After PITI and management fee cashflow is about $1,500

Hi all,

I'm purchasing an investment property (residential rental duplex) and I'm wondering what the best legal entity to hold it in would be.

Purchase price: $479,000
Monthly cash flow: $1,500

Income will be kept within the entity to use for acquisitions down the line. Additionally, I plan to sell the property in 5-10 years for a profit and 1031 exchange it into another property. I'd like the legal entity to provide liability protection and mitigate taxes.

What entity should I use? S-Corp, C-Corp, LLC? Or should I just get an umbrella coverage insurance policy and report the property on my 1040 Schedule E?

Thanks in advance!

Jeremy
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