All Forum Posts by: Janene Tompkins

Hi Again,

The 199A deduction has nothing to do with having a real estate license. It is part of the 2017 Tax Act, and is the 20% profits deduction available to pass-thru entities. The “real estate” professional qualification allows the deduction of RE losses against ordinary income. It is a time and services test, no RE license needed. In fact, real estate sales does not necessarily qualify one for the deduction. Sorry, I meander. But 199A and “RE professional” are two separate tax items. As for the deduction for paying people in cash, it depends on what your tax advisor is comfortable defending should you be audited. Again, nothing I say here should be construed as tax or legal advice. Please seek out a good CPA or EA who works a lot with RE clients.

First, disclaimer: this is not tax advice. Please seek out a CPA or EA for your individual tax situation.

Ok, now then. An LLC is a pass-through entity. Net income from the LLC passes through to your individual tax return. As for the cash you put into the LLC you could allocate it different ways, as a capital contribution or as a loan to the LLC. The expenses you incurred in getting your business started could be deducted against the business income. And yes, use that depreciation! This all goes on the LLC's K-1. The net income or loss from the LLC's K-1 is then reported on your individual return. Don't forget the new 199A deduction! Depending on several factors, mainly do you meet the test to call yourself a "real estate professional", you may be able to use the LLC losses to offset regular income. If you do not meet certain tests, the losses are deferred. There are multiple steps in this process, please hire a good tax advisor. Good luck!

Check with Credit Human and ParkLane, maybe they have better terms. Also, if your personal credit is good, you might qualify for a decent unsecured loan. SunTrust does them online through their LightStream division. Rates were fixed and they had a 10 year AM. Sofi might be another source for a decently priced loan. Good luck!

I would value old homes that need a lot of work at ZERO. Value the MHP on the basis of lot rent only. You will probably have to put in a minimum of $4000-$5000 per Home to bring them to any kind of decent living standard. I am speaking from experience. I bought a park with 20 park owned homes. They were “rehabbed” by the previous owner. I valued them at $5000/ each figuring that was the cost of moving and setting up a home. I wish I had given them a Zero. I just had to tear four of them down. We have rehabbed 8 others and it was a minimum of $4000 just to get them liveable. Meaning heat, floors that don’t have holes, operational bathrooms, electrical, etc. Okay, sorry for the rant. What I’m getting at is that home rent is usually a sunk cost. If you are renting out a mobile home, you will probably spend a lot on upkeep. Try to sell the homes to the resident, let them take care of the maintenance and you collect lot rent. Old homes are a money pit. Old homes with rough tenants are a money pit with a headache attached! 

With a REO, it's doubtful you will be able to get accurate financials. I agree with all of Jon's comments. Check the infrastructure of the park. See if you can take possession of the homes that are being foreclosed upon. See what area lot rents are and try to get the bank to take less.

Does the purchase price include the land? What type of services does it have, City water and sewer? Well And septic? This could be a decent investment, but more info is needed. Good luck!

I breakout two values, the lot rent with applied cap rate and then a value on the POH’s based on age, condition, etc. Usually, the two figures together result in a realistic price. If you approach the owner with The NADA value, perhaps they will see it your way. Of course, if the two numbers are close to their asking price, you don’t have to delve into how you derived your number. Good luck!

I’m going!

Absolutely!

I highly recommend First South Bank. They did a loan for me at that exact amount on a similar sized park in NC. Depending on your personal credit and number of partners, SunTrust does unsecured loans through their LightStream unit. It’s all online. I got $100k at 6% 10 year amortization and the money was in my account 24 hours after I did the application. SunTrust does not do these loans in their branches, it’s all online.