All Forum Posts by: Luis Barrios

Hi all,

I will be creating an LLC in the next few days and will be filling in the state of Rhode Island. I've been in contact with an attorney and a few accountants as how they recommend I file, but wanted to ask seasoned investors on the forums.

My wife and I currently own a 2-family home with a short term rental which generates quite a bit of cash flow month-to-month, and it is getting to the point where we need to separate our personal finances from the rental's, and, we also want to protect our personal assets from liability and take advantage of any tax benefits. Also, we will be purchasing a 2nd home in the next few months and will turn that into a short term rental as well. 

So far, I plan to create an LLC in Rhode Island, open a business account and a business line of credit, have all the earning and bills from the short term rentals go into said account, and have the LLC sign a lease on each of our properties (which my wife and I will own under our name) and then transfer the earning after expenses from the LLC over to our personal bank account. My reasoning for having the LLC sign a lease on each property is, 1) for refinancing or getting a new loan, our mortgage person said it looks better on paper to have rental income coming in from a lease than a "short-term rental", and 2) the rent that the LLC will be paying us is tax deductible as a business expense (for the LLC) when we file at the end of the year.

Eventually we will be buying and flipping some properties (will create a different LLC for that) and buy and hold a few. So, I was also told not to purchase a property using my LLC as my wife and I have enough financial history to qualify for a conventional loan or a refinance and the LLC won't (I assume this mostly applies to buy and holds and refinancing as with flipping we will not be looking to refinance or go conventional).

Most of the advice I have gotten about how to have our LLC taxed is to simply have it taxed as an LLC and file our taxes together. However, I was also thinking of paying myself from some of the earnings as a 1099 employee simply so I would only have to pay self-employment tax on what I pay myself and not all the earnings, so filling taxes as an S-corp.

Can some experienced investors advice on my plan?

Is there any flaws i my logic?

Also, are there any benefits on filling my LLC with an attorney or by myself (which I was planning)?

Any advice or personal experience will help!

@Jason D., @Lydia R., @Claudiu Peter, @Joseph Birbiglia, and @Anthony Thompson, thank you all for your input! I'm actually working with a realtor friend of mine to find my first deal and am planning on visiting a local real estate meet up tomorrow. I have a friend that has had great experience with Renatus, so if I choose to invest in a program, I'd most likely go with them and purchase their starter program. 

I'm looking to find a property in the next few weeks to a month and turn it into an Airbnb listing. We currently run an Airbnb out of our second apartment from our 2-family home and have been super successful, so we want to scale to one more listing. After we have our second listing, I plan to do my first rehab and flip or focus on wholesaling. I want to set up some more monthly cashflow for me and my wife before switching gear to something that might take more time and money to generate income. 

My wife and I are planning to invest in our first property in the next month or so. We will either purchase a property at an auction or do a short sale, etc. We are new at this and since we are doing this with out a realtor or other partners we lack access to contracts, forms, procedures and legal paperwork needed for our first deal.

We know that we want to purchase a property using either a hard money loan or a private lender, rehab it and list is as an airbnb in Providence, RI (where we currently live). After that, will will refinance with a bank and take the lump sum and repair (essential BRRRRing the property). We are extremely confident in the Airbnb model as it has worked for us in our current home for the past year (we own a 2-family home and list the 2nd apartment as a short-term rental).

My wife and I both attended a Fortune Builders workshop last year and where inclined to invest in their Jumpstart program simply for the access to the contracts, forms, legal procedures and their back-end-office system. We also have a friend who invested in the Essentials program thorough Renatus, which essentially offers the same but at $2k investment instead of $9K with Fortune Builders.

Do any of you have any experience with either programs? Is one better than the other? Are they different? And the most important question: Is there any way to get access to these forms, contracts, legal procedures for our first deal, for free or for less than the $2k-$9k investment?

Thank you all so much for your input!

@Matt Nusbaum

We’re glad we did it as I got laid off right before we close don our house and discovered we really like Airbnb!

@Lexi Teifke, Thank you! We're planning to purchase another home and repeat the same model minus the MLS and bank financing, next.

@Zac Lester, So we make on average 2-3 times what we would make with a regular tenant here in Providence. We've averaged $2.1k/m minus expenses (utilities, furniture, fixes, food, etc.) but it covers our mortgage and bills (which was the plan). The next property will hopefully make more and our mortgage/bills will be less :)

Investment Info:

Small multi-family (2-4 units) buy & hold investment in Providence.

Purchase price: $200,000
Cash invested: $10,000

2-family home in Providence. The 1st floor apartment is owner occupied and the 2nd floor apartment is currently a short-term rental listing.

What made you interested in investing in this type of deal?

We were first-time home owners who wanted to live mortgage free and take advantage of the growing short-term rental industry.

How did you find this deal and how did you negotiate it?

It was an MLS listing and purchased it with a realtor and traditional bank financing.

How did you finance this deal?

MLS

How did you add value to the deal?

Even thought the place was "newly renovated" we invested in some small finishing touches and completely furnished the 2nd floor apartment.

What was the outcome?

The 2nd floor apartment is currently a successful year-round short-term rental.

@Anthony Thompson, thank I'll send them a message and see where it goes. And, thank you for pointing the signature out. I'll send you and email and connect with you through there!

@Frank Patalano and @Anthony Thompson, I would love to meet and chat with one or both of you guys. Would you mind sharing your email/contact info and we can set up something? (not sure if this has to be done outside the forum or not).

Thank you so much for both your input and taking the time to introduce yourselves and talk to me!

@Anthony Thompson, thanks again for the info. Sounds like I definitely stay up to date on this and attend the next meeting/discussion. I'll look them up online and get back to you if I can't seem to get connected. 

...On that note, I actually just found their website and Facebook page and they don't seem to have been updated since 2017. Here are the links:

https://www.facebook.com/fixprov/

https://www.providenceapartmentassociation.com/new...

Maybe I found the wrong pages?

@Frank Patalano and @Anthony Thompson, thank you so much for the advice and responses.I like the no-sell or soft-sell idea. I've been in sales/marketing for most of my 20s and haven't really enjoyed it much.

We definitely want to invest in the right property and make sure all the number are good, even without Airbnb, although we feel super confident about the model after a year of doing it. It does take a lot of work but it is worth it in our opinion. Any "fair regulations" would only promote host who are hosting and listing their properties the right way and hopefully deter or shut down host and listings who are not.

I am definitely planning to attend the April event in Warwick but I'd like to start networking before. Do you guys know of any other events or groups that meet before then?

Would you guys be up for meeting up? Not sure what the etiquette is here on the forums and I'm not looking to sell myself or anything. We're Really just looking to meet people and, of course, potentially find a lender!