All Forum Posts by: Michael Plaks

@Liwen Gu

The easy part: taxes. There're no tax benefits from LLCs for landlords, except for some rare and complicated cases.

The difficult part: asset protection. Zero consensus between attorneys. They all have different opinions, unfortunately.

There have been several threads on this forum recently that discussed LLCs and asset protection in depth, including this one. Please look at them.

 @Dave Foster or @Bill Exeter

This is what most of us do. By us I mean the tax accountants on this forum. We serve clients nationwide, remotely, using technology. The technology we use varies, and so do the services we offer. 

@Michelle Eisenberg

The problem that @Paul Allen mentioned is one of a few common ones. They happen when the tax return is created from scratch every year instead of being transferred from year to year - in which case the software picks up the carry-forward items. But if you keep changing software or lazy tax offices - then such items are dropped, costing you money.

This is the textbook dilemma: don't pay but risk costly errors or pay a professional. You can also change oil in your car and cut your own hair, as long as you know what you're doing. If you;re willing to invest as much time as @Dave Toelkes did in learning about taxes - then you can probably self-prepare. There're not many investors who understand taxes, however.

Like my colleague @Account Closed said, you can successfully complete a basic tax return with couple rental properties yourself - as long as you're willing to invest some time into understanding the rules, which you're doing by reading the books. 

A good tax professional who understands real estate (this part is critically important, as REI tax rules are unique) will still do a better job and likely save you some money. Your compromise could be to do it yourself and, before submitting it to the IRS, have a tax pro check it out. The risk is that you may end up paying more for tax prep this way, if the accountant discovers that you made major mistakes, and you need to hire him anyway. Well, could be considered the price of learning.

Eventually, an accountant will be necessary for you, as our ultimate job is not tax preparation but the proactive tax planning. This is where the real value is. The bigger your business, the more it matters. Good luck in this business!

@Andre Chambers

What you call materials and what the tax code calls materials are two different things, unfortunately.

The initial rehab, including both labor and materials, is generally not deductible right away, except for some specific items such as appliances, carpet, fence and similar things. Many details are involved, so there's no quick online cheat sheet that you could rely on. A lot of it is under the "it depends" category.

Which is why we accountants enjoy our job security. :)

My bad. I was not sure how to spell "inexplicably" - English is not my first language :)

Besides, in the Code, almost nothing means what we think it means.

Nobody knows for sure at this point, of course. Sec. 199A only applies to a "trade or business" which is conveniently undefined in the code. The general consensus is that this term will be applied as in Sec. 162. 

A typical casual investor with a full-time job and couple rentals on the side does not meet this definition.

Also, most leveraged SFHs show a loss on taxes anyway, after depreciation, so Sec. 199A would be irrelevant even if applicable.

@Josef Roberge

It seems you're trying to complete the closing paperwork by yourself. I would not, especially when a trust is involved. 

At a minimum, ask the title company for assistance. If they know what they're doing, they will help. I've heard stories of incompetent title companies, however. You best bet, of course, is an attorney, and I'm not one.

@Leila Nosrati

All IRAs are solo by definition. You can have an IRA whether or not you have a business. When you hear the word "solo" - they are talking about a Solo 401k, which is a different type of an account, and they are excellent for the self-employed investors without employees.

Some of the providers with solid reputation are @Dmitriy Fomichenko, @Carl Fischer and @Brian Eastman.