All Forum Posts by: Mike S.

@Jason Adam

I am not a CPA but here is my understanding of the subject. Please confirm with a tax professional before acting on it.

If you are talking about the interest on the mortgage on your rental property,

You will not deduct the interest directly on your own tax return, but the interest will be an expense on the schedule E that will be deducted from your gross rental income the same as the utilities , property taxes or repair that you pay for the rental. So it will be deducted.

Now if you took a mortgage on your primary residence to finance the purchase of an rental property and you can prove that all the money went to finance this property you can also do the same as it will be an investment expense.

Where the confusion lies is that you can not put that interest expense directly on your 1040.

You also will get the depreciation deducted from that gross passive rental income.

It all come down to what would you accept to lose.
If you have properties that are worth $40k, then you may accept to have multiple ones in the same LLC or not...
Some people sleep perfectly fine with no LLC, some like me want to limit the exposure and believe that the one hundred dollars a year cost of having an LLC per property is justified.


But be also aware of the negatives of using LLC. In addition to the creation and renewal costs, lending become more difficult and expensive, you would probably need a lawyer to act in court to represent your entity, you need to operate the LLC properly to keep its protection veil (documentation of meeting, separation of accounting, proper way of signing documents on behalf of the LLC, etc...).


At the end of the day, there is no one right answer for everyone, but only one that make sense to you.

Originally posted by @Jason Xue:

@Mike S. When it comes to email correspondence for all your various properties, would you just use one email address that's linked to your management LLC? Or do you have separate emails set up for each property LLC? I imagine the latter to be overwhelming in practice...

I do have email setup for each property LLC, but it is seldom used for the registered agent.

The tenants don't even know the property LLC name, their only contact is with the management corp. So the quasi totality of the correspondence is under the header of the management corp.

Originally posted by @Mary M.:

@Mike S. I am curious why that would be a requirement.  Why would a landlord need to be addtl  insured on a rental policy? How do they have any financial interest in the tenants belongings?

My understanding is not about the belongings but the liability coverage part that is usually included with the renter's insurance.

Some time a mortgage lender will require that the owner be additional insured on the tenant’s renter’s insurance. They may even require that the lender be also an additional insured on all policies.

Time is money. There are some repairs that I will do myself and some that I subcontract to save me time.

Last as mentioned above, some work need to be permitted and you may not be able to pull a permit yourself as builder/owner without a license if you don’t reside in the property. Last if you do some repairs without the required permit your liability in case of problem is through the roof as none of your insurances will cover you.

I would say 0% down is great in any market, especially now.

If things go badly what is worst that can happen? You loose the property and the money you put in. But you didn’t put any money!

So the only risk for you is the time that you invested and possibly your reputation. These two are important for sure but the education you would get may be worth the time and your reputation can be spared if you are totally upfront with your seller and you kept your promise. An outside event that you had no control on may sink your boat but probably not your ethics and reputation.

@Dennis Shinn

Transfer the money to your living trust.

On the contract do not put yourself as the buyer but you as trustee of your trust.

On closing, have the trust pay directly.

@Nicki Hard

Depending on your mortgage agreement the transfer of the underlying property will usually trigger the due on sale clause that will make the lender ask you for a balloon payment all of the principal and interest due.

Some type of loan will authorize a transfer to an LLC where you are the sole member.

One option to get around it is by transferring the property to a land trust where you are still the beneficiary. This transfer while being recorded and known by the lender can not trigger the due on sale clause per the Garn St Germain Act. Then later you can assign the beneficial interest of your land trust to the LLC quietly as it is not recorded anywhere.

@Robert Hernandez

Instead of calling the police that will send a road patrol unit that won’t be able to do a long term investigation try to get in touch with their narcotics unit or street team. Have a meeting with them and explain the situation. Offer to let them install cameras or other equipment on your property to help them during their investigation. Do not disclose that information to your tenants or neighbor as it would come back to the dealer eventually. Just stay low and let the specialized unit do their job. It may take a few months to get a solid case for prosecution and also they won’t be able to put all their small staff on that single issue but that is the proper way to deal with it.