All Forum Posts by: Mariah Jeffery

I don't, but I have enough properties now that I don't necessarily add to the reserve fund for every new property I buy. Basically I'm pooling the risk.

A friend of mine just suggested MIL set up a trust to put my husband in control of the property and make him the owner when she dies. He claims she can include up to $1M in the trust and this would effectively "gift" all of the shares to him now, without tax consequences or having to set the basis arbitrarily low. Does this sound right?

The land is already leased to a cattle rancher and we definitely have no plans to change this or the tax status any time soon.

Do you have family in the area that could look over your properties and the management co. after you move?

My 28 rentals are in another state where I never lived, but my father in law lives in the area and is a general handy man. He does the maintenance for us. It has worked out, despite the advice not to do business with family.

I wish we knew the future. I wouldn't mind selling off some parcels and building our dream home there on best 20 or so remaining acres, but my husband prefers to keep it all in the family. Most likely, our daughter will end up selling it when we die. We had considered a business venture, such as a bed and breakfast. However, that would require a huge capital outlay and neither of us has any experience with a bed and breakfast, and my husband and I both have full-time jobs and live in another state.

This ranch happens to be in the general area where we have our 28 rentals, and we are tentatively planning to retire early (about 20 years from now) and build a home on this land. With time on our hands then, we may come up with a business venture involving this land, but I have no idea what it will be, only that it probably won't involve selling. Right now, the property taxes are low because it's ag land, and as soon as we change it to commercial purposes, both tax and insurance will quadruple, so we really better have a good plan to bring in cash flow with any business venture.

One thing I'm hoping, when I learn more about the rules involved, is that we can take advantage of having both an LLC and a C-corp.

Unfortunately I can't be much help. I've really only looked at the east side of Orlando. My sister is about to become a landlord there because she bought a new home and will be renting out her previous home in Altamonte Springs. She paid $60K and will be renting it out for $850/month. That's not 2% rule material, but not bad considering she became a landlord by mistake!

In my case I would probably settle for something similar, just because of the additional write-off potential, but I haven't had time to get serious about it.

You are very young and rates are very low. Both of those things point toward buying more rentals, but only you can determine your comfort level.

I started buying rentals at 26 and I paid only the bare minimum so I could use excess cash flow. This last year, my husband and I got to 28 units (we were 31, now 32). Now we are actually considering paying some of our highest rate mortgages down, simply because we don't think we want to buy more rentals any time soon. We have our hands full with the ones we have, full-time jobs, and our daughter. We're glad we haven't paid anything down before now, though, because we would not have been able to jump on the good deal we took advantage of without significant cash reserves.

Another thing to consider is liability. If your properties are not in an LLC and they are paid off, this makes them a prime target for a lawsuit.

What are you looking to find out? I grew up in Orlando and have family there. I have briefly looked into buying a rental there (especially since I travel there 3-4 time per year and would love to write off my travel) but haven't pulled the trigger. All I can say is that cash flow seems to be decent in the area and the 2% rule is possible to achieve.

I've gotten a lot of great advice on my rental properties over the years and I have to thank the BP Community for that. Today I'm looking for advice on a different topic, but it's related to RE, corporations, and tax-minimization, so I'm hoping some of the gurus are here can help.

My husband is a minority shareholder in a family-owned C-corp. The corp. consists of approx. 600 acres of land, part of which is leased to a cattle rancher, another part of which is logged every 8-10 years. There is a house on the land. The corp. is not especially profitable; it generally brings in enough cash to pay the property taxes, insurance, maintain the house, and buy equipment (snow blowers, etc.) Occasionally the owners take a small distribution.

His mom and uncle each (along with their kids) own about 45% and 55%, respectively. They are not seeing eye-to-eye and want to split the corp., but the uncle (majority shareholder) will not agree to do the split unless my husband is a majority shareholder in the new, smaller corp. The reason is that MIL has a younger boyfriend, recently turned fiance, who no one (including MIL) wants to get the land that has been in the family for 150+ years.

We are exploring options to transfer enough shares into my husband's name so that he will become a majority shareholder ASAP. MIL is fine with this and wants my husband to be a majority shareholder so that she can be done dealing with her brother, and all she asks is for free rent (her brother charges her rent, which is paid to the corporation). She is willing and eager to do whatever is necessary to get the shares to my husband and expects no cash. However, our preliminary plan will involve buying some of the shares.

So far our plan is the following:
- Come up with a value for the shares that can be documented by something like "the average price per acre for land in County X time the # of acres, plus avg. cost per sq. ft. of the home, plus value of machinery. The value will purposely be biased low (but not ridiculously low to flag an audit), which MIL will be fully aware of, and we will all agree to it.
- MIL gifts shares to my husband, myself, and our daughter up to the max value of $13K each, this year and 2013. This will get our combined shares up to ~40%. The shares, for gift tax purposes, will be discounted 30% to reflect the fact that they are minority shares and not marketable.
- We enter into a contract with MIL to buy the additional shares needed at the discounted value on a 25 year note.
- We then split the big corporation into two smaller c-corps in January of 2013, after the gift shares have been transferred.

Does anyone see any holes in my plan?

Obviously we are involving an attorney and a CPA, but the first meeting we could get is over 2 weeks away and I wanted to see if anyone had any ideas in the mean time that I could use to do some research before the meeting or perhaps books I can read to educate myself on the topic. TIA!

I forgot to add, I have $425K borrowed through this credit union and they are charging me only $3K for the rate mod fee. No new title, appraisal, nothing. B/E is 6 months.