All Forum Posts by: Nicole Bernshaw

Google Mark Kohler. He is a CPA, attorney and real estate investor. He knows exactly what a real estate investor needs tax-wise. Tell him that I belong to the best real estate investor group in Salt Lake City. He will know.

One thing to keep in mind: using a law professional (who know what they are doing) may be expensive at the start, but using someone who does not know what he is doing will cost you much more (with added headaches) in the long run.

When you say "acquisition fee" are you talking about the profit? Have you thought about a 1031 exchange?

On a tangent, Schedule E is for passive income (such as an occasional rental) as operating as a non-professional.

If you were a real estate professional (≥ 700 hrs active participation, ≥ 500 hrs material participation), then Schedule C is used on your tax report.

I agree with Brandon Hall. It is a good idea to document the work and the time you spend in your real estate activities, especially at the beginning.

500 hours a year means about 10 hours per week. 

750 hours means about 15 hours per week.

Some weeks, you will work more, some weeks you will work less. 

Of course, the material participation can be included in the professional qualification, but it is a good idea at the beginning to monitor your efforts to give you a "feel" for the "job" and to be able to protect yourself in case of an IRS audit.

Good luck.

If you owned the house for 2 out of the last 5 years and lived in it in 2 of the last 5 years, and your profit did not exceed 250K (if single) or 500K (if married filing jointly), you will not pay capital gain tax.  Ownership (purchase contract date) and residence are the only 2 criteria.

Technically, you are receiving income from rental, which is supposed to be taxed. Again technically, you could consider this as Schedule E rental, with all the calculations of income and expenses that this involves, and then claim the tax benefits.

This comes from the tax professional, owner of a tax service franchise, for whom I work: "All legal expenses for a business are tax deductible as business expenses."

Jeremy, Some states are indeed very expensive when it comes to create new LLCs. I know California is one of them. There are a number of issues to consider when creating LLCs:

1. How much equity is in a particular LLC? Basically, you want to protect that equity is someone sues you for an accident that took place in 1 of the many properties in that one LLC? If all properties are mortgaged to the hilt, no one will be enticed to proceed with the suit.

2. If there is a lot of equity in a particular LLC, you will have to evaluate the safety net that each LLC will provide you against the cost of the creation of each LLC.

3. If it is allowed in your state, consider creating series LLCs. They are like baby-LLCs and it costs very little, if anything, to created them. Series LLCs basically isolate properties from each other in such a way that, if  an accident takes place in one property, all the other properties are out of reach of the suing party.

What are the biggest benefits of LLC's?

• Asset protection

Are there any reasons I shouldn't start an LLC?

• If you have no real estate property, you have no need for an LLC

Will I be subject to additional taxes with an LLC?

• The tax on profits of a sale is carried to the individual(s) who own the LLC. Profits are taxed, no matter what, except if you opt for a 1031 exchange.

Is it advisable to have a separate LLC for each property?

• Because the main benefit of an LLC is for asset protection, it is advisable to protect properties with sizable equity separately. This discourages sue-happy people from going after your hard-earned assets.