All Forum Posts by: Patsy Waldron

There is nothing to be achieved by setting it up in California, since the property is located in Ohio. As James Wise noted above, you would need to register your CA LLC as a foreign entity in Ohio if you do business in Ohio, so it makes most sense to only set up an LLC here. Bonus: It only costs $100 to set up an LLC in OH! Super easy to do yourself by going on the Ohio Secretary of State's website and filling out the paperwork there. The only possible difficulty that you might have is that Ohio requires an Ohio resident as registered agent (the person who accepts your legal documents from the state). Many people use their attorney. Anyone who can reasonably be expected to be available during normal business hours will do. Maybe your property manager can do that for you?

The no tax on $500 K profit is for primary residences only (actually $250K if you file single and $500K if married filing jointly), and if you have lived in the house for 2 out of the last 5 years. If this is purely a flip, you would pay short-term capital gains tax on it regardless of how much you made on the house. 

Again, it looks like you would make pretty much the same amount of money on the house if you flip and pay tax OR refinance. Personally, I would choose to take the money out and get the long-term income from a rental. A third option is to hold the unit and rent it out for at least 1 year and 1 day and then sell, after which you would only pay long-term capital gains, which is lower than short-term gains. There are some good options here, since you got the house for such a great price.

An owner-occuoant loan (FHA, 203K, conventional) is entirely possible if you are willing to extend your stay in the will-be rental for a few months to reach 1 year, as Mike mentioned. It would be an opportunity to lock in great loan terms for 30 years (low down payment, low interest rate).

If you flip (i.e. sell immediately after rehab), you will definitely be paying a good chunk in short-term capital gains tax. From your numbers, refinancing would net you about the same amount (70-80k), so this is a no-brainer! Keep the house and continue to collect rent every month, use the cash-out refinance to get your next property.

You could use your 401(K) to invest in RE, but only if you are self-employed and set up a solo 401K and roll over the balance currently in your 401K with your employer. There are several providers on this site whose prices vary but essentially set it up for you, file all the paperwork with the IRS to set it up and every year for your filings.

As for comparing ROI, you would need to set up a spreadsheet with all the factors you listed- income, benefits, taxes and intangibles for current job and expected for different position. See which one comes out ahead.... It sounds like you have a pretty good position right now and your income would be taking a big hit if you change jobs, so financially the current job sure looks better than the alternative. Are there compelling personal reasons for considering changing jobs? If so, then it's a personal decision you'll have to make.

Congrats on your adventure! Sounds like you have your work cut out for you. Good luck!

@Sada Rafi

If the deal you are working on with the second agent did not come to you through your first agent, I think you're in the clear (i.e. you are not going behind first agent's back in dealing on a property that she showed you). That said, it is probably a good idea to just let the contract expire at the end of the month and switch agents. And be very forthright and open about working with the other agent- don't let her find out afterwards and create bad blood between them.

LOVE this.

Interesting question. I guess you are going for the line between getting a great deal and taking advantage of someone (who may be "motivated" because of a hardship). For me personally, the line is-

1. When someone does not know/understand the true value of what they are selling (not educated enough, relative selling, not aware of true market conditions, etc.);

2. Forcing someone to take a loss on a property;

3. Taking advantage of grief, turmoil, financial distress.

Essentially, I would sleep better at night knowing I had negotiated with someone who was on an equal footing.

Ah, okay! Sounds like an interesting building, for sure! I hope the zoning committee approves your plans. You would essentially double the cash flow with the change! Best of luck.