All Forum Posts by: Pauline Zhao

Hi, if one already has a W-2 job, but at the same time has an LLC for rentals, can that personal still qualify for real estate professional?

Thank you!

@Christopher Smith @Dave Foster Thank you so much !

@Odell Cregger

On your EIN confirmation letter, it will state when the first return is due, and what type that return is. You will need to file accordingly even it is a zero return.

@Jack Grove

For buy and hold investors I recommend Stessa, it is free of charge and more flexible than Quickbook.

@Darius Jessup

I agree with Carl. Early withdrawal from traditional IRA will cause 10% penalty and taxable income. However, if the withdraw is for a reasonable cause, such as purchasing your primary residence, you might be able to waive the penalty. You will need to speak with your IRA carrier for the details.

Without reasonable cause, it is preferable to roll your IRA to a self-directed IRA and you purchase the properties with your self-directed IRA. You can also do a backdoor to convert your IRA to a Roth. You will need to pay tax on this convention, but the proceeds from the property/investment will be free of tax.

What are the options for the exit strategies for 1031 like kind properties that are fully depreciated with zero tax basis left? Thank you!

@William Boeklen Welcome! I strongly recommend to plug yourself in the local real estate investor groups in Charlotte area once you moved in! The name is Metrolina REIA, and it also has a meetup page there. Wish you have a smooth transition.

@Christopher Smith

Even if you have never formed a company/LLC for your wholesaling business, you will still need to report the income from the wholesaling business on your personal tax return as self-employed and pay self-employment tax on it if there is a net profit. I would suggest that you open a separate bank account to track all the income and expenses that incurred for the wholesaling business. If you didn't report the income from the past years but you think that you should have, I would reach out to a tax professional to exam your previous tax returns and see if amendments are needed.

Hi @Laura Shinkle,

It is going to be difficult for you to get loan from the banks who use the fannie mac and freddie mae standards to underwrite the mortgages. Here are some of the options that I can think of that might help you:

(1) Purchase the entire property using cash. Most of the Chinese investor do it this way and it is easy to do. Lower closing cost and faster the transaction. But if you are looking at the deal as an investor, the cash on cash return will be very low. It will also be hard for you to re-finance the cash out, so that your cash will be locked into the properties.

(2) Seller finance. There are sellers out there who are willing to do seller financing to the buyers who cannot get a loan from the bank. So you can still use leverage to purchase the house. I would suggest to work closely with your realtor on this method because there will be a lot more communications involved.

(3) Form an LLC and use portfolio loan or hard money lender. If you plan to invest in the properties in Charlotte, maybe it is a good idea to form an LLC and purchase the properties under the title of LLC. You won't need to be physically here to form the LLC or to purchase the property. Plus, the LLC will give you better protection on the liability side.

@Joe Frank 
Losses from the sale of personal–use property, such as your home or car, are not deductible. It is not eligible for the capital gains loss of up to $3,000 annually. Sec. 121 is a great means to exclude gains on selling your primary residence. It allows $250,000 for single and $500,000 for married filing jointly on gains. So I think it will be more tax beneficial if you can settle with a profitable price.