All Forum Posts by: Shad Rich

Thanks, @Allan C.. Maybe I will split the expenses by creating a journal entry for each property. I have a couple of days to decide before the filing deadline...

Thanks, @Clifford C Toth.

I only have the single LLC for real estate at the moment (no holding company). My inclination is to report the shared LLC expenses as "Ordinary business income (loss)", which will almost always be a loss. Then the individual properties roll up under "Net rental real estate income (loss)".

Hopefully some additional users will reply as to how they deduct the shared expenses. I imagine there are multiple ways.

I started an LLC partnership two years ago for rental real estate investing. The LLC currently holds two properties, one of which has been put into service. The properties obviously have their specific income and expenses (rent, lawn maintenance, advertising, repairs, etc.). However, there are also shared costs associated with running the LLC (bank interest, email hosting, accounting systems, property management systems, business liability insurance, business licenses, etc.).

I have done forum and internet searches trying to determine the answer but have not come across anything of value. For the Bigger Pockets users who have an LLC Partnership holding more than one property (or tax accountants who are feeling generous), my questions are:

1. Do you deduct the "common/shared" expenses at the LLC level on the Schedule K-1 as "Ordinary business income (loss)"?

2. Do you create a journal entry, dividing the "common/shared" expenses to each in-service property? This results in the expenses being deducted on the property Form 8825, going to "Net rental real estate income (loss)" on the Schedule K-1?

3. Does it matter?

For context, I maintain my own books and file my personal taxes as well as the taxes for two LLC partnerships (one real estate and one service-based). All income and expenses are tracked by location (each rental property or for the LLC office). They are reported on "Profit and Loss by Location" reports.

Thanks in advance for informative responses.

Shad

@Sam Griebenow - Exactly. I currently live in Seattle where land is at a premium. An empty lot down the street went for $1.6m where the same sized lot in Lubbock goes for $15-20k. It's also the reason that investing in rentals does not make financial sense in Seattle unless gambling on appreciation.

Lubbock seems to look worse every time I visit because there are few incentives to fix up older properties. Cheap land vs. letting the center of town go to crap. Maybe McDougal had the right idea when he razed the North Overton neighborhood...granted there were a few cool older houses that were lost as a result. And I am sure there was plenty of political corruption involved seeing that he was the mayor at the time.

I grew up in Lubbock, and half of my family is still there. I bought a major BRRRR gut job and a light fixer in the Heart of Lubbock neighborhood a year ago. Heart of Lubbock is mixed with college rentals, low income housing, and a few nice houses. I wanted to invest in Heart of Lubbock, since it is next to Texas Tech and needs some people who care about the community to fix up the older neighborhoods. Unfortunately, Lubbock tends to build out rather than fixing what is there. I think that if the right things were done around South Overton, Heart of Lubbock, and Tech Terrace, there could be a nice walkable neighborhood vibe.

Luckily my brother is handling the project management side of things as well as some of the work. Finding dependable workers to do the rehab has been our biggest challenge. The major BRRRR project is still in progress almost a year later, and the light fixer is about to go up for rent. I doubt the major rehab is going to net a profit, but hopefully it will improve the neighborhood a little and cash flow enough to be comparable to VTSAX. Then on to the next one...