All Forum Posts by: Curt Smith

Oh that's right, SOLOK or SEP retirement plans. That was the big deal when I was running my IT contractor S-corp...

For real estate I don't flip or wholesale, but lets take a number like: $100k / yr income that needs optimal tax treatment (sole propritership vs LLC as S-corp). Wholesaling has alot of driving to look at properties that the IRS does not allow deductions for (pre-purchase miles). But the S-corp might re-imburse??

I think it makes sense to mention the audit risk of sole proprietership vs S-corp, where I've heard / read that the IRS is scrutinizing sole proprieterships much more heavily than S-corps or partnerships (multi-member LLC).

curt

Join your local REIAs. Both Atlanta REIA and GA REIA have free how to wholesale classes. You'll rub shoulders with other learners and experts. I know first hand that the GA REIA class is good.

curt

Hmmmm, not sure folks heard what JScott said why I feel it's so important to repeat re Atlanta, maybe the other hot cities too.

So much inventory has already been converted to rental, there's alot of hedge fund properties sitting empty I hear in places like Stone Mountain and the other prior hot areas. New comers are just going to get screwed by being late to the game, with their properties sitting empty. Central Lawrenceville is another over converted to rentals area.

use: padmapper.com and look at how much inventory is in the hot areas. This is what renters see too. You think they are going to pick your place out or are they smart enough to play one landlord off another? I'm hearing renters asking for rent discounts as they tour properties. Of course they will try to take advantage of a glut of rentals.

To new folks: have you ever heard of the adage, when you see a Bull on the cover of Time magazine, the top in the stock market is in. Well the news that Atlanta is a hot buy and hold market is old news friends... Sure there's still deals, but you have to be "very smart". I live here like JScott and I've moved to new strategies, like he has.

This tip will at least keep you from getting too killed: buy only in school districts where Great Schools rates the high school a 5 or better. IE: google Great Schools. Buy where it's 5 or better. You'll at least see some appreciation potential. Then select renters wanting to keep their kids in a certain school as your main renter criteria. Put the school names in your marketing.

If you can't get in early and cheap, then buy good schools, near water or with a good view. :) Also check if the schools math scores are going up or down. This is what I meant by you have to be "very smart".

curt

FYI I posted what I feel is an important question re S-corp vs income directly to your 1040, on Steven's thread he mentioned above.

So far this thread has not mentioned why a multi-member LLC offers superior liability protection over a single member. And how to run an LLC so as to hold up in court. I suspect BP has many threads already covering these 2 LLC issues.

Circling back: If one is just wholesaling, there is little liability to worry about, so the issue is mainly tax advantages (thus maximizing spendable income). As John said, no need to get fancy at first, just make the income. When you have spare cash then hire an accountant to set up an LLC taxed as an S-corp if Steven's discussion bears this out to be the the best way to go... :)

curt

Steven Hamilton II, Tnx. But this hasn't clarified the truth or fiction in the common wisdom of: only do flips and wholesaleing in an S-Corp.

In an S-corp (or an LLC with the S-corp taxation election) you pay W2 income from your wholesale income and flip profits and some small amount of dividend after you've paid yourself a "market rate" salary. Paying W2 (salary) you loose 6% paying the corp side of FICA.

Having run an IT contractor S-corp, I remember taking many deductions that I knew were not possible if I recieved my 1099 IT contractor pay directly to myself. So I figured that the 6% loss to the gov in the form of corp side FICA payments was made up for with other deductions. At least this is what I thought, I never did a paper comparison of both tax strategies.

In a real real estate business doing wholesaling and fliping, where there's driving expense, buying of software, monthly fees for (too) many services like VA's, call centers, out bound dialers, yellow letter mailing expenses. Can someone pencil both paths: wholesaling/flip income directly onto the 1040 vs through an S-corp to verify which path is more advantagous?

tnx curt

The quick answer including tax implications:

- LLC single or multi-member classifed as a tax non-entity (default), where all transactions fall down onto your 1040. Use this LLC for rentals where you have rental house depreciations, expenses and long term capitial gains. Depreciation will cancel out W2 income to a point that varies (RE professional or not, your W2 income level). It's prefered to setup a multi-member LLC. IE a husband and wife. Single member LLCs are ok, but don't have nearly the liability protection as a multi-member. A multi-member is treated as a partnership and thus pull all the property details off the 1040 and just a K-1 falls onto the investor's 1040, thus keeping details out of view of the IRS and scrutiny.

- LLC but classified as an S-Corp. This is an election you make after setting up the LLC. You need to file corp quarterly / annual taxes and a K-1 to your personal 1040. Use this entity for short term capital gains (flips and wholesaling). Ideally you'd never wholesale or flip outside an S-corp so you can take better advantage of expenses and you can reduce your taxes via paying out of the S-corp w2 vs dividends and save on FICA and take more deductions than as a DBA.

IRS audit: DBA/sole proprietorship are being audited at a high rate. S-corps have a low rate of audit.

The above was a terse over view and needs to be corrected and clarified. tnx.

Hi Mashia, Be sure to join the local REIAs. I'm a member of 3, North Metro REIA, Atlanta REIA and GA REIA, and all are different and all deliver value. There's more face to face events at GA REIA and more evening classes and a Deal makers email list.

We've figured out that there's so much to know to run a real estate investment business that we'll always be in some REI eduction almost every month but certainly every year.

Yesterday was Negotiation 101 via Atl REIA, the weekend before was a Lawyer talking about RE issues via GA REIA... Next weekend will be multi-family by a national speaker in Charleston...

Good luck, curt

Hi Nate, We are investors working South East counties of Atlanta and ran into this fellow who has a meetup South of Newnan: [email protected]

Danny Williams
(404) 798-4812

Give him a call to find out were his REI meetup is at. We've never gone but my wife met him and though highly of Danny.

Curt

Hi Guys, we've just spent 2 days struggling with mailchimp's newsletter templates and editor and are totally frustrated with the effort vs end result.

Now that you have had a year at it, what tools do you now recommend? Mailchimp's free for up to 2k list size is of no use if you can't get a decent looking email / newsletter with their tooling. I'd pay for aweber or ?? if their tooling is easier to use.

Maybe you found VAs who are better at html / templates that we are? lol probably but still I'm at a brick wall and want to start sending out newsletters and am no closer.

FWIW we started with a MS publisher experiment but publisher has poor export to HTML functionality so that was a throw away effort even though we liked the style...

tnx curt

@Morris A jet setting guru in the last few weeks, Marco Rubio (??) is selling his short sale system where underwater sellers that are current, so not short sale candidates, are to be convinced to come to closing with lots of cash to make up their underwater amount. His DVD has babes jets and talk of sellers coming to closing with $50k.

The under water folks I'm talking to are deluded enough to think they can just raise their asking to their balance do and poof they'll be free of their house. I remind these folks that it takes typically 19% of the asking to close. Play with the numbers on http://truecosttosell.com/

It's shocking how easily you can loose 19+% in a traditional sale.

Not sure how one markets for under water folks but has lots of cash and has to move bad enough to give all that cash to you vs just renting their house themselves. I don't really like jets so I didn't shell out for this system... That's how it works in DVDs anyway. lol

Brian Gibbons describes the realistic scenarios and percent off market value that one can do lease option and assign to the seller or go to sandwitch lease option and stay in the deal.

curt