All Forum Posts by: Corey G.

@Natalie Kolodij thanks. I read something about that but it was confusing on how to specify/ determine whether the rental rises to the level of a trade or business rather than a passive investment. 

 I didn't mean a 6 hour time frame per-say but typing a text takes about 30 seconds. Sending it and waiting for a response may be 5 minutes or 30 minutes ..or 6 hours. A quick text conversation may be 10 texts over 10 minutes. I guess I am trying to figure out what is reasonable? Is it only the time it takes you to physically type the text and the time it takes to read the text? So in the example of ten texts over 10 minutes...would that be 30 seconds to text and 30 seconds to read for a total of say 5 minutes? or would 10 minutes from the start of the conversation to the end be appropriate? 

I am doing my taxes and had a few questions about QBI. I own 16 units (4 Buildings) and manage them myself. I have maintenance done monthly and repairs come up all the time. I am coordinating the repairs, sometimes doing them myself, and actively managing everything that comes up. From my understanding there are 3 main components to be able to take this deduction. 

"Separate books and records are maintained to reflect income and expenses for each rental real estate enterprise."

"250 or more hours of rental services are performed annually with respect to the rental enterprise. Note that these hours of service do not have to be performed by you personally."

"The taxpayer maintains contemporaneous records, including time reports, logs, or similar documents, for: (i) hours of all services performed; (ii) description of all services performed; (iii) dates on which such services were performed; and (iv) who performed the services. Such records are to be made available for inspection at the request of the IRS. The contemporaneous records requirement does not apply to the 2018 tax year."

1. That being said, I do keep separate books with rental income and expenses but I think I need to be better with showing purchase dates and where expenses get charged. Like "balancing the books" like we did in accounting class. I forget what that is called.

Example: Purchase home depot for 60.25 / Citibank credit card charge for 60.25 = equation balances. Is that necessary or overkill?

2. I'm pretty sure I have 250 hours total across all properties but need to document it. Most of the tenants reach out to me through text message. How would I calculate the time I spend on this activity? I'm thinking from the start of the text until the end of the text thread that same day? Does that sound reasonable even if the actual texting part is quick but it takes the tenant a long time to text back?

@Basit Siddiqi I would be Trustee and I will designate a beneficiary (family most likely in the event of my passing). The attorney did not mention if it would be a grantor trust or not but from the definition it sounds like it might be. But essentially you are saying that as trustee, I would be able to transfer the profits from each individual LLC into the trust? I'm guessing a separate bank account is needed for the trust as well? And then from the trust account, I could pay off the individual mortgages or whatever other expenses I need? I understand I need to talk this over with the attorney more. I have an appointment on Friday but need to know which questions to ask.

@Basit Siddiqi, Thanks, but do I have to leave that money in those accounts? Can I transfer the money into my private account and spend it how I see fit? Can I use profits from one LLC to pay off a mortgage for another property? I'm understanding the separate accounts but how do I access that money and spend it without "piercing the veil" of the LLC? Can you explain? Thanks.

@Pamela Sandberg thanks for confirming that. I'm concerned about how I get at my profits or use them to pay off expenses that are not property related? For instance, using the profits from one rental to pay off the mortgage of another.... Can I do that? Or is that not allowed? Because that would likely determine if I'm going to set them up this way or stick with my umbrella insurance until they are all paid off. 

Mike, in AZ the only cost associated with an LLC is the fee to set it up (and of course what the attorney charges). I know the trust has some costs but I'm likely going to do that anyways. Now I'm sure there are costs for keeping everything separate...bank accounts, etc but I think those costs are probably pretty minimal.

Thanks Jeremy, I already have an umbrella policy. My question was more directed at someone who has already done this. I see some postings in the forum and it seems like people are setting up separate LLCs (but not mentioning trusts). I'm guessing it has been done however. I'm more wondering about keeping my accounts separate and how I get paid and investing without "piercing the corporate veil". I spoke with this attorney but he was not a trust attorney I don't think so I'll have to ask someone who specializes in that.

Thanks Jeremy, from what I understand is the LLCs offer asset protections and keeping the properties in separate LLCs prevent someone from suing and having access to my other property assets. I was told the Trust just makes for ease of transfer to beneficiaries. I was told that revocable trusts do not have asset protections by themselves (unless they are irrevocable trusts). Putting all of the properties in a revocable trust owned by one LLC would still make all the assets in the one LLC (all 4 of my properties) subject to the same lawsuit? Maybe someone else can chime in on that.

Hello everyone. I own 5 properties. One personal, 4 residential rentals. I do not have my properties in LLCs yet but went to speak to a real estate attorney today who suggested that I create a revocable trust and then have 4 individual LLCs (one for each rental property) owned by the trust. From my understanding this will provide asset protection and ease of transfer for my beneficiaries if something was to happen to me. I have some questions that I wanted to ask anybody who has done this. 

1. I was told I need separate bank accounts to keep the LLC asset protection in place. I'm guessing I need business accounts under the LLC name for each property and tenants pay the LLC instead of me. I pay all expenses for each property out of each individual LLC account and not co-mingle the deposits or expenses with my other accounts? Is that right?

2. If this is the case, how do the profits get back to me? Do I have to leave them in each individual account? I'd like to invest them instead or take the profits to pay down the mortgages one at a time and I'm wondering how I would do that. Would I be able to set up a bank account for the Trust and have the money from each LLC transfer into the trust bank account and invest and/or payoff mortgages from there? I'm confused on this part.

3. I normally pay all of my property expenses through a credit card (for cash back rewards) and then pay it off at the end of the month. I'm guessing I couldn't do this anymore without having a separate credit card for each LLC. Is that right?

4. The attorney said I need to have reserves for each LLC so does that mean I need to have certain minimums in each bank account that I could dip into if needed? What kind of minimums are we talking? I'm guessing placing money back into the accounts from an external account would again cause problems? (Once again could I have a trust account set up for that or that wouldn't work?)

5. If I was to go purchase another property how are these LLCs looked at from an income standpoint by a loan officer? 

I would appreciate any advice or answers to these questions.