All Forum Posts by: Tim Crumley
Tim Crumley has started 5 posts and replied 25 times.
Post: "What's the difference between "Maintenance" versus "Cap-Ex?"
- Simpsonville, SC
- Posts 25
- Votes 4
Maintenance=fix things that break. Toilets, small roof leak, etc
Capital Expenditures=Upgrades and large expenses. Roof replacement, HVAC system replacements, etc
Post: Made my first offer!
- Simpsonville, SC
- Posts 25
- Votes 4
Quick math using the 70% rule shows.
$55k(ARV)*70%=38.5
38.5-20(rehab)=$18.5 offer price
I believe purchasing at $18.8k would show you a profit of approx 15% or 8.5-10K depending on financing costs, closing fees, seller concessions, etc.
The numbers are more in line with a $65k sales price so definitely shoot for that! Congrats on making the offer.
Originally posted by @Brett Russell:
The big thing that you're missing, based on my reading, is tax treatment. According to the Rich Dad Advisor books (as well as other talks I've heard on the topic), if you are just doing passive buy and hold, then an LLC is probably best. However, if you are doing anything "active" such as flipping or wholesaling, you want to do S-corp (alternatively you can file your LLC to have S-corp tax treatment) because you don't want to have to pay self employment tax on all the profit. You can take a reasonably salary, which is subject to self employment tax, and then disburse the remaining profits free of that tax. So you could have tax savings there.
Best to discuss each individual's situation with an accountant and/or attorney.
This is what our accountant had us do. LLC and file as an S Corp.
My acct had my wife set up an LLC and then file taxes as an S-Corp. He said that is how is accounting firm is set up too. Didn't get into the why behind it all because he's busy with income tax time but I plan to have a chat with him after tax season. My old home building company was a C-Corp and my real estate holding company is an LLC. After I get the scoop on the why behind electing to file taxes as an S-Corp I will probably be filing the paperwork. I guess that route provides the best of both worlds.
Post: Passive income generation and retirement ?
- Simpsonville, SC
- Posts 25
- Votes 4
I am a former home builder (thanks 2007- 2008) married to an active real estate agent. My wife only sells new homes. During the down turn I took a job with a large insurance company as a large loss (fire, tornado, hurricane, etc) residential property adjuster. I am always travelling and that is getting pretty tiring. The job is nice and pays well but I am an entrepreneur at heart.
We have been discussing getting back into the real estate game as investors this go-round but I am still a little gun shy about getting too leveraged. We have already lost EVERYTHING once. We did retain our credit for what that's worth.
I am interested in generating a passive income to carry us into our old age. I was thinking that a $100k/yr income would be sufficient to allow for spending and saving. Based on what I am reading it seems that to generate a personal income of $100k we would need to be bringing in near $200k in rent. At a rent of $1000/month (way outside the range of mobile homes that I was originally considering) we would need 200 properties. That seems crazy. There must be something I'm not thinking about.
This passive income is a future goal and I understand that it will take many years to achieve. I have no immediate plans of leaving my job but would like to perhaps change jobs in the next few years to something that will keep me home a little more and allow more focus on REI. In order to do that I will need to generate a secondary income to off set the likely pay decrease. Who knows what will happen by then though, maybe we find that we have a knack for REI and go full time. It seems that flipping would have to come into play then just to generate a decent yearly income.
Any advice or insight would be appreciated.
Sorry for the long first post.