All Forum Posts by: Account Closed

So private lending if done < 12 months is not investment income, its taxed as regular income. Interest, late fees, extension fees, underwriting fees, etc are all income. You can offset regular income with real estate losses if you are a real estate professional, which as you mentioned with your w2 is not possible. If your spouse was a RE pro, that would be a different case. You could also make your fix and flip projects into short term rentals and try to go for the "short term rental loophole". LLC is passthrough entity for tax purposes, unless you elect to be taxed as a C or S corp.

I don't know your specific situation, but I feel this accountant you are working with now may not be a real estate-focused CPA? There are solutions to explore here to offset this income it seems he is either not aware of or he doesn't think fit your situation. 

Hey @Nathan Kostrba

I would look for a firm that you can grow with along the way. Lots of firms often times have niched down and only work with larger investors. For example, we work with real estate investors big and small, and have fair pricing along the way. The firm I worked with in the past charged me massive fees, largely because we were higher income and they didn't back it up with value. Beware of these traps, and good luck in your search! 

"we need to build up our cash equity to be equal to theirs if we are going to file as equal partners"- This is simply not true Alissa. I would need to know both you and your partners specific situation on how to best advise on distributing capital out, but as @Basit Siddiqi Mentions consider the basis limitations and then create a plan around how profits are going to be used. 

Hey Weronika, 

I would look for a firm that you can grow with along the way. Lots of firms often times have niched down and only work with larger investors. For example, we work with real estate investors big and small, and have fair pricing along the way. The firm I worked with in the past charged me massive fees, largely because we were higher income and they didn't back it up with value. Beware of these traps! 

Hey Jordan! Many accountants can work in other states, they don't need to be living there or even have an office there to do great work. For example, we have several clients focused on real estate investing doing short term rentals in other states that we do great work for out of our main office in Manassas VA. I hope that allows you to broaden your search!

If your going to do it, try to lend out of your roth IRA. Lending income counts are regular income (fees, interest etc) (most of the time) When I started doing private lending that was a big regret I wish I did sooner

My vote is for house hack as well. number 1 bang for your buck starting off

Depending on your specific situation, a c corp managing things could make more sense from a tax perspective. This C corp and its bank account would receive the funds from the LLCs and serve as a management company. Talk to your tax advisor about this setup! 

Hey Jane, 

100% I would strongly recommend looking into getting an LLC for asset protection purposes. You can also take it farther then that if you feel necessary. everyone's asset situation is different and the "level of protection" can vary.
See the tier list below: 

Worst:

– No coverage, held in your name.

Bad:

• Relying on insurance. This is the most basic level of protection and it is not very effective, but it is still better than nothing. Insurance companies have many exclusions and they may not cover everything, but they can help to pay for some of the costs of a lawsuit.

Good:

• Using one LLC for all of your rental properties. This is better than relying on insurance because it protects your personal assets from liability. However, if someone sues you and wins, they could take all of your rental properties.

Better:

• Using a separate LLC for each rental property. This is the best level of protection because it isolates each property from the others. If someone sues you and wins, they can only take the LLC that owns the property that was involved in the lawsuit.

Best:

• Using a combination of LLC and land trust to protect your rental properties. These are more complex legal structures that can provide even more protection than a traditional LLC alone.

Here are some of the key things to keep in mind when choosing an asset protection strategy for your rental properties:

• Your risk tolerance: If you are not very worried about being sued, you may not need the best level of protection. However, if you are worried about being sued, you should use the best level of protection that you can afford.
• Your state laws: The laws governing asset protection vary from state to state. You should consult with an attorney in your state to make sure that you are using the best asset protection strategy for your situation.
• Your budget: The cost of asset protection can vary depending on the type of protection that you choose. You should make sure that you can afford the cost of the protection that you choose.
  
  Please also keep in mind for your situation to consult a professional and share more details!

Hey Matt! 

I would recommend doing some research on the "short term rental loophole" and work with a real estate-focused accountant who you can grow with. A trap you can fall into is finding a great real estate accountant, but they specialize in working with larger clients and you end up paying way more then you should. For instance, we work with real estate investors big and small for tax prep and advisory and try to grow with our clients and refer them out if they are not a fit.