My name is Carlos and I have been walked through a few deals but am still new at flying solo. Want to start out on my own in a few months (graduating with Bachelors in Engineering) in the right direction. In 3 to 5 months will have pay increase plus Mom is deeding over $80,000 home to me (am only child).
My question is this… what strategy should I choose. Do I go with an LLC or a C Corporation. Also, am I correct in assuming that it would be best to use the equity in the house as a line of credit for purchase and rehab? Lastly, what is the best way, tax-wise or investment wise for the home to change hands from Mom to myself? She is currently disabled and counting on me. I want to do the right thing.
It must be good that you’re getting such pay raise to support your real estate investment venture. For just an individual like yourself, an LLC should be sufficient enough to cover your assets especially in the time when your investment have grown over the course of time. But a consultation with a lawyer is your best bet when you which type of entity you want to have. Plus, whichever entity you chose to have will require the services of a lawyer anyway. consult with a lawyer and you won’t go wrong.
Using a home equity is an excellent strategy for doing rebab because its a borrowed money that you could do tax write-off. And you could just continue repeating the whole cycle once you paid your equity loan after the rehab. The bottom line is this when you assume ownership of your mom’s house, after you lived on it for two year whatever profit you get if you decide to sell it, you keep it…tax free. Again, I highly recommend consulting a professional for tax situation you want to take advantage in assuming a property. You friendly accountant should be able to tell you the best strategy in order to maximize your tax benefits.
Thank you, reslynn. Your advice was very helpful. I am new to this site and would like to say that I am from the Mississippi Gulf Coast where not alot of creative real estate investing goes on. There is only a handful of people that are actually doing it and doing it well. My REIC only started a couple of years ago with a handful of members and is growing as people see that this stuff really does work.
This site will be very helpful for objective and expert opinions. Again, I thank you very much.