Do I need to create a LLC?

General Real Estate Investing
21

here’s an interesting question:

the closing fees associated with buying a property - what are these considered - expenses?

i.e.
title insurance
tax certificates
o/n mailing fees
recording fees
other fees

what about assignment fee?

are these deductible items?

22

these are considered part of the cost of the property (cost of acquiring). not deductible. they reduce gain when you sell.

23

right.

hey i bought quickbooks - and i consider it a waste of money at this point. i’ve been using Excel to manage accounts.

here’s a question.

say your one business (LLC) is buying properties - land to hold and properties to rent.

and also has revenue and expenses from sales of a seperate service - unrelated to acquiring real estate.

i’ve set up Excel to track all revenues and expenses, including partner equity.

but, i’m thinking of seperating the “seperate service” and incorporating it as its own business entity to make things easier.

at our bank - i’ve set up seperate accounts for each revenue stream.

i’m thinking of incorporating the one service with myself as the sole shareholder - completely seperate from current LLC.

questions:
financial plan is to take income from corp and invest it in LLC, where i am a partner. thus having LLC acquire real estate.

then final entity may be a Corp for property management, which of course would tend to the properties -

could both my partner and i be shareholders of property management firm? or must we have a third party (wives) as 50/50 owners of prop management company?

i’m just trying to be creative and follow the rules.

24

no reason they can’t run together if that’s what you want to do.

25

thanks.

26

mc,

with the dealer issues of buying and selling real estate -

if LLC buys property and sells it - they’ll be considered a dealer.

if LLC buys property and pays your seperate entity to do the rehabs (i.e. C-Corp) - LLC generates an expense report, thus decreasing profits…

as long as it is reasonable (i.e. C-Corp doesn’t charge $4 for labor on every $1 in material) - won’t this limit the LLC profits and thus limit tax liabilities overall?

LLC pays C-Corp 10k in rehab labor expense - that:

  1. lowers LLC profits
  2. C-Corp can retain portion of these earnings
  3. C-Corp pays me, the employee, a salary for it
  4. LLC profit are taxed less due to expense
27

TMCG,

Don’t overlook the big picture. The C-corp is also taxed on its net income.