in order to do any kind of short sales? Has anyone felt the
need to get a LLC or just remain a private investor. Thoughts?
Thank you in advance.
Never buy a property in your own name. Even if you own it for 5 minutes & flip via double close.
[Disclaimer: Just my personal advice, I AM NOT AN ATTORNEY].
Remove all liability from yourself and pay whatever it costs to setup an LLC. We live in a very litigious society!
Your replies are very welcoming. Thank you
Its not so easy as to go out and buy in an LLC if your financing. Many people put them into the LLC after the close. LLC would need 2yrs history to be able to buy with it alone, and still very limited banks since they want personal guarentee.
Buying a property in an LLC with hard money/private money should not be a problem. As with everything, it’s different with banks.
LLC’s are ok if yo uare buying properties to to hold. However if you are focusing on quick turn ( flipping is a bad word ) then an S corp would be better, this will allow you much greater deductions and also you only pay 1 tax.
GQ
Have to argue with the S Corp on flipping… How much tax you pay all depends on how you set up your corps, the state you live in, the state your buying in and how knowledgable (creative) your CPA and you are.
I use a LLC for both and in over 3 tax yrs I have never paid capital gains on a flip or property I owned that I sold regardless of how long or short term I owned it.
YES…there are legal and creative ways to lower your taxes on income and sales from real estate investments.
Excellent information! I have a question. I have found a property in a
Mountain Resort that has went bankrupt. I have negotiated a “very
cheap” price for the property. I just found out that they will be installing
city water & sewer to all the properties. Cost will be 40-60K per home.
If I understand it correctly would this not cause the price of the property
to go up 2-3 times in value? Any help from anyone would be appreciated.
We are going to finish the deal with 3 weeks.
Infrastructure improvements virtually always tends to increase property values. As long as you are not required to pony up for part of the improvements & you already have the property under contract for a discount, you should be fine.
That is the big part of what I was concerned about. I found out that the cost per house would be $50-60K per house since they are installing city water-sewer and up to standard roads. I underbid the REO property and it has
$140K in equity up front. I really hate to hand over $60K for the improvements, but “IF” the market value increases 2-3 times then it would
be worth it. Please note the real estate agent made that statement to me.
I hope the statement is true, but I am really new at Real Estate investing.
These are not timeshares, they are houses and my intention is to buy the property and live there for 2+ years, then sell for a large profit once the improvements have been made to the area.
If anyone else has experience in investing in Resort properties please advise
me. Any help is appreciated.
The “If” market can cost you $. Run your numbers & see if you can still make a profit even if you had to pony up $50-60K, and there was no appreciation. Be sure to include the holding costs during the time of water/sewer installation. City projects seem to never be on schedule, so my guess is that your holding costs would be the biggest factor in nixing the deal.
Everyone has their own “risk factor”. I personally would not want to risk the holding costs for OPM ($50-60K) for something that was not a sure thing.
The figures really look good since the house has $140K equity when we
close on it in a few weeks. The market value is assigned by the state, not
an appraiser. The work is supposed to be completed in 9 months starting next February. Since the roads will be torn up, widened, water-sewer lines installed, we won’t be able to live at the property for a time period. Since
we have another place to live it won’t be a problem. I am really hoping
that after 2+ years the value will be increased greatly. One Real Estate agent
said that it could be 2-3 times the present value. That does sound excessive
to me, but I am hoping that it will increase quite a bit. The present growth
rate for the property is 6-8% per year. (It is a lake front resort property).
Real Estate investing is new to me, but I am trying to search for info.
Thank you for responding! I would appreciate anyone else’s comments also.
What is the purpose of becoming an LLC? What advantage does this give you? How does this give you a tax break on short sales?
Okay better questions…
How does becoming an LLC exclude the company from the short sales tax?
I’d have to say “founder & CEO” definitely does have a nice ring to it. 