My partner and I are currently in talks with the owner to do a rent to own deal. The property is not getting fair market rent because the owner does not know how to market the property nor does he target the highest paying tenants. We have already lined up tenants that are willing to pay over 30% more per room(it is a 4 bedroom, getting 500 per room). We will have alot of positive cashflow from the property.
My questions are:
1)Is it worth looking into establishing an entity with my partner to do the lease option?
2) Can the entity possibly save us $ in tax saving for the positive net income we retain after expenses at the end of the year?
3)As the leassees of the property, can we be held liable if a person is injured on the property? Even if we are not the actual owners at the time?
4) If we decide not to establish an entity for the lease option now, when our option is up, can we buy the house under an entity at that time?
Thank you very much. My partner and I are only in college and this is our first real estate deal. We have been preparing a long time for this and finally found a diamond in the ruff. We need to do this right.
Renting by the room is a rooming house, which is subject to a different set of laws than traditional rentals. Make sure you are not running an illegal rooming house.
You and your partner are in a partnership and you would be wise to formalize the agreement.
It depends on the entity, but I doubt it unless you plan to establish a retirement or benefits program. Business expenses are deductible whether or not an entity is involved. With an entity, there will be increased costs for compliance and record keeping.
You are personally responsible for whatever you do and whatever your partner does in the rental operation. You are also responsible for any LL-related liability since you are acting as one.
Renting by the room is a rooming house, which is subject to a different set of laws than traditional rentals. Make sure you are not running an illegal rooming house.
What constitutes a rooming house and dormitory/hotel? The house is a two unit on a college campus. I plan on renting to college students. The house has four total bedrooms and i was told by a school official that i could put bunkbeds in the rooms( there are four bedrooms). There is an extreme shortage of housing on this campus and after talking with the school official he emailed me a list of transfer students to contact to rent the rooms. The home usually holds 4 people and i hope to house 8.
That is up to your local code enforcement, not school employees. In my city, renting by the room, having multiple agreements for a single dwelling unit, putting locks on interior doors, etc. are part of the analysis inspectors use to differentiate a rooming house from a rental. There are also minimum requirements per person for a bedroom in many areas. You have to know the law in your area and then make sure you are compliant.