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I am in the process of starting another company to handle real estate / property investment / management for flipping and renting. As far as credit goes, what would be the best way to register my business for credit purposes. I have seen a few people on here say leave real estate off completely, because lenders are not as apt to give credit. I have spoken to my accountant about it and she has said just form as a Sole prop, because it is all capital gains, but I do not want to do that.

 

Mostly I am really seeking responses from people that are in this type of business or those that have been, but if anyone else can provide information, please do.

 

If I am not clear enough, please let me know.

 

 

 

Thank you in advance.

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I am in the process of starting another company to handle real estate / property investment / management for flipping and renting. As far as credit goes, what would be the best way to register my business for credit purposes. I have seen a few people on here say leave real estate off completely, because lenders are not as apt to give credit. I have spoken to my accountant about it and she has said just form as a Sole prop, because it is all capital gains, but I do not want to do that.

 

Mostly I am really seeking responses from people that are in this type of business or those that have been, but if anyone else can provide information, please do.

 

If I am not clear enough, please let me know.

 

Thank you in advance.

Hi 829! :wave:

 

We use an S Corp for our Real Estate Brokerage, rental management, and rehabbing. :P After talking with 4 accountants before setting ourselves up, we decided on an S Corp due to the SE Tax savings. :yahoo:

 

If your accountant did not understand that rental income is passive and not a capital gain in any way :lol: ....ummm...suggest finding another accountant for advice. :stop: Even if you rehab and sell houses, you have multitudes of expenses you can deduct. B)

 

Take care,

Skipper

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I am in the process of starting another company to handle real estate / property investment / management for flipping and renting. As far as credit goes, what would be the best way to register my business for credit purposes. I have seen a few people on here say leave real estate off completely, because lenders are not as apt to give credit. I have spoken to my accountant about it and she has said just form as a Sole prop, because it is all capital gains, but I do not want to do that.

 

Mostly I am really seeking responses from people that are in this type of business or those that have been, but if anyone else can provide information, please do.

 

If I am not clear enough, please let me know.

 

Thank you in advance.

Hi 829! :wave:

 

We use an S Corp for our Real Estate Brokerage, rental management, and rehabbing. :yahoo: After talking with 4 accountants before setting ourselves up, we decided on an S Corp due to the SE Tax savings. :yahoo:

 

If your accountant did not understand that rental income is passive and not a capital gain in any way :lol: ....ummm...suggest finding another accountant for advice. :stop: Even if you rehab and sell houses, you have multitudes of expenses you can deduct. B)

 

Take care,

Skipper

 

 

Thank you for the advice. My 1st business is an S Corp and my accountant set that up. I was puzzled as to why she would suggest Sole Prop, she pushed me so hard to incorporate my 1st business. I am in agreement with you, there are so many things that could be deducted. I think maybe I have bothered her too much and that is why she gave me the short answer?

 

 

DJ, thanks for the link. I think I am going to register as an asset management corp. Seems like aoihimitsu made it real difficult and more expensive by having multiple LLC's or maybe he/she is just much more seasoned at this than am I?

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Hello, I currently own 4 quads and will be purchasing 2 more next month. First advise would be to find a new tax accountant. Second advise is the general rule of thumb is if you are flipping properties form a S Corp but if you are doing long-term rentals form an LLC. Third advise is not to setup as a sole prop. as that would make your entire financial well-being liable if someone was to sue your company.

 

We do long-term rentals and we are an LLC. We don't flip properties. We self-manage all of our properties. As far as business credit, register immediately with you secretary of state. This is the date you company is officially recogonized by banks etc so the sooner you do that the better. We just passed 2 years of business and have started to apply for business LOCs and we have found that some banks are souring our real estate. Last year WAMU said that they could do a LOC even if the business was under 2 years and it would be based on financial credit information. Talked to WAMU last week and they no longer do the under 2 year deal based on personal credit information for real estate companies. Talked to First Horizon and they require min of 2 years for real estate and prefer 3 years.

 

Hope this helps and good luck in your business.

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Thank you. I am trying to decide between being either an asset Management or a Holding company. I plan to have a mix of Flipped and rental.

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What is the real difference between having a Scorp and having a LLC taxed as a Scorp when it comes to the SE taxes and deductions? Is there any?

Also not to throw it off but any one have opinions on using Investments in their biz name?

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What is the real difference between having a Scorp and having a LLC taxed as a Scorp when it comes to the SE taxes and deductions? Is there any?

 

Also not to throw it off but any one have opinions on using Investments in their biz name?

Hi Missty! :yu:

 

The main issue in "Flipping" houses is getting tagged as a "Real Estate Dealer".....Try googling that for more info......it is a very nasty tag taxwise. :(

 

The big plus with an S Corp is you can take half the net profits of the active (versus passive) business income without paying SE taxes on it..... :) That saves 15.3% of half the net profits from going to the IRS legally. B) From what I understand, that is not possible to do in an LLC. :blink:

 

Take care,

Skipper

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My feedback on putting investments in your company name. If you are flipping properties then logically you are looking for very undervalued properties than you can quickly fix up and sell. The target market is usually people who are in pre-forclosure or going through some other major event like divorce or lost job so can't make mortgage payments etc. When I started in real estate this is what I was targeting. A very seasoned agent who works with lots of investors recommended against us putting investments in our company name which was to be Northpoint Investments. She said people in tough situations like above would be turned off with investments in the name. So we changed to a basic Lang & Thomas. This gives us much more flexibility in that with that name we can be investors, property managers, or go into anything else.

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My real question was, how did everyone register with their state and IRS. For instance, my current business is listed as "Computer Service."

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Seems like aoihimitsu made it real difficult and more expensive by having multiple LLC's or maybe he/she is just much more seasoned at this than am I?

This is to avoid exposure. When real estate went up we ended up with a company worth a lot. At the attorney's advice we decided to create different LLCs to limit exposure. This means that if something happens with one rental and someone sues and win for whatever reasons, exposure is limited to the LLC that property is in. He told us we should make it a rule of thumb to either put each property in its own LLC . which is what we do when building a new spec home. Or to create a new LLC when the LLCs value reached $500K.

Then again I have been at this for awhile now and while initially I had just a LLC we soon found that to be not exactly efficient. The type of entity depends on your situation because different entities have different advantages and disadvantages.

 

As to selecting what the company does when you register the company should have the option to select "Any legitimate business". This way you do not have to select anything

Edited by aoihimitsu

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Seems like aoihimitsu made it real difficult and more expensive by having multiple LLC's or maybe he/she is just much more seasoned at this than am I?

This is to avoid exposure. When real estate went up we ended up with a company worth a lot. At the attorney's advice we decided to create different LLCs to limit exposure. This means that if something happens with one rental and someone sues and win for whatever reasons, exposure is limited to the LLC that property is in. He told us we should make it a rule of thumb to either put each property in its own LLC . which is what we do when building a new spec home. Or to create a new LLC when the LLCs value reached $500K.

Then again I have been at this for awhile now and while initially I had just a LLC we soon found that to be not exactly efficient. The type of entity depends on your situation because different entities have different advantages and disadvantages.

 

As to selecting what the company does when you register the company should have the option to select "Any legitimate business". This way you do not have to select anything

 

 

Thank you.

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