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Old Yesterday, 01:37 PM
 
67,544 posts, read 68,351,515 times
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Quote:
Originally Posted by projectmaximus View Post
LLC. Lots of tax deduction benefits. Incorporation, as mentioned above, is not necessary for the benefits until you have significant and steady revenue.

Anyway, you want to talk to people in your area to get advice. CPA and/or lawyer as well.
there is no tax benefit to an LLC . the LLC is transparent tax wise .

here in nyc if you dabble in apartments that are stabilized , an LLC or corporation can never claim one for themselves and remove a tenant .. you can only do that if held in personal name . apparently LLC'S and corporations can't have family
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Old Yesterday, 07:13 PM
 
2,875 posts, read 2,565,140 times
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Quote:
Originally Posted by projectmaximus View Post
LLC. Lots of tax deduction benefits. Incorporation, as mentioned above, is not necessary for the benefits until you have significant and steady revenue.

Anyway, you want to talk to people in your area to get advice. CPA and/or lawyer as well.
If you are going to do this as a business, put the property into an LLC when you purchase it. Ask your attorney if the LLC should be in your home state or the state where the property is located. If your LLC is domiciled in your home state, you will need to register the LLC to do business in the state where the property is located.

Stay away from CPAs until tax time. They are useless except for preparing taxes.

You need to do a complete estimate of repairs before you purchase any property so that you will know if the deal is worth it. As a poster said above, this property probably needs $85k worth of work.
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Old Yesterday, 07:36 PM
 
1,742 posts, read 678,185 times
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Honestly, how hard is it to just google this information? Why are you posting on a forum where maybe a few people actually know what they are talking about and posting maybe 3 sentences worth of useful information. Google LLC. If you can’t understand what it is after that, then you aren’t fit to run a business. You don’t need a CPA.

Last edited by Berteau; Yesterday at 08:32 PM..
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Old Yesterday, 08:27 PM
 
102 posts, read 17,635 times
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Quote:
Originally Posted by Berteau View Post
Honestly, how hard is it to just google this information? Why are you posting on a forum where maybe a few people actually know what they are talking about and posting maybe 3 sentences worth of useful information. Google LLC. If you canít understand what it is after that, then you arenít fit to run a business.
Go back to point 2 on my post. Sell.
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Old Today, 03:26 AM
 
Location: Cary, NC
32,221 posts, read 56,388,996 times
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Quote:
Originally Posted by Robeaux View Post
I recently took an early retirement and had a windfall due to a death in the family. While searching for a new home for my family I came across a property at auction and was able to purchase it for $15K. Comps in the area are $100K. I've done construction in the past so I will be doing a lot of the work myself, hoping that will increase profit considerably.


If this one goes well I'd like to do more in the future...figure it will keep me occupied in "retirement". My question is, should I flip under a business? I'm asking mostly for tax purposes. Also, it would seem more "stable" if it went through a business and I payed myself a salary, but I'm not sure if it would work that way...which is why I'm asking. FWIW, the property is in Illinois and I live in Iowa if that has any relevance.


Any advice is greatly appreciated!
Unless you start to flip in volume or take on a partner, I think the tax implications are minimal whether you have a business entity or not.
And, you don't need to pay yourself a salary to have business credibility. Plenty of sole proprietors flip houses and make money without much structure.

In your situation, I might consider creating an entity to separate my personal assets from my business liabilities in the event I was sued as a result of business operations.
While you can form an LLC as a shield from personal liability, it takes some knowledge and focus to maintain and operate that entity to provide you with effective protection.
And, you can form an LLC in many states without professional legal assistance, but a good attorney will help you get started with some guidance on operating effectively.

There are many online discussions regarding "piercing the veil" of an entity:
https://www.bing.com/search?q=pierci...ekrxamvuusOOxU

Really though, a simpler and reasonable approach might be to operate as a sole proprietor with a hefty liability umbrella insurance policy to protect personal assets.
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Old Today, 05:55 AM
 
67,544 posts, read 68,351,515 times
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Quote:
Originally Posted by MikeJaquish View Post
Unless you start to flip in volume or take on a partner, I think the tax implications are minimal whether you have a business entity or not.
And, you don't need to pay yourself a salary to have business credibility. Plenty of sole proprietors flip houses and make money without much structure.

In your situation, I might consider creating an entity to separate my personal assets from my business liabilities in the event I was sued as a result of business operations.
While you can form an LLC as a shield from personal liability, it takes some knowledge and focus to maintain and operate that entity to provide you with effective protection.
And, you can form an LLC in many states without professional legal assistance, but a good attorney will help you get started with some guidance on operating effectively.

There are many online discussions regarding "piercing the veil" of an entity:
https://www.bing.com/search?q=pierci...ekrxamvuusOOxU

Really though, a simpler and reasonable approach might be to operate as a sole proprietor with a hefty liability umbrella insurance policy to protect personal assets.
We have an LLC that holds our real estate that is in a family partnership .

the LIABILITY insurance is good if you are sued . THE llc protects you when financially things don't go well .

there is no tax advantage and all proceeds pass to us directly where we report it via a k1 on our taxes .

single owners in an LLC may not get much in the way of liability protection .. the benefit is when others cause the liability and not you as the sole owner .

keep in mind it can be very hard to get loans or sign leases as an LLC . you usually have to give a personal guarantee anyway .
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Old Today, 08:30 AM
 
1,731 posts, read 976,647 times
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You might be required to have a real estate license in some jurisdictions ....I think they said if you were more than half time, you were working in the business. I recall a guy called "the Whale" on some cable show, got a cease and desist order from the board of RE. No big deal.

I also recall the Washington Post doing a much sensationalized story about a flipper, who had done 70 homes...thing was, he was still using hard money lenders at 14%...I never had a mortgage after my fourth, but I am only on number ten.....so maybe less is better. Do one at a time, and worst case you got a roof over your head..hopefully paid for.
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Old Today, 05:49 PM
 
28,399 posts, read 69,092,251 times
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Default Things to think about...

Quote:
Originally Posted by Robeaux View Post
I recently took an early retirement and had a windfall due to a death in the family. While searching for a new home for my family I came across a property at auction and was able to purchase it for $15K. Comps in the area are $100K. I've done construction in the past so I will be doing a lot of the work myself, hoping that will increase profit considerably.


If this one goes well I'd like to do more in the future...figure it will keep me occupied in "retirement". My question is, should I flip under a business? I'm asking mostly for tax purposes. Also, it would seem more "stable" if it went through a business and I payed myself a salary, but I'm not sure if it would work that way...which is why I'm asking. FWIW, the property is in Illinois and I live in Iowa if that has any relevance.


Any advice is greatly appreciated!
Quote:
Originally Posted by mathjak107 View Post
We have an LLC that holds our real estate that is in a family partnership .

the LIABILITY insurance is good if you are sued . THE llc protects you when financially things don't go well .

there is no tax advantage and all proceeds pass to us directly where we report it via a k1 on our taxes .

single owners in an LLC may not get much in the way of liability protection .. the benefit is when others cause the liability and not you as the sole owner .

keep in mind it can be very hard to get loans or sign leases as an LLC . you usually have to give a personal guarantee anyway .

I included mathjak's post as it is SOLID advice about the "value" of an LLC, in your situation there is little reason to worry about the difference between doing this with any sort of "legal structure" to try to distance yourself from the financial issues and under the current tax code there is pretty much ZERO potential to lessen the tax implications of either profitably flipping this property, holding it as a rental, or even "losing" money on something that is so modestly priced. In fact I sort of wonder if the "auction" included delinquent taxes or similar situation, if so, hope you are aware of the relevant Illinois law -- 35*ILCS*200/*Property Tax Code.


I do know that it is entirely possible to purchase properties at very low prices in rural parts of Illinois. Sometime the properties are not in terrible condition. The issue is really not so much about just "fixing them up" regardless of one's skills / access to value-priced tradespeople, but about finding buyers in areas where the trends are far from positive -- this article is excellent in going deeper than the "shouting points" and showing that the loss of population is quite complex: https://www.sj-r.com/news/20180607/i...l-due-to-taxes It is also less than widely known that the other states with negative migration trends include New York -- https://www.bizjournals.com/chicago/...st-states.html With that in mind I include this post from, again, mathjak -- http://www.city-data.com/forum/54287122-post2.html The implication ought to be clear: if there are no jobs and nothing particularly attractive to do for folks with time on their hands it may be a very long time before you find ANY buyer for the home you want to fix-up. Again, given the low price you paid, this does not necessarily mean you will "lose money" but it certainly should reframe the potential for profit...



Just for a reality check I might suggest that you take a gander at the "help wanted" listing around the town where you've bought this home. For fun I did that for the town of Laurel MS, where the couple who are now two seasons into their HGTV "Home Town" renovation show are based -- https://www.google.com/search?rlz=1C...3D&htivrt=jobs Not exactly a "boom" but a pretty decent mix of standard retail / food service / trucking things that at least confirms there are likely enough folks with spendable income maybe from the Masonite plant or clinics and such in the area, to afford a decent home... https://www.glassdoor.com/Jobs/Mason..._IC1141396.htm & https://scrmc.com/clinics/laurel-surgery-clinic/ That town also has a fairly robust history of prior importance to the lumber industry -- https://www.countryliving.com/life/e...l-mississippi/ If the town your house is located in has similar mix you might do OK, if not....
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Old Today, 06:15 PM
 
Location: Iowa
858 posts, read 501,568 times
Reputation: 588
Thanks everyone for the advice, it's much appreciated.


So far, permitting hasn't been an issue at all. I've gotten to know the Building Official pretty well and I haven't had any issues there. This property has been empty for a number of years and he's ready to have it lived in. Reason is, the person that lived there passed away and her daughters didn't really want anything to do with the house, so they just let it sit. It's in an historical district (the historical society hasn't been a problem either) and 20 or 30 tour buses ride by it during the season, that's likely his motivation.



I'm going to get through this one without the LLC to see if it's something I want to try again.


Thanks again for the help!
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