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peterhardman

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Posts: 4
Reply with quote  #1 
Good Afternoon

Im currently looking to invest private funds into purchasing 2/3 properties, from what ive read creating an LLC to protect my personal assets is the way to go .A couple of questions

1. When actually purchasing is it best from a tax perpective to put the cash into the business ccount then write a check from there or does it matter if it comes from my personal account. ?.

2. the rent is around 1100$ then Tax 100$ HOA 300$ insurance 100$ leaves me about 600$ how much of the above expenditure will I see back ?

3. If the properties are purchased with cash can I still depreciate the value and how much can I depreciate a year ?

Thanks



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pkh
OHlandlord

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Posts: 3,737
Reply with quote  #2 
Good questions.  By "2/3 properties", do you mean joint ownership of a property (paying for 66% of a property, with another person paying the rest), or are your referring to numbers of bedrooms/bathrooms of the properties?  I am assuming you will be the sole owner with these answers.  If you mean you will be joint partners with another person, the depreciation in answer #3 will be reduced by a 1/3.

1.  You want the LLC set up in advance, the money in the LLC account, and the LLC to pay for any and all monies due.  This helps to stop any method of a litigant from linking you to the LLC personally and from claiming the LLC is a sham set up to shield you from litigation.  This way, the LLC bought and paid for the property and nothing is linked to your personal account.  You want nothing linked to a personal account so a litigant cannot go after that account!

2.  See back in what way?  As a tax deduction?  As income?  I'm not sure what information you want here.  Please give more info.

3.  The purchase is depreciated whether or not there is a mortgage on it.  Without a mortgage you will have no mortgage interest deduction on your taxes, but the actual property itself will still be depreciated over the life of the property (for 27.5 years).  Take the purchase price, subtract the land value (which is not depreciated), and divide it by 27.5 years.  That is the depreciation you will see each year on your taxes.
peterhardman

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Posts: 4
Reply with quote  #3 
Thanks for your quick response. couple more questions if you dont mind yourself definately know the way to do this.

Myself and my wife were looking to both be names in the LLC are you suggesting just one of us to get the maximum depreciation ?

We are looking to buy 3 properties all with savings.

Can we deposit the cash into the LLC with a personal check or does it have to be cash ?

With the properties only being 3 is it still worth setting up an LLC ?

Do you know a tax advisor around ft lauderdale ?

Sorry for all the questions



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pkh
peterhardman

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Posts: 4
Reply with quote  #4 
to clarify

2. the rent is around 1100$ then Tax 100$ HOA 300$ insurance 100$ leaves me about 600$ how much of the above expenditure will I see back ?


I was trying to work out after all the above expenditure if any money will be made after all the expenditure ?

Thanks again The Novice.

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pkh
OHlandlord

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Posts: 3,737
Reply with quote  #5 
You can both be named as officers of the LLC.  (Remember to have official meetings and notes of those meetings to prove the LLC is legit.)  Depreciation is not affected by the number of officers or owners of the LLC.

Since you won't have a mortgage on these and they will be free and clear, I think it would be alright to put the money into the LLC by check.  After all, money in an LLC had to come from somewhere to start it.  And this LLC will be self-sustaining (more assets than debts) so it would be much harder to penitrate the protection the LLC offers.

Is it worth it?  Only you can answer that.  You know how much of your total savings you are investing, how much you can afford to lose, etc.  Perhaps it would be sound advice to have a tax accountant and your attorney review this plan.  You may wnat to set up separate LLCs for each property to shield them from each other.  (Liabilities on one wouldn't transfer to another.)  Or you may want to forgo the LLC idea and get large umbrella liability policies.

The $600 is what is left monthly from the proposed rent after insurance, taxes, & HOA fees are paid?  Did you price the insurance yet?  (Rental property insurance is priced different from homeowners.)  Did you check the tax amount yet?  (Remember, many taxes go up after purchase since the property's value may "reset"  to the purchase price in some communities.)  Even if it doesn't reset immediately, did you check with the property tax auditor to find out when the next tax reassessment will be?  Most places do this every 10 years and taxes tend to climb each time.  Have you checked the HOA and the last time they had an increase?  Does the HOA do maintenace of common areas or facilities and how well are they funded?

How well have you checked out these properties? Had them inspected to find maintenance the last owner deferred and other hidden issues that will cost you after you purchase them?  Look at all the major systems before you buy - heating, cooling, plumbing, electric, roof, foundation, structural, and for pests.  If you buy them and then find out they need new roofs or have been eaten up by termites, there goes any idea of profit for a while. 

If everything else looks OK, figure about 2 months vacant each year and another 10-15% for maintenance and repairs.  This gives you a cushion should a tenant break a lease in mid-winter or a major system fails.  Rent of $13200 per year - ($1200 taxes + $3600 HOA + $1200 insurance + 1320 maintenance/repairs + $2200 vacancy).  That leaves about $300 a month profit (probably more since this builds in a cushion that you may not need).

Also, a precaution about HOA communities.  Many impose regulations about the number of rental unit spermitted in a complex or community.  If they impose these later, they will still apply to you.  Owner have come to find that these rules were put in place after they p[urchased and that they could not replace a tenant after they moved out.  Check the HOA rules and regulations carefully about these types of things.  You will have to include the HOA regulations in your lease agrement so the tenant will follow them and you won't be fined for any vilations.  HOAs are notarious for having to many tules - on dogs, play equipment, lawn height, landscaping, numbers and types of vehicles allowed, where they can be parked, even the color of curtains that can be seen from the street.  Before you buy into any HOA community, know what you are getting into by reading these carefully before you purchase.  And even then, know that these can change at any time after your purchase!  HOAs are not always funded well.  Do they have plans and budget for future maintenance and repairs?  Or will they just hike up the fees again (via special assessments) if a major problem arises?  Check the books of the HOA to be sure they will reamin in place and be able to care for their responsibilities later.

chris011

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Posts: 23
Reply with quote  #6 
LLC will surely be very helpful for you cause i know a person also do this way when he invest on buying two properties.Well the guy was really professional about bank tendering or pankkien kilpailuttaminen and i never thought that he got successful for investing in buying properties.
NoNonsenseLandlord

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Posts: 178
Reply with quote  #7 
Keep everything in your personal account until you are ready.  The fund the business and buy the property.  Even a transfer is OK.
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