sort of a digression from the LLC-sCorp thread

2 guys want to buy a rental property together. 50/50 split on initial investment for down payment and renovations...

How should this be organized so that they do not get killed in taxes because both have good paying full time jobs?

Discuss

8/14/2006 1:26:02 PM

well, if you read the LLC thread, then you would know that your best bet is to go talk to a CPA/Lawyer

8/14/2006 1:28:45 PM

yeah, well that thread was confusing when trying to apply it to this situation..

So, just hoping to get some specific suggestions for this situation.

8/14/2006 1:35:27 PM

youre going to need to involve a lawyer in the first place to draw up the ownership agreements and all that, might as well have them in on the ground floor

8/14/2006 1:37:02 PM

paging Str8BacardiL

8/14/2006 1:38:17 PM

^that dude seems like one of those really smart type guys IRL...like knows all sorts of "good to know" type shit

8/14/2006 2:32:24 PM

Do you ever watch property ladder?

I will be kirsten.

Has everyone here established their roles? How will decisions be made? Who is determining color selections? In the event of a dispute who has the final say? Which of you is responsible for keeping the construction on schedule and managing the budget? ]

8/14/2006 2:35:01 PM

so any suggestions for me?

8/14/2006 11:00:33 PM

First of all, I dont understand why you are buying a rental property to renovate, but if you must...








LLC
51/49 split (shares)
pay yourselves small salaries (assuming positve cash flow) (if not, dont do it)
arrange for both of you to take a draw once a month (down the road of course, when you have money coming in)
your profit will get taxed unless you do a 1031 exchange. Its really the only legit way to shelter capital gains. (if you plan on selling)

Key: if you already have good paying jobs, keep your salaries to a minimum.

One or both of you need to become a broker (if you plan on business growth)
Get in good with appraisers (always key, if you plan to sell)
Get in good with a real estate attorney

As an investment, be prepared to put 15-20 % down

[Edited on August 14, 2006 at 11:29 PM. Reason : .]

8/14/2006 11:27:36 PM

Thanks for the advice...

When I say renovate, i mean minor things...

There will be positive cash flow.

One additional question: Is there a way to give ourselves 0 salary, and keep positive cash flow as a savings for the company, to be turned into other investments, without having to claim it on taxes?

8/15/2006 6:27:56 AM

DBA...thats the way to go...DBA with one person's name...with additional owners listed. It allows you to only pay the LIcense Tax Fee of a/b $65 for Real Estate.

8/15/2006 10:32:06 AM