Tuesday, October 18, 2016

What's Your Preferred Method of Rent Payment?

Wednesday, October 12, 2016

What’s Best for Real Estate Investors : LLC or S Corp?

By Thomas J. Franklin

There are many Real Estate Investors that are unsure whether they should establish a Corporate Entity or not. The primary purpose of having your Real Estate Investments, in a Corporate Entity, is to protect you personally. You want Asset Protection. Ideally, for Buy and Hold Investments, you would want to create a LLC, for each property. This may seem a daunting task; and you may be thinking how to manage all the bookkeeping. Depending on your area and the value of each property, you may want to consider grouping properties into a single LLC that does not exceed a total monetary threshold.

To better illustrate this concept, I will share my Company's Business Model. Each acquisition is placed in its own Clone LLC, with the only member of the Clone LLC being the Umbrella LLC. This funnels all net gains and losses, from each Clone LLC, to ACT Investment Properties, LLC that operates as the Umbrella LLC. This Business Model only requires two Bank Accounts: a Corporate Checking Account and a Corporate Savings Account.

For Buy and Hold Investors, why is a Corporate Entity important? What happens if one of your tenants has a slip and fall, on your property, or something else happens to them? You are on the hook and can be personally sued, for everything you own. Some people will say, "Take out a quality Liability Insurance Policy and you will be protected." Ambulance chasing attorneys know their way around and can legally navigate around Insurance Policies. Another downside is you loose on the advantages, of the Federal Tax Code, by not closing in the name of a LLC, or S Corporation.

I would strongly suggest you establishing a Corporate Entity such as a S Corp or a LLC. This is a relatively inexpensive process. I invite you to Google "Creating a LLC or S Corp in _____," "Division of Corporations in _____," or another phrase. The blank line is where you insert the name of the state, in which you want to establish the Corporate Entity. You can go to http://www.sunbiz.org and see how Florida does things, to give you and idea what to look for, in a website. I invite you to please consider the following, from a Federal Income Tax Filing Perspective. I cannot stress the importance of finding a very good Investor Friendly CPA. Below are some things you may wish to consider, as to which Corporate Enity is best, for your Business Model as well as your Real Estate Investment Goals and Objectives.

Flipping Properties

If the primary objective of your real estate business, or one of your real estate businesses, is to buy, potentially fix up an existing property and resell it within one year, the Internal Revenue Service can consider that to be an active trade or business. Unlike passive rental income, the income from an active trade or business is subject to self employment tax (a nasty 15% tax commonly referred to a "social security and medicare" by working folks). If your goal is to reduce that self-employment tax to a minimum, an S Corporation is the best entity to use. Why?
It is the only entity structure whose rules allow the business owner to take a "reasonable salary" (subject to social security and medicare) and then take the remaining profit (often as much as 50% of the remaining income) out as distributions not subject to self-employment taxes. Correspondingly, all business income taken from an LLC under similar circumstances is subject to self-employment taxes. For a business owner with $100,000 taxable annual income, the net tax savings for using an S Corporation instead of an LLC in taxes paid every year can be as high as $7,500.

Holding Properties

When holding properties as a cash flow investor, the LLC (or LP) is generally the better choice because an LLC has more liberal distribution rules. The key here is flexibility. If you purchase a large piece of property and later decide to sub-divide it, you could distribute out a piece from an LLC without incurring a taxable event. LLC distributions come out of the LLC at cost basis. The members of an LLC are issued K-1 Form and have to pay taxes on all profits as though it were income, which could expose the owners to high employment taxes. Also, an LLC can elect to be taxed like an S Corporation.

While there is never only one answer that is correct for all circumstances, there is a general rule that is almost always the correct choice. So remember, for legal and tax planning, a good CPA will recommend that clients hold their properties in an LLC or Limited Partnership and run their businesses as S Corporations to avoid self-employment taxes.

I hope you found the above information valuable and would enjoy receiving your feedback.

Thomas J. Franklin
Website Link: Click here

Sunday, October 2, 2016

The LPA Rental Application with Do's & Don'ts Video

The LPA Rental Application

Free Rental Application for LPA Members

"It is far better to have no tenant than to have a bad tenant."

The LPA RENTAL APPLICATION has after years of research and improvement, developed into a great collection of the best and most effective screening ideas .

I feel very strongly about strict tenant screening.to Essential landlord rental forms with lease rental agreement, rental application, eviction notice, lease form, apartment lease, pay rent or quit, notice to terminate tenancy

  • The LPA Rental Application gets straight to the point
  • A very effective rental application
  • Isn't unnecessarily long or intimidating
  • A collection of the best ideas that we have found necessary to assemble into what we believe is one of the BEST RENTAL APPLICATIONS around!

The LPA Rental Application has eliminated many tenant problems by helping us to do a better job screening the applicant. Qualified tenants are more than happy to fill out the form and show you how wonderful they are. Find out as much pertinent information on your rental applicants as you can before entering into any lease or rental agreement.

Do's and Donts - The Rental Application

Some of the items contained in this rental application are:

  • Authorization to obtain a copy of tenant's credit report(s) and verify any information given. We need this because it is illegal to pull a credit report without the tenant's written authorization according to the FCRA (Fair Credit Reporting Act).

  • Deposit Not Refundable, unless applicant is rejected. Deposit receipt and rental offer form is included in this rental application. (Applicants may not get their deposit back if they decide to change their mind.)

  • Includes Non-refundable screening fee agreement. The prospective tenant pays a screening fee when the rental application is submitted to you. This fee covers you for the cost of checking references and running credit reports!

    Important background information on tenants including:
      Rental Application of The Landlord Protection Agency
    • maiden names, alias',
    • Date of birth,
    • social security numbers,
    • driver license numbers,
    • previous addresses,
    • previous landlords and their phone #s,
    • previous rent amounts,
    • pets,
    • smoking,
    • vehicles and license plate #s,
    • intended residents,
    • military status
    • criminal history
    • income and financial references
      • employment
      • income
      • bank accounts
      • credit
    • perjury and fraud warning

    (Always take a copy of the the tenant's drivers license or other legal form of I.D. so you can verify the person you are screening is really the person whose references you are checking.)

  • Financial and Employment verification section. Get the right questions answered before negotiating on the rent.

  • Verify bank accounts. Credit balances and outstanding loans.

  • This Real Estate Broker friendly form has an instruction checklist for rental agents and an optional space to enter rental commission.

  • The rental application was designed to fit on one legal sized page. It is formatted to store in your word processing program and allows you to make changes as you see fit. Feel free to add any good ideas to improve the rental application.

  • Get your LPA Rental Application FREE along with all our Essential Forms included in an LPA Membership.

    Remember: "95% of tenant problems can be eliminated in the screening process!"

    I'm sure you'll be pleased with the LPA Rental Application and the results it will help you achieve. - John Nuzzolese

    To Order,
    to Essential landlord rental forms page with lease rental agreement, rental application, eviction notices, lease form, lease purchase option, furnished lease, apartment lease, pay rent or quit, notice to vacate, notice to terminate tenancy

    LPA Landlords who use the LPA Rental Application also use:

  • The Landlord Reference Qualifier
  • The Tenant-Finder™ Telephone Worksheet
  • The LPA Tenant-Finder™ Prospect Qualifying Chart
  • The Credit Reporting Disclosure Notice
  • The LPA Lease

    Legal Disclaimer
  • Tuesday, September 27, 2016

    Thursday, September 22, 2016

    Tuesday, September 20, 2016