Income property

roybean · 07-03-2006, 12:19 AM

Here's what I have decided to do given that I am still in court and got some things to still fight...I want to buy income property in my business name until I stop litigating (if I can ever stop).

Pale Rider · 07-03-2006, 01:58 AM

I have read some about people who start an S corporation, then put each property as a LLC under the S corp (I think that is right). The idea was to have each property protected from lawsuits in case of liability on one. I haven't looked into it to see if it is worth the trouble to do all that, and I am just starting out so I don't think I need that yet.

I am about to sell my first property, but I had it more than 2 years so there is no tax liability. I would be interested to know if the corporation idea is the way to go if I get to the point of having several properties. I would prefer to flip quickly, but can see the many advantages of renting also.

Hedwig · 07-03-2006, 02:07 AM

I've heard that it's a good idea, but don't know much myself. When I get a chance maybe I'll do some research and let you know.

I don't know if you can have LLCs under and S corp or not. I remember studying the differences and similarities, but I've studied so much since then that it's gone from my brain right now.

roybean · 07-03-2006, 02:18 AM

Quote:

Originally Posted by Pale Rider

I have read some about people who start an S corporation, then put each property as a LLC under the S corp (I think that is right). The idea was to have each property protected from lawsuits in case of liability on one. I haven't looked into it to see if it is worth the trouble to do all that, and I am just starting out so I don't think I need that yet.

I am about to sell my first property, but I had it more than 2 years so there is no tax liability. I would be interested to know if the corporation idea is the way to go if I get to the point of having several properties. I would prefer to flip quickly, but can see the many advantages of renting also.

This is exactly what I am thinking of doing; I was just trying to get some info and hoping that some of our experts would chime.

Pale Rider · 07-03-2006, 02:30 AM

It may not have been an LLC, but I'm sure the top level was an S corp. I'll have to look and see if I can find it again. I had found a site about investing, and it may have been there.

http://www.thecreativeinvestor.com/r...rum-index.html

You have to register to enter the forums. Lots of good info on investing.

roybean · 07-03-2006, 02:36 AM

Ok, I'll check that out, but I am pretty sure that I already read that the corp. should be like the governing entity, and you use LLC underneath the corp. Sort of like they are all watching the other's back/butt.

Pale Rider · 07-03-2006, 02:42 AM

http://www.thecreativeinvestor.com/r...915-12-39.html

This thread looks very interesting. You set up a land trust, then an LLC. You got me wanting to check this out more. Could be useful later on.

roybean · 07-03-2006, 02:46 AM

I have been grabbing notes here and there between homework and planning, so I am pretty sure; I've even made some calls, emails; just gotta put my plan in action now...sounds good uh? Hell yes, it's useful.

Darren · 10-28-2006, 10:28 PM

If you do this, most lenders will need a personal guaranty as well. Meaning, someone will have to be personally responsible for signing on the dotted line.

Also, buying a home as an investment property usually requires a hire credit score and/or more downpayment.

Just some things to consider.

Hedwig · 10-28-2006, 11:32 PM

And the mortgage won't usually have as good a rate as if you occupied the home yourself.

roybean · 01-21-2007, 07:42 AM

Ok...folks...onto my next endeavor...A HOUSE!
I am just not sure what to do or how to start...I need a place to live, but I also need income.

If I go with income property, I will need a big down payment and income starts low. It seems it would a long teem investment.

If I start with a home to live in I can get in with a little down and probably a nice piece of property (my agent tells me a new home is best)....

What if I get a home and rent out rooms...would I have to worry about it being considered rental property?

Hedwig · 01-21-2007, 07:48 AM

As far as the mortgage goes, it would still be owner-occupied. You would have some tax consequences, you would have to depreciate part of the house and declare rental income.

Is your agent getting a bigger commission for new homes? I've never bought a new home. If you get a home that is in an established community, and get one that needs some work or is a foreclosure, you can often buy below market value and have some equity almost immediately. On a new house you won't get that benefit. Also, in some areas, housing prices are going down, and that may be even more true for new homes.

When I bought my first house, the realtor I was working with showed me some new homes. We went underneath (there were no basements in that area but most had crawl spaces underneath) and then we did the same for older homes. Believe me, the construction was much better on the older homes.

roybean · 01-21-2007, 08:32 AM

Quote:

Originally Posted by Hedwig

As far as the mortgage goes, it would still be owner-occupied. You would have some tax consequences, you would have to depreciate part of the house and declare rental income.

Is your agent getting a bigger commission for new homes? I've never bought a new home. If you get a home that is in an established community, and get one that needs some work or is a foreclosure, you can often buy below market value and have some equity almost immediately. I am new at this so what will immediate equity do for me? On a new house you won't get that benefit. Also, in some areas, housing prices are going down, and that may be even more true for new homes. From what I am reading prices are going down in a lot of places.

When I bought my first house, the realtor I was working with showed me some new homes. We went underneath (there were no basements in that area but most had crawl spaces underneath) and then we did the same for older homes. Believe me, the construction was much better on the older homes.

I like new homes because I like modern conveniences, but I agree that newer homes seem to be thrown up quite fast.

I was thinking about foreclosures, but then I have to really hunt for what I want. Hell I will even do a HUD home for the right price and area. This isn't going to be as easy as the car by no means!!!

Hedwig · 01-21-2007, 08:50 AM

There are several things that instant equity do. First of all, you have some equity, so if you have an emergency there is something to borrow against for a home equity loan or something.

Also, on some loans you don't need private mortgage insurance (PMI) if the loan-to-value is below 80%. Notice I didn't say loan-to-price. I bought my current home for about $65K when the value was about $85K. It was a HUD foreclosure, and they sell for the balance on the mortgage at time of foreclosure plus a set percentage. So, I never had to pay for private mortgage insurance, since my mortgage was less than 80% of the value. PMI can run a couple of hundred dollars a month.

When I bought my house, there were one or two realtors in the area that HUD designated as managers of foreclosures. I worked with one of them.

If you go for a foreclosure, try to find out the history. In our case, the house was owned by a professional couple who divorced. Neither wanted the house, and rather than sell it they allowed it to be foreclosed (they sure didn't understand the impact to their credit!). So it was really in good shape.

If it's a case of the people couldn't keep up payments and they were in the house for a while, there might be a lot wrong with it. Pay for your own inspector to look the house over before you buy it (this applies whether it's a foreclosure or not).

Prices are going down in a lot of places. But it hits builders harder, because they need to turn those homes to get the money to stay in business.

Another reason I wouldn't buy a new home is that I saw what happened in the development behind me. The builder had financial problems (see above paragraph!!) and did a lot of shortcuts and shoddy work. Then the builder went bankrupt. A lot of problems weren't covered by the warranty and the owners were left with no recourse because there was no one to sue.

Just some food for thought.

roybean · 01-21-2007, 09:10 AM

Quote:

Originally Posted by Hedwig

There are several things that instant equity do. First of all, you have some equity, so if you have an emergency there is something to borrow against for a home equity loan or something.

Also, on some loans you don't need private mortgage insurance (PMI) if the loan-to-value is below 80%. Notice I didn't say loan-to-price. I bought my current home for about $65K when the value was about $85K. It was a HUD foreclosure, and they sell for the balance on the mortgage at time of foreclosure plus a set percentage. So, I never had to pay for private mortgage insurance, since my mortgage was less than 80% of the value. PMI can run a couple of hundred dollars a month.

When I bought my house, there were one or two realtors in the area that HUD designated as managers of foreclosures. I worked with one of them.

If you go for a foreclosure, try to find out the history. In our case, the house was owned by a professional couple who divorced. Neither wanted the house, and rather than sell it they allowed it to be foreclosed (they sure didn't understand the impact to their credit!). So it was really in good shape.

If it's a case of the people couldn't keep up payments and they were in the house for a while, there might be a lot wrong with it. Pay for your own inspector to look the house over before you buy it (this applies whether it's a foreclosure or not).

Prices are going down in a lot of places. But it hits builders harder, because they need to turn those homes to get the money to stay in business.

Another reason I wouldn't buy a new home is that I saw what happened in the development behind me. The builder had financial problems (see above paragraph!!) and did a lot of shortcuts and shoddy work. Then the builder went bankrupt. A lot of problems weren't covered by the warranty and the owners were left with no recourse because there was no one to sue.Just some food for thought.

This is what happened to the people I knew...they all got together, but couldn't find anyone to go after.
I saw and know some people who bought new homes and the builder didn't have problems, ...he was literally cutting costs to pocket money. I think I said this before, but people in the area had mushrooms growing in their living rooms, walls were splitting down the middle, bad carpeting in which something was growing underneath it, a lot of stuff was wrong, but the builder left the country and no one knew where to find him or the company.

This helps Heddy...thx for info.

Hedwig · 01-21-2007, 09:20 AM

That's why I wondered if the agent was getting a higher commission on new homes (they probably won't tell you), because things like this are why I wouldn't buy a new home.

You said you liked modern conveniences. You can either add them, or get a home that's relatively new but not brand new. Then you can see if the walls are split or mushrooms are growing in the living room. The first house I bought was 9 years old when I bought it, and this one was only five years old. So you can still get modern things in it.

If you're willing and able to put some work into a house, a fixer-upper can be good. Again, just get an inspection first to see what you are getting into. Try to get the inspection before you make a firm offer. You might have a problem if you're going to try to get FHA or VA financing, because they have strict guidelines. When I was having credit problems and refied, I got an FHA loan. This house has concrete at the bottom, below the siding and around the garage. It had been painted at one time and because the paint was peeling, I had to have it repainted to get the loan!!! You know it wasn't to protect the propery, because concrete doesn't need to be painted. But I had to get it painted.

Pale Rider · 01-28-2007, 08:18 PM

Quote:

Originally Posted by Hedwig

If you're willing and able to put some work into a house, a fixer-upper can be good. Again, just get an inspection first to see what you are getting into. Try to get the inspection before you make a firm offer.

Not sure of the rules where everyone else is but you can do this to protect yourself. I put up small amount at the time of offer ($50, but could be more depending on price of house) that allows me to back out of deal in a specific timeframe, usually 10-15 days. That allows you time for inspections of house, water, sewer, termite, etc. If anything goes wrong, you walk away and seller keeps the $50. Real estate agent should be able to give