Free Q n A sit down times are the best way to see where you’ve been, where you’d like to go, and explore options for how to get there.
Our typical consulting times for highest and best effect are NOT tax time. This is largely bookkeeping for an otherwise on-going year to year plan.
- Beginning of year sessions we use to plan out strategy and most importantly: timing.
- Tax time. Good time to evaluate what you have to work with and how to get what you don’t yet have to work with, as well as entity options and buy sell strategies.
- Mid year. We sit down at this quiet time and ‘annualize’ your numbers and to date results. Then adjust, plan, and move forward.
- End of year. After the books close its ‘too late’ to grasp some strategies uniquely available at this time. That’s why we recommend 12/10 of each year for a year end review.
We explore with our customer/ client base various tax and other aspects of:
- Your first home/ Buy or build/ MI-FL vacation home
- Move up/ Down size/ Relocating 101
- ‘In-place’ cleaned, rented & managed rentals & tax benefits
- Use real estate to pay for college Links
- Real estate investing in retirement Links
- Real estate investments for cash flow Links
- Real estate as tax shelter Links
- Use real estate investment in your golden years Links
- Diversify Your Portfolio – Purchase Shares in Private Real Estate Investments Link
- About shared investing
- How it works http://www.highya.com/realtyshares-reviews
Clients should realize pros and cons of the entity they form for their business or investment activity.
- S corporation?
- How about an LLC?
- When planning to purchase several single-family homes … should I form a C corporation?
Answering the question of entity choice is best before transactions are initiated, but remain a valid question at any point. There are issues like income taxes, legal protection, partners, ease of doing business, insurable risk, and access to credit. Cash flow preferences, (now or later), along with the right entity can even slash your tax burden while providing legal protection against creditors and lawsuits. The right entity could affect your ability to deduct 100% of your medical expenses, and save income and self-employment tax.
Choice Of Entity Considerations For Real Estate Investors. One of the most difficult choices for investors in real estate, either new or seasoned, is determining …
Choosing the right business entity for your investment real estate is an important decision with many consequences. It is crucial to work …
Sep 12, 2012 – If your business is holding real estate, go with a pass-through entity, …. of the owners, the entity choice for your business is no small decision.
advises real estate funds, private equity funds, hedge funds, limited liability … considerations such as real estate investment trusts and tax-exempt entities.
Choice of Entity in Real Estate Transactions. (With Emphasis On Partnerships. And Limited Liability Companies). Tab le of C onten ts. Page. I. SCOPE OF …
(Speak to your accountant/ lawyer/ lender/ and insurance agent for specific advise – the following is excerpts from counsel received and not to take the place of paid advisers in their respective field of licensing.)
Well here’s some interesting perks for home sellers looking for tax breaks. No tax on up to $500k MFJ if owned over 2yrs – most of us knew that one, but did you also know:
There are several exceptions. Under the old rules, if the home has been held fewer than two years, and if the move is job-related or health-related or there were other unforeseen circumstances, the taxpayer was allowed a prorated portion of the exclusion. The IRS ruled that unforeseen circumstances could include:
- divorce, legal separation, or death of a spouse;
- becoming eligible for unemployment compensation;
- a change in employment that makes it impossible to pay the mortgage or basic living expenses;
- multiple births resulting from the same pregnancy;
- damage to the home from a natural disaster, act of war, or terrorism; and
- condemnation, seizure, or involuntary conversion of the property, such as foreclosure.
The dad signed a deed giving property to the child, left it in his desk assuming child would find it after death.
- Never delivered
- Never accepted
- Never recorded (aka perfected) although not a requirement but a good idea
- and is now subject to probate without a will to pass the property
Deeds undelivered until after death in Michigan do not survive death.
Lesson: See the lawyer now.
For future planning FYI.
particularly the part:
“….Joint Tenancy:……Another problem with owning property in joint tenancy is that when you add a co-owner to
the property as a joint tenant, you lose many aspects of property control. Many parents think that by
adding their son’s or daughter’s name to the property that it is a way to pass the property on without
a probate and this is generally true, but …...bla bla……. You also
expose the property to your co-owner’s debts and obligations, so by adding your son’s or daughter’s
name to the property, you could potentially lose your home to your child’s creditors if he or she is
successfully sued. There could also be gift and/or income tax problems if your co-owner is not your
…….bla bla bla…..
Finally, property held in joint tenancy only receives a step up in the basis equal to one-half of
the property value at the death of the first joint tenant.
Easiest tax wise, the spouse owns with spouse….property willed to child(ren). Child(ren) get full stepped up basis to reduce tax burden on them. Parents get ease of mind not having to worry about child being sued and attachment to parents property.
I’ve seen children added to deeds prior to passing of parent(s). Sometimes this is great, but I saw a real estate agent give advise she wasn’t at all qualified to give & it created an immense hardship ($15ooo tax bill) that could have been avoided with a 5 minute call to myself.
This should involve legal AND taxation planning – if not insurable risk as well – consultation.
Landlord / investors, are you using component depreciation as an option in your year to year tax planning ? If income will remain flat or decline, you may wish to ‘pull’ your deductions back with various planning techniques.
Another quick tip, you can increase your ROI by 4+% just by using a different entity to hold your investments.
Here’s a nice little primer on evaluating real estate investment options. https://www.biggerpockets.com/…/introduction-to-real-estat…/ Clients, if you’d like some fillable templates to automate calculations in the article, let me know.
Looking for a primer on real estate analysis? Learn about Pro-Formas, Cap Rates, NOI, Cash-on-Cash Return and Total Return in this thorough tutorial.
Mid November thru Mid January is typically an excellent time to pick up investments and/or move up as prices are soft at this time of year.
This strategy has been one I’ve followed for 3 decades to the advantage of my client base and myself. Why?
- Kids are back to school creating busy and less flexible schedules
- Folks have committed funds shopping for gifts
- Holiday gatherings keep focus off looking for properties
Move up scenario:
- If you sell a $300k home for $270k, you take a 10% hit = $30k loss
- When you buy the ‘move up’ house and get a 10% advantage on $450k, that could = a $45k savings.
- You buy a house, for example, that will rent for $850/ mo., typically costs $65k. = 15.7% ROI
- At a 10% purchase discount, you’d pay $58500 = 17.4% ROI
- Additionally, you now have a quicker ‘equity build’, an equally significant part of investing in property. ‘Equity build’ is the 401k type of gain real estate has, where you don’t pay tax on the gains of appreciation until the property is sold. Maybe not even then ! – but that is a sit down consultation.
Point: this is a good time to ADD to your realty holdings be it
- a first time purchase,
- ‘move up’,
- picking up an investment,
- or a vacation property.
This is NOT the time, in my opinion, to sell a home and move to an apartment, or in other ways LESSEN your realty holdings – unless there are other circumstances of an unusual or more complex nature.
Call to sit down and chat further., PA
Here’s to my friends at Youth Haven Ranch – you rock on so many levels!
For more ideas about entries and elevations:
You got a great deal, but its stuck back in the 80’s, or 70’s or maybe the 60’s.
Practice your search word skills on Pinterest. E.g: https://www.pinterest.com/search/pins/?q=trilevel%20remodel&term_meta%5B%5D=trilevel|typed&term_meta=remodel|typed
Where you’ll find such ideas as raising the ceiling, opening up the entry/stairs, changing from carpet to tile and hardwood, or moving the kitchen.
Freshly updated 2 bdrm/ 2 ceramic baths/ 2 car garage, huge rear deck, fenced rear yard with shed and garden space, includes frig/ stove/ dishwasher/ & laundry room appliances, a/c, lighted closets, bsmt laundry.
$925 includes lawn and snow plowing service, $875 without.
If you want to get a glimpse of your ‘highly secretive’ FICO, try this tool. Why ? Because if you apply for credit but get turned the inquiry effects your score for 25 months ! Ouch, see if its even worth it first.
Well the short answer is ‘usually they can’t.’ But there are some simple tax planning tools I first learned from my dad.
A tool I’ve set up for many to make the high costs associated w/ future/current college costs deductible is nice little managed rental homes. Consider this:
Our company will:
- find the properties – give the data – for you to make an informed investment
- broker the sale(s)
- oversee/manage the pre-rental rehab
- screen/manage tenants
- send monthly statement and direct deposit earnings.
While you, the taxpayer:
- have child(ren) care for lawn and any tasks they can handle – this is deductible exp to parent, comparatively minimal tax effect up to $4000 for child.
- gets to now deduct many things that have or will be paid for anyway – tools already owned: mowers, trailers, mileage at $56c/mile, childs cell phone & computer to extent used to help care for property(ies), etc.
- deducts depreciation – another not out of pocket ‘tax preference item’ as the IRS calls it.
- deducts house office area used for tracking & managing the manager – so now a % of house costs are deducted that again are already being paid for.
If the property is in the college town:
- child deducts mileage to/from and many other costs for him/her to ‘site manage’ it as an occupant or near by resident.
If you need assistance contact me immediately as these MUST be filed timely and complete.
Things to remember:
- New in Michigan – vets now qualify for 100% property tax abatement
- Federal poverty guidelines must be the most strict a city/township can use + asset test
- The assessor MUST make the guidelines available to you – so you don’t waste your time applying when the criteria is uncertain AND so he/she doesn’t change the rules as the process moves forward….GET THEM IN WRITING, NO VIA PHONE, OR SPOKEN WORD OVER THE COUNTER OR VIA EMAIL. I’ve seen assessors give folks guidelines verbally then change his story at the Lansing level !
Here are some useful links.
1344 Beaverbrook SOLD.
Pat / Laurie, thank you for the opportunity to serve you.
Mike / Kelly, thank you for the opportunity to serve you again.