The Money Mustache Community
Learning, Sharing, and Teaching => Real Estate and Landlording => Topic started by: PAstash on March 26, 2017, 09:41:42 PM
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didn't know if this goes here or the real estate land lording section?
Two years ago I purchased a worst house in the best neighborhood type of situation. I renovated while living there. I paid off the property due to market conditions and the relatively small amount owed on the property.
Soon i'll be purchasing a home for myself and my family to live in in hopes to begin to rent this out. As I understand for tax purposes and to insolate yourself from liability you should almost always house your rental properties in a LLC. I would really like to tax advantage of some of the tax benefits of being a business owner.
So options from here...
1. I did well on the flip I could sell now and net about 40k. I could dump this into the market and forget all this nonsense.
2. try to give it a go as rental real estate (which was the original plan) however I did the renovations in mind with leaving myself a out which would be selling out right.
3. Hold the property. Appreciation was NOT my main play however due to the cost of reno and area it maybe my best play. Every property in the area is appreciating like crazy.
part 2a. So say I hold it open a LLC could I use cash overflow from the business to purchase indexes? I assume that money would be help inside the LLC would there by any tax advantages to this? Would there be any other advantages to doing this?
part 3a So I want to avoid the risk of a tenant destroying the property so I don't rent it would it still make sense to hold it in a LLC to attempt to take advantage of text benefits?
Anyone have any books on this subject? using real estate holding to help boost index holdings? Books on how to arrange LLCs to hold these things for tax benefits?
I am going to cross post this in the land lording section.
thanks all!
P.S. Haven't met such a fine group of people in all of my travels as this forum.
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There's no advantage (or at least an income tax advantage) to holding stocks inside an LLC.
Your LLC is probably a single member LLC, which means for income tax purposes, you ignore it.
Even if your LLC is a multiple member LLC--which means it's probably a partnership for income tax purposes--you get no income tax benefit by holding the stock through your LLC. The dividends and capital gains and any deductions generated by the stock will just flow through to your 1040 tax return via the K-1.
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The only issue I see is:
If you decided to hold stock within the LLC, and then you wanted to distribute that stock out to yourself personally, there are instances where you would have to recognize gain on that if you have basis issues.
Otherwise, as SeattleCPA mentioned, all items will just flow onto your individual and retain their original character.
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Another thing to keep in mind is if you hold the investments in the same LLC as your rentals you are putting your investments at risk to any liabilities you may incur related to the rentals. I would pull the cash from the LLC to invest in indexes. If you find tax advantages to holding the investments in an LLC then create another LLC to hold the investments. This is not my area of expertise so I really do not know the answer to whether there are tax advantages.
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You put rental property in an LLC so tenants can't sue you for your personal assets in case they slip and fall. You can put each rental property in a separate LLC to 'limit your liability'.
Your stocks aren't going to sue you for slipping and falling. That's not what LLCs are for.