In a nutshell, a 1031 exchange is voluntary. A 1033 exchange allows the taxpayer to defer capital gains when his property is subject to seizure by eminent domain.
The character of the income does not change because of the LLC. Passive income is still passive, and, the sale profit from your rental is still a capital gain.
As has been stated repeatedly here, deliberately losing money month after month does not normally make for a smart investment. And counting on future appreciation or rent increases is a bad bet.
However, with that said, I recently had a property that lost $150 mo for 3 years. But I knew it would going in, and was okay with it because I financed it at 100% and also put over $18,000 in my pocket when I bought it. So, I didn’t mind trading $5,400 over the long haul for an immediate $18,000. But it takes the right deal to do that.
One thing you may want to consider is not doing a typical rental, but selling with a Lease Option, or Contract for Deed, or something along those lines. It’s just one way to make more than you could with rent, and oftentimes turn a negative cash-flow deal into positive cash-flow.
I live in CA and have not bought in CA for the last 4 years. Instead, I get on an airplane and purchase elsewhere. I suggest you might consider the same.
Obviously the consensus opinion is not to buy a property that is going to negative cash flow, which is probably correct in most cases.
So, maybe we should throw out some suggestions on how to find something in your area that will cash flow? You may want to try geting on some wholesale lists from other established investors in your area and find a "deal of a lifetime" there. Even if it is hard to find deals which will cash flow in your area, they do exist. You can rest assured other investors in you area are finding them.
Also, as for buying in your name or a co., I believe you should always hold investment properties and all other assets in something other than your name. Granted, you may have to qualify for a loan in your name but afterwards just transfer title. If you are concerned about triggering the due on sale clause, use a land trust. Land trusts are probably a better way to hold title than co. in moost cases anyways.
If your houses A and B go thru foreclosure, they certainly will be on your credit report, but the IRS will not consider any write-off to be income to you or place a lien on your primary residence.
I have done hundreds of short sales and never had a owner taxed on the 1099. All you have to do is prove that their assets were less than their liabilities and the IRS will allow you/them to disallow that 1099. ANy competent CPA can help with the proper form.
[addsig]
In a nutshell, a 1031 exchange is voluntary. A 1033 exchange allows the taxpayer to defer capital gains when his property is subject to seizure by eminent domain.
Thanks NewKid
The character of the income does not change because of the LLC. Passive income is still passive, and, the sale profit from your rental is still a capital gain.
Why would you buy a rental property that does not cash flow? It is good to get multi-family rentals because they usually cash flow.
Just looking at purchasing a single family home. Not sure how the 4 plex thing got brought up.
As has been stated repeatedly here, deliberately losing money month after month does not normally make for a smart investment. And counting on future appreciation or rent increases is a bad bet.
However, with that said, I recently had a property that lost $150 mo for 3 years. But I knew it would going in, and was okay with it because I financed it at 100% and also put over $18,000 in my pocket when I bought it. So, I didn’t mind trading $5,400 over the long haul for an immediate $18,000. But it takes the right deal to do that.
One thing you may want to consider is not doing a typical rental, but selling with a Lease Option, or Contract for Deed, or something along those lines. It’s just one way to make more than you could with rent, and oftentimes turn a negative cash-flow deal into positive cash-flow.
Just my 2¢
I live in CA and have not bought in CA for the last 4 years. Instead, I get on an airplane and purchase elsewhere. I suggest you might consider the same.
Obviously the consensus opinion is not to buy a property that is going to negative cash flow, which is probably correct in most cases.
So, maybe we should throw out some suggestions on how to find something in your area that will cash flow? You may want to try geting on some wholesale lists from other established investors in your area and find a "deal of a lifetime" there. Even if it is hard to find deals which will cash flow in your area, they do exist. You can rest assured other investors in you area are finding them.
Also, as for buying in your name or a co., I believe you should always hold investment properties and all other assets in something other than your name. Granted, you may have to qualify for a loan in your name but afterwards just transfer title. If you are concerned about triggering the due on sale clause, use a land trust. Land trusts are probably a better way to hold title than co. in moost cases anyways.
Best of luck,
Sean Flanagan
What choices do you have?
If your houses A and B go thru foreclosure, they certainly will be on your credit report, but the IRS will not consider any write-off to be income to you or place a lien on your primary residence.
[addsig]
I have done hundreds of short sales and never had a owner taxed on the 1099. All you have to do is prove that their assets were less than their liabilities and the IRS will allow you/them to disallow that 1099. ANy competent CPA can help with the proper form.
[addsig]
How about in the case of short sales and I DO NOT have any foreclosure reportings on my record/credit report? Will the lender also send a 1099?