Four Reasons You Don t Want to Put Real Estate Inside an S Corporation
Rental property owners sometimes consider using S corporations to hold their investments And at first look, this idea sort of seems promising S corporations are very popular with non-real-estate small businesses And one hears all the time about all the tax savings that the S corporation delivers . .Sadly, while many people do hold real estate through an S corporation, an S corporation doesn’t make sense for a handful of practical reasons: . .No Benefit to Using S Corporation . .The first reason you shouldn’t put real estate inside an S corporation? Simple S corporations don’t deliver special or extra tax benefits to real estate investors . .Income and deductions within an S corporation retain their character as they pass through the S corporation and flow onto the S corporation owner’s tax return Accordingly, an S corporation doesn’t let you avoid the passive loss limitation rules (which often trip up real estate investors) And the S corporation doesn’t increase the number of tax deductions you get . .Note: If you’re concerned about limiting your legal liability, you don’t need to use an S corporation You can use a limited liability company . .Forces an Extra, More Complicated tax return . .One thing putting real estate inside an S corporation does do? A real estate investment S corporation automatically forces you to do an extra, more complicated tax return . .Here’s why I say this: A real estate investment that you personally own or that you own through an LLC can be handled on a simple schedule E form that’s part of your regular 1040 tax return . .Unfortunately, if you own the exact same investment inside an S corporation, you’ll need to file a full-blown S corporation tax return The S corporation tax return will annually cost you at least several hundred dollars–and maybe even a bit more Yikes . .May Trigger More Complicated Accounting . .You what else happens when you put real estate inside an S corporation? You will, as a practical matter, need to step up to a real double-entry bookkeeping system like Microsoft’s Office Accounting program or Intuit’s QuickBooks program Why? Because when you do your S corporation tax return, you’ll need to include not just statements of income and deductions in your return You’ll also need to include balance sheets at the start and at the end of the year . .Checkbook programs like Quicken will produce statements of income and deductions No problem But you’ll probably need to buy, learn and then use a full-fledged small business accounting system to produce good balance sheets if you’re doing your real estate investing inside an S corporation . .Note: To be nit-picky, balance sheets are not required components of a corporate tax return until the corporate revenues or assets exceed $250,000 In some areas of the country, accordingly, a small real estate investor might be able to own one or more properties and not tip over this threshold In many parts of the country, however, a single property will cost more than $250,000 and, therefore, will mean balance sheets are required if the investment is stored inside an S corporation . .Limits Your Depreciation Write-offs . .A real estate investment S corporation will also often limit your depreciation write-offs Why this occurs is a little tricky to understand But in a nutshell, when individuals and partnerships borrow money to purchase the real estate, they may be able claim tax write-offs for depreciation on the owner tax returns . .Note: There are rules which limit these so-called passive losses But if you can trick your way around the passive loss limitation rules–and maybe people can–you can use the depreciation as a tax deduction on your personal return . .So here’s the problem with an S corporation: You can’t get tax deductions for things the S corporation borrows money for If the S corporation purchases the real estate using a mortgage, for example, the S corporation’s shareholders probably won’t be able claim the depreciation loss . .The reason for this is that you don’t get credit (or what tax laws call “basis”) for loans other people make to the S corporation You only get credit (basis) for money you invest in the S corporation or money you lend And you need basis to claim the deduction . .Note: S corporations and their shareholders can use back-to-back loans to get basis With back-to-back loans, the mortgage company first loans to the shareholder and then, second, the shareholder loans to the S corporation Then the S corporation purchases the property using the money borrowed from the S corporation owner or owners This approach, which often works with non-real estate loans, usually doesn’t work with mortgages The bank wants to have a first-row security interest in the property .
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How to Choose a Real Estate Agent
A lot of property buyers, as they decide to go in for a purchase, decide consciously to exclude real estate agents from the entire process, so as to save on precious money, which has to be paid by way of commission This sometimes backfires as they end up dealing with unscrupulous people who take advantage of their naivety and cheat them of their hard earned money Real estate agents or brokers as a valuable part of the entire process provided you use them judiciously . .It will be wise to recall incidents in the past of people who have taken the help of agents to finalize a deal They shall tell you that the money paid as brokerage fees has been worth it, as they have got good deals and been able to live a peaceful life afterwards, as they have faced no issues regards that purchase Need less to say, not all agents are sincere and honest There are cheats among these too, those who resort to unfair means to earn a fast buck It is therefore advisable to have a screening process for real estate agents as well, before you decide to choose one . .A few factors that can be help you in finalizing a real estate agent are: . .1 Reputation of the agent: The goodwill earned by an agent and his reputation in the open market carries a lot of weight You can gauge his honesty by asking for a list of his clients and then proceeding to cross verify with them about his work ethics This gives you valuable insight into his business .2 Status: The status of an agent can be measured by the location of his office or by the type of staff employed A well organized set up indicates that he has worked favorable deals and has been fairly successful Such people can help you as they have contacts to clinch good and fair deals .3 Contacts: As you personally meet an agent, it will be wise to check with him about the availability of a legal back up for your transactions A competent legal team will help you finish all formalities without any mistakes .4 Deals Offered: Ensure that the agent is offering you commission rates which are on par with the market rates Some agents offer lower rates to lure customers, in which case, it is always a good option to scrutiny the workings of such a broker . .Like in every other aspect of property purchase, this is also an important point which needs to be scrutinized to the maximum A simple tactic is to do your homework well in advance and keep your facts ready, so as to speed up the process .
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Looking For Real Estate Sales Training That Puts Your Business on Steroids
Real Estate sales training is just like it used to be I will never forget when I decided to go into real estate sales A friend of mine was a successful broker and she was ecstatic when I told her I was interested She hovered over me like a mother hen while I finished the required study of state law then took my state test to be licensed The next phase of real estate sales training was about mindset . .She focused on the wealthy mindset She stressed to me that I had the potential to earn a very large income and with that, comes problems Not only the obvious problems, i e , taxes, distribution of income, etc But, quite possibly, the loss of friends from changing my financial status and that I may experience jealousy from family members Hmmmm, I certainly had not considered that but, I obediently took the course she recommended Next, came the real work of real estate sales training, or so I thought . .I learned how to: . . * Present my self and use sales skills, tactics & strategies . * how to farm a neighborhood . * I joined networking groups & the Chamber of Commerce . * I created a newsletter & found post cards . * I learned how to put a sales package together . .Except for the newsletter and postcards, none of the above brought the starving crowd to me from my target niche and I was busy all the time building my business through attending this meeting and that meeting Sound familiar? . .Before I wrote this article, I researched real estate sales training online and I found out that nothing has changed It’s still being done the same way and you are still left essentially on your own to find the business - the people, the customers, the referrals, the coveted real estate listings . . Real estate sales training is still the same old song and dance . .Wow, I was surprised I’ve enjoyed and profited from the world of internet marketing for the past nine years and I couldn’t fathom that real estate sales trainers aren’t on the internet marketing playing field! . .Let me take you by the hand and hover for a moment just like my broker did a few years ago I will introduce you to a five year old Internet Marketing School that will show you how to: . . * Target your market niche . * Develop new market niches’ . * Get new referrals that contact you . * Get listings that contact you . * Target specific demographic and geographic locations . * Build a relationship business online that will have your target niche eating out of your hands . * Build a real estate business on steroids . .All of this is possible using your brain and the technology known as computer and internet, from the comfort of your home, office, wherever you do business for less than a cup of coffee per day The good news is, you can put a lot of your business on automatic and just let your phone ring off the hook! Wouldn’t you rather spend time selling to prospects than chasing them? I know I sure appreciate business done just like that! . .And remember read on below for some quick, easy (and FREE) online marketing strategies you WON’T find anywhere else :-).
Source: www.rsstnx.com