two sides of the REI business - Posted by Theo (ny)

Real Estate Investing Real Estate Law
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Posted by Natalie-VA on April 24, 2005 at 12:15:33:

Regarding question #2, my CPA advised me NOT to hold long term properties in the S-corp. He said if I buy an office, the LLC should take title and then rent it to the S-Corp.

I would like to see feedback from others regarding your question #1. We keep our rentals in an LLC and our rehab/flips in the S-corp. We keep the two entities totally separate. We recently bought one in the S-Corp and changed our minds. We want to keep it as a rental. My CPA advised that the S-corp should sell it to the LLC and to ensure that the S-corp makes some sort of profit on the deal.

Anyone else run into this scenario where they changed their mind on what to do with a house?

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two sides of the REI business - Posted by Theo (ny)

Posted by Theo (ny) on April 22, 2005 at 13:26:29:

First off, thank you for all the great information - from everyone asking questions, to the experts helping. This site is an amazing resource!

My question is about working the two sides of REI - fix/flip, and hold/landlord.

I’m working toward buying a 4-family to hold for the long term, and hopefully acquiring about 2 or more every year. I’d like to keep these for the long term for the passive income they’ll produce down the line.

However, I’d also like to find properties, buy them below market, fix them up, and then sell them for a profit.

I’d like some thoughts on three questions…

  1. If I setup a LLC for the rentals and a C (orS)-Corporation for the rehabbing/flipping, and don’t mix the deeds, could I get in trouble with the IRS and be considered a Dealer, even on my rental properties? I’d be gaurenteeing all the mortgages/LOCs, etc…
  2. If I buy a house with the proceeds from the S-corporation to use as an office/home, can I legally rent it from the Corporation at a below market rent while using part of it as my company office?
  3. If I pay myself a salary from the S-Corporation, will the corporation have too pay taxes, then me on my salary money?

I also have one more question…I was reading Dolf De Roo’s newest book on tax RE issues, and he mentiones a category of income from rental properties that isn’t taxable … is there such a thing?

Thanks a bunch…I know there is a lot to this post. Any help of answers is appreciated!