Rental Real Estate - Structuring & Tax Planning with Mark J. Kohler | CPA, Attorney

welcome everybody we're live now these are my two props I'm wearing headphones to get in the mood and to prove that I'm hip and cool and then I was also wearing glasses to try to help myself look smarter but anyway those props are done we're ready to roll thanks for being here today got to keep it fun and entertaining thank you so much for watching we're live on Facebook at entrepreneur also the Kohler channel and live on YouTube we've got a lot of questions we're here talking about real estate tax and legal structuring it's hard to get a straight answer out there there's a lot of misdirection some confusion people selling very elaborate structures various spendy say you know you can get as many entities as you want in the future for one flat price I don't know so I'm here for you I want to make sure that you get the straight answer the right answer and an honest answer about how to structure your real estate and should you even be investing in a real estate so let me just say this as an attorney as a CPA and our law firm an accounting firm I'll do probably nine hundred to a thousand consultations any given year sure I'm slowing down a little bit on consultations a lot to teach and train and manage my staff but I'm in the office every day but in these thousand consultations that I would have any year on a regular basis that's three or four a day nothing over the top I would see patterns I would see examples of my clients that were really really smart and successful and clients that were train wrecks and I was trying to help and everything in between well let me just say this I'm not kidding honestly and I think I was the biggest benefactor of seeing this and learning this my successful clients year after year consultation after consultation there was a common thing they would have real estate in their portfolio they would they would and I'm not just talking about REITs in the stock market or you know some sort of mutual fund that's focused on real estate I'm hanging up my successful clients have passive cash flow from some former real estate it could be nowadays Airbnb svr BOS it could be story units mobile homes multi-unit for plexes apartment buildings single-family homes commercial buildings where does it stop guys real estate is where wealthy people put their money you know that let me just repeat it because you know it wealthy people park a lot of their money in real estate and that's what you should be doing so I want to show the structure we have a lot of questions already in the hopper we're gonna hit it I'm gonna rock and roll will be here for 3045 minutes you got a tax question a legal question I'm here for you I do it every week next week I'll be out because I'll be doing my Chicago workshop live I think there's only about ten seats left if you're in the Chicagoland area you want to fly in come hang out Cubs didn't make the playoffs I know but you can come out to Chicago for a full-day workshop this Saturday on Saturday the 12th it's a couple hundred bucks we're gonna have port loz for lunch and I'm there with you all day with a workbook on how to build your business you're gonna love it it's all me for a day I'm gonna make it interesting so next week we will not be here live because I'm hitting the road to head to Chicago so here's the structure let's just get structure out then we'll talk tax strategies and I'll stop start filling your question we won't even be a leaf through all of them all right here we go you may just have a day job that's great you're in corporate America you got a w-2 and you're killing it and you got a sweet FICO score you want to park some of your money in real estate I get it that's cool some of you may be married both of you have a day job w-2 that's cool some of you may have a full-time small business you could be a sole proprietorship you could be an LLC but if you're making money you would have graduated to the S corporation and this S corp is where you're going to be saving on self-employment tax taking lots of rhino's this is not your real estate side if you're doing fix and flips wholesaling rehabs turn in property quick you're gonna run that through an S corp but you're never gonna put your rentals over here this is money and money out you want to sue me you can have my escort there's a laptop in it nothing an S corp is a shell for channeling your ordinary income from a business now if you have your day jobs those are up here but if you have an S corp you've got a w-2 down here now on the other side of this wall this very important wall is where we're putting your passive income real estate and that includes air B&B and BRB oh so I know you many of you I've already seen some of the questions you want to say where what's a air B&B VRBO do I owe self-employment tax joy run it through an S corp I'll just answer that right now no over here we're gonna have LLC's and I don't know all that real estate is over here LLC's do not say taxes LLC's protect your assets that's it LLC's don't save taxes now if you have an LLC taxed as an S corp alright you just you know get out of jail free card your LLC is really an escort now but other than that LLC's are for protecting our assets so we're gonna buy real estate over here generate passive income that's typically tax-free we're gonna have losses that we can use on our 1040 generally there's some rules there and I'm gonna be building equity and the future wealth it's like the trifecta I love it tax-free cash flow equity tax losses what could be better you know alright so this is what we're talking about today why are we building this how are we structuring it some you may have some short-term questions how do I get my eight kids involved on the payroll do I put my spouse on payroll hey I want a fun - 401k with my rental real estate how many LLC's do I need where do I set up my LLC's we could be here for 3-4 hours I know cuz I love this topic and I'm a geek so I'm gonna just throw it open let's see where we go I got Anna Karina was a question what do we got okay so Anna Karina if you're doing flips I'm gonna repeat that question I don't think that came through ana Karina asked how are gains on flips treated so if you're a fan of chip and Joanna down in Waco Texas doing fixer-upper I love Chet pieces Scott I gotta get them on my podcast so what chip and Joanna doing or buying real estate and flipping it within twelve months if you're a flipper and you've got property longer than 12 months something's wrong there's a reason right but if you're doing it right you're gonna be buying and selling within six months a typical fixin flip well if you do more than three a year or that's your primary occupation there's different little definitions we could get into it but if you're doing two three four of these a year and it's your primary deal one of the two it's gonna be subject to self-employment tax and we're gonna it's gonna be ordinary income and we're gonna want to funnel the fix and flips and rehabs through an escort now some people you'll see it out there don't have their escort is their parent company and they'll have a different LLC for every flip because they want to isolate the liability of these big projects and in some states that can be affordable I'm still setting up an LLC with an operating agreement stock certificates minutes articles a tax ID number a bank account just don't think that one sheet of paper and on legal zooms gonna get you covered it's not it will not protect you in a lawsuit I've got case after case that proves it you've got to do the basics with the setup of an LLC but in some states it can be generally affordable to have an LLC for every fixin flip and I'm not gonna do that usually I'm just gonna let the fix and flip be held by your escort we're gonna buy it fix it up sell it ordinary income and a Corrina we're gonna do a w2 a k1 we're gonna get a $1.99 a pass-through deduction we're gonna save on self-employment tax Obamacare we are off to the races this is what every developer fix and flip contractor electrician plumber we do we're an S corp the rental is over here the rehab is over here there we go next question Mary what do you got what is depreciation recapture and how do you calculate you calculate it is it possible to avoid it 1031 extract that you didn't sound like Mary that's sounded like a deep male voice are you sure that was Mary okay anyway that's Logan one of our helpers on the set you should have Logan ask the questions from the mail guess in the late understood okay here we go depreciation recapture what is that all right so let's say you go out and buy a rental property oh let's say you buy it for a hundred grand now but you're gonna get to write this off every year under what's called the term depreciation now you might allocate eighty grams to the building and twenty grand to the land now we can't write off the land we can only write off the building in in a residential rental we're gonna do this over twenty seven and a half years now you could have put one dollar down and got some seller to carry the paper or some bank and you've got a hundred thousand dollar mortgage that's cool you're still going to depreciate this and you get to take that right off year after year and by the time I do mortgage interest property taxes HOA travel dining computers internet cell phones we I got all sorts of write-offs rental real estate will generally lose money on paper I'm gonna go through a four quadrant analysis here in a minute well what do we do with that depreciation did we just get a save taxes with it yes it's a time value of money the IRS has given me a write-off now but when I sell the property I got to give the write-off back that's called depreciation recapture there's really only two ways to get out of it maybe three number one 1031 exchange when you bump this property and sell it and buy another one of equal or greater value you don't depreciation recapture you push your gain into the ex building new cash flow you hit reset you're off to the races that's a 1031 got videos on YouTube about that chapters in my book by the way I'm gonna be giving away a book today for all of you that shared this broadcast do a little join and I'll announce my winners from last week now the second way you can get out of it is with what's called a charitable remainder trust it's a CRT there's a lot of variations but basically you give this property to a charity which you control you get a tax write-off and then the charity sells the property then you get a stream of income from the charity and then at some point in the future the charity gives the money or the trust gives the money to the charity so you get this stream of income it's a really it sounds complex it's not too bad just go to youtube and type mark Kohler CRT charitable remainder trust five ten minute video you can learn about it no depreciation recapture the third option is a way that we can kind of get out of it for the most part it's called an opportunity zone strategy they're hot and sexy right now everybody's talking about opportunity zones where you sell this property or you sell stock or any sort of capital gain and go buy a property in an opportunity zone if you hold it long enough you can exclude any future gain from the sell that property big topic again those are two to three ways marry look into it okay now before I take another question sorry Carly Nancy we're gonna come right back to you your neck by the way I'm looking for a question from let me see Kelly I'm gonna call her Kelly D I don't want to give her full name if you see a question from Kelly D you got to put it up to the top because I told her I'd answer it if she got in here okay here's my four quadrant analysis if you're a real estate investor you should be able to do this in your sleep I'm not kidding when i teach workshop i always do this even if you've seen it ten times from me i'd say i'd love it's always a good reminder to me of why we're looking at rental real estate everybody in the room here too i want you to be able to do this on the kitchen table for your aunt and uncle this weekend here it is y real estate now we've got to get this out on the table as we start to do more of our tax and legal structure and i'm gonna say this to when i go give a lecture to the association of plumbers or morticians or dennis or orthopedic surgeons i always talked about real estate i don't go to real estate conferences and it's the only place i talk about real estate I talk about rental property everywhere I go because remember where to buy wealthy people put their money for the most part in real estate so that's why we're talking about this okay there's four benefits to run a real estate I know some of you that know me have seen this before just do it in your head with me we've got appreciation we've got I'm gonna put up here let's do more use reduction mortgage reduction then we're going to do tax benefits and cashflow now I know there's real estate experts out there that do little analyses just like this in different ways and you want to know three or four ways to analyze real estate so you always make your best decision BiggerPockets those guys over there I love them I've been on their podcast they take a little different approach on it and then I've been into some others that take even a different pros and it's all good but the bottom line is I want you analyzing rental properties three different ways to tell Sunday to make sure you make a good decision remember you're not buying a cute little house with the white picket fence you're buying numbers if the numbers don't make sense walk away I don't care how cute it is how wonderful the neighborhood is or how sexy you think it is or how I'm just going to grow in value you buy property for cash flow and a better make sense or get out of there okay that's what we learned from the O 708 crashes right everybody okay appreciation real quick I buy a property for a hundred grand and I put down ten thousand I get a mortgage for ninety so here's my down down payment here's my mortgage ninety I'm into this thing ten grand now appreciation real estate over time will appreciate will go like this sure it's gonna go up and down but you don't lose the dirt with a stock you might it's crazy the stock markets a little return on rental real estate over the last 50 years has been six point seven four percent across the board nationwide so if I buy a property in it for a hundred grand and it goes up I'll say 5% a year Thunder for the next ten years will be worth a hundred and fifty grand it's going to go up every year so five percent appreciation on the value so it's gonna go up five grand five percent appreciation well what's my internal rate of return how much did I make on my money look at you only invested ten the bank loaned you the other ninety this is OPM using other people's money not opium that that's illegal but I'm talking opium other people's money so if I invested ten and made five what's my ROI in this section 50% I invested 10 I made 5 tax-free tax deferred I'm not gonna be taxed on this this year my property's gonna go up in value and I'm building equity quadrant one quadrant two mortgage reduction who's paying the mortgage are you Oh No you rented the property you have a tenant paying the rent for you and we want to make sure the tenant bare minimum and I have clients that require a lot more but bare minimum I want the rent to cover piti piti now that's going to be the principal interest on the loan taxes which is going to be property taxes and insurance piti insurance is the property insurance now if I want a little more than that I want a cushion for vacancies repairs maintenance HOA fees and all that but if I can at least cover this who's paying the mortgage that tenant the tenant is paying the mortgage so if my mortgages and is going down let's say even 150 $175 a month because a lot of it on this hundred thousand $90,000 mortgages can be interest at the beginning my son was just complaining about that to me the other day it's like man I bought a house I'm in paying mortgage payments for a year and a half what the Freak is all interest yeah it's a lot of interest right off the bat so 150 $550 175 a month might reduce the mortgage by $2,000 at the end of the year even though you paid a lot more for those mortgage payments that your tenant paid for you so look what happened the property went up in value here the mortgage went down and you can put any more money in the property the tenant paid the mortgage for you so look at you're building more equity and went up by five thousand and the Warriors went down by two that's a 20 20 percent ROI you invested 10 you made - this is 20 percent all right now I'm going to move quick through because we're just kidding I find no there's a lot of questions tax benefits the average rental property will lose money on paper even though it might cash flow because look at rent and say we're getting a $900 a month in rent twelve you know this might be a $9,000 of rent during the year well I bet it depreciate it remember I'm gonna write off depreciation the big be and I don't mean Dallas that's a country song talking about divorce okay depreciation mortgage interest property taxes travel dining home office internet computers for kids repairs maintenance tools the average rental is going to lose money on paper this year we're gonna do over five thousand rental properties on tax returns for our clients around the country do you think we see trends you bet the average rental property is gonna lose around six thousand dollars on paper now some people have a property paid off they're paying taxes they're just collecting rent they're not investing when you use leverage you're going to generally have a mortgage interest deduction that'll generate that loss on top of depreciation and everything else so here's the bottom line if I'm my tax return I've got a six thousand dollar loss coming in on my tax return and let's just do a little diagram here I've got my day jobs I've got my rentals and there's a six thousand dollar loss that means on my tax return my taxable income went down by six thousand if I'm in a thirty percent bracket twenty five fed five state that means I save two thousand and taxes look at lower taxable income less tax more refund by buying a rental I get tax benefits that's why the rich do it so if I can save 30 percent of six thousand which is two thousand dollars what's my ROI I invested ten I made two grand in my pocket and save taxes that's a twenty percent ROI in this quadrant now last quadrant let's say cash flow could you cash flow one hundred bucks do you pay taxes on that cash flow no that's tax-free cash flow because here's your tax return minus depreciation of mortgage interest and blah blah blah but you bought a rental and you have an extra hundred dollars in your pocket every month to pay for the sale the cell phone bill that you're gonna write off anyway you weren't paying for your cell phone bill before but now your rental is paying for your cell phone bill that is a rate of return the cash flow is a rate so if I can make 100 bucks a month that's a thousand dollars a year let's stay round it down what's my ROI I made a thousand dollars on a ten thousand dollar investment to pay for my kids cell phone that's helping me on the rental that's a 10 percent rate of return so here it is I hear me out 50 60 70 80 90 hundred my math worked out 100 percent rate of return on one simple little rebel this isn't even that aggressive if you think it's too aggressive let's cut it in half 50% rate of return are you kidding me now are we gonna get this same rate of return in every rental every year no is there risk and rental property sure if you got to learn about it and test the waters and make some mistakes been there done that still do rental property is not a guarantee but if I could even make 50% rate return give me half of that 25% y'all performing Wall Street sure let's try to do that in our retirement account yes you can so if I can get these rates of return in real estate leveraging my money why not and remember you don't have to be rich to do this some people are at their mark I'm trying to buy my own house hey maybe it's better to rent where you're at and invest I guess on my podcast all the time how can i buy rentals with crappy credit and no cash I've got six people here in the room with me could we all put in a little money and buy a rental sure maybe someone's got more money but better credit someone knows where the rental is and they'll do all the management you can form an LLC and create partners to help you buy a remedy when 20% of a rental be better than no rental at all my challenge to all of you will get back to questions right now Nancy my request of all of you is to make the goal to buy one rental a year or part thereof just make that goal write it on it little index card and put it by your mirror in your bathroom and every time you're brushing your teeth you're going I can do this I'm gonna build my credit I'm gonna get out of debt I'm gonna save my money and I'm gonna buy a rental and I can Dave Ramsey yes Dave Ramsey hear me I can use debt to do it cuz debt that makes me money is okay not all debt is evil and I love Dave Ramsey just changed my life and he changes the lives of so many people but I frankly I think he goes too far not all debt is bad I can buy a rental property that makes me money it's okay now I'm not gonna put a dollar down I'm gonna put down a substantial down payment and hedge against problems and I'm gonna buy last point I'm gonna buy rental property based on cash flow not the hope of appreciation not for tax benefits I'm gonna buy a rental property that cash flows everything else is freaking chariot on the top let's do it she says thanks for how you are structuring my life recently I did a short sale on an LLC property how will I need to report this on taxes okay Nancy did a short sale on a rental property or a su rental you say remember just property okay so it's an LLC property so she might have let's go over here to our diagram she might have a property over here that she acquired and she's short sale that means she negotiated with the bank got a lower mortgage and then she sold it and had a profit it could have been her property she could acquired it who knows Nancy here's the easy answer if you're in the business of short sailing and you've done more than I'm gonna do it more than three so four or more short sales during the year you better funnel it through an S corp if you're a pharmacist and you work full time as a pharmacist and you did a couple short sales during the year capital gain and it could even be short-term capital gain no need for an S corp see if you're not doing enough transactions you don't qualify as a dealer or a real estate professional now some you're like well I don't want to be a dealer professional sometimes I want you to be because if you've got a lot of losses from rentals those losses can wipe out your income over here so don't think that being a dealer is bad or being a real estate professional is always good you got to look at each person's situation so Nancy I'd go through your tax return I look at any deals you're doing are you married you have a day job what are you doing your accountant should be able to explain it in 15 minutes and you make a plan for the year okay next question okay I know there's okay it's just throw it out let's do it quick come you name North Carolina this is the way I'm going to set it up and correct me if I'm wrong she's gonna set up as a partnership LLC in the state of New Jersey for management and then men are member managed North Carolina LLC and North Carolina LLC will be disregarded for tax or purposes please correct me if I'm wrong taw ta that may be your initials I'm just gonna call her ta ta I hate to say this don't be offended I think you're wrong on several fronts and I'm gonna save you money here too and I'm gonna give you better protection so let's just summarize ta I don't know if she's got a day job married or small business frankly I'm not gonna worry about that she's buying a rental property in New Jersey now why do we set up an LLC in the first place now let me ask you that ta are by doing this to save taxes no do you get to still write off your depreciation your mortgage interest your travel when you go oh sorry I just read that up right okay ta is down here in New Jersey but her property is up here in North Carolina so does she get to still write off her trips to North Carolina to check on her rental sure does she get to write off her cell phone and Home Office and property management expense sure does she have to have an LLC to save taxes no I cannot say that enough I say it from the rooftops and some bozo out there selling LLC's to save taxes they're not doing your tax return are they they sell it and leave be careful so ta then says well I must need a for asset protection now step one I'm going to just assume and I think ta said this and her message right Logan this is her first rental property ta let's just do it simple and easy now if I set up a New Jersey LLC notice she knew this she's got a register it in North Carolina or get a North Carolina LLC and she wants a two member LLC whoa now you got to file a tax return we charge at least two grand for a 1065 tax return any decent accountants gonna be that much so now you've got an extra tax return to member LLC in New Jersey you're not even doing business in New Jersey see what I mean so my recommendation Fortier on the phone and this would be from any of my five attorneys consulting clients around the country because we want you coming back not getting ripped off I'd set up a North Carolina LLC that's it one LLC in North Carolina and then I would deed the property over to the LLC and I'm not gonna worry about the two on sale clause I know someone's out there freaking oh well I got this loan from the bank under my own name yeah and they've already sold your loan nine times and Wall Street as long as you're making your mortgage payment there's never gonna be a due on sale class in 20 years over thousands and thousands of LLC's and transfers I've only had one client where the bank threw a tizzy fit and wanted them to put it back in their own name and it's worse because I went in and asked permission and made a big fuss about it don't worry about it ta get in North Carolina LLC do a deed transfer you can use Mallory at my office another 50 bucks they'll transfer the deed into your LLC even after the mortgage is all done said and filed the LLC will have its own tax ID number now take a TA said something else that was kind of not good she goes she's gonna do a member managed LLC no no I want to manager managed LLC's I want ta to be the manager of the LLC that's public record the ownership is private no one knows don't do a member managed LLC because if you change the membership you've got to go file amendments with the state and everybody in the world knows who owns it I want that to be private I'm gonna let you be the manager I'm gonna have mail forwarding into our digital mailbox where no one knows where you live I want privacy there are so many strategies here for camouflage as well as bulletproof vest now nothing's bulletproof I hate that word but protection and privacy so don't worry with about the new LLC just set a point in North Carolina call our office don't do it online either and if someone's selling you this you've got a bad advisor we charge 800 bucks you get an hour with an attorney tailoring your tax return to the plan answering all your questions do a little diagram done now this is not an infomercial but I want all you to know what the prices should be out there you should be more than that now if it's an IRA LLC it could be a little bit more if you have a bunch of partners and a bunch of negotiation it could be more but this should be a single-member LLC in North Carolina manager managed the end okay Gary what do we got when I buy a rental property should I set up an LLC beforehand or just buy it personally and then switch it Gary great question and this is for ta as well Gary you're gonna close in your name because you know Fannie Mae and Freddie Mac they're freaking out they're going through your FICO score and you're gonna go sign on the loan closed in your name you're gonna get the best terms in the best loan we all know it meanwhile at the same time Gary ta any of you else out there we're setting up your LLC at the same time then well when you closed on the property the skies open up the stars align and we transfer the property into your LLC then with your property management company or yourself the tenant signs a lease agreement in the name of the LLC meanwhile you've set up a bank account for your LLC they pay their rent to the LLC bank account all they know is that TA and Gary are the managers of the LLC we have privacy as to ownership and privacy as to your address off to the races Gary and I would set up the LLC at the same time now some people here's a caution some people say mark I'm setting up an LLC to go buy a rental in Florida I go do you have that under contract no I'm just shopping well what happens you find a property in Georgia they're not stuck with the Florida LLC so Gary I really want you to be close to closing you know you're past the conditioned space and its eminent you're gonna buy this property call me let's set up the LLC call me all right Ellie what do we got well hurt how come Carly's asking the questions for Gary and your ass and the questions for Ellie this makes no sense totally throws off my mojo okay okay Ellie we just gotta keep your toes okay while purchasing an investment property and having rental income and the benefits of the depreciation offset the income on the and lower taxes on active income Ellie I am so glad you asked this question because we're gonna take it to another level Ellie said Marc come on look I've got my day job over here maybe I'm married you're single if I gotta talk faster everybody's like move it along lots of questions okay Ellie she's got a rental property and we did our four quadrants and she's got a loss and she says mark are you sure that loss is deductible on my 1040 the answer is maybe I want to be honest there's three classifications I talk about this for an entire chapter in my book and I have many clients read it and go correct their CPA who jacked it up I teach this class to CPAs around the country I'm not kidding you guys are learning some powerful stuff here when you marry Ellie files her tax return she's gonna check the box one of three ways one okay is she a real estate professional no no sorry is she passive is she active or a real estate professional this determines how she can write off the loss on her tax return if she checks the box passive she can only write off the losses against other passive income sucks I don't want any of my clients there number two if she checks the Box active you can write off all the losses Ellie up to $25,000 but once your AGI adjusted gross income it's a hundred and fifty grand you're you lose him or do you lose them huh some of you accounts out there does she lose them no if she's an active investor which all my clients are all you have to do is be a decision-maker no time requirement no licensing if she makes too much those losses go into a bucket in Le you want to capture those I have some clients to go yeah I didn't track taking my kids to Grandma's at Thanksgiving to work on the rental because you know I make too much money I don't get the right off anyway I'm in oruro you'll get the write-off tracking it's just delayed gratification someday when you sell any of those rentals you can dump out the bucket and take the losses so Ellie you're gonna get the write-off so don't freak out continue to track it and then you'll in the long run get it now the real estate professional is our last classification if you are a real estate professional you can take all these losses against any w-2 or small business income what it's huge right that's good well in order to do that it's a two-part test a you have to do 750 hours of real estate during the year it's an average of about 13 a week to your primary job has two primary occupation has to be in real estate you can't have a w-2 working for someone else you either but you don't have to be a realtor that would help but you just have to be doing real estate all pharmacist so you've got primary occupation now what's cool is if you qualify as a real estate professional all these losses are right on you ready for the next level if your spouse qualifies you both qualify so now my day job spouse has benefits and security the other spouse want runs the real estate business so that's why I'm setting up a website called tax match comm and you can discuss your long walks on a beach and your AGI and your now amount of rental property I'm gonna bring together real estate professionals and boring engineers Oh into a perfect match made in heaven and tax return bliss that's my goal in life that's what I do I just match make your matchmaker make me a match sorry this is getting out of control okay next question what do we got Gustavo man and I am a Breaking Bad family I will say that right now I can't get right on my head now okay this one short mark where's your Mountain Dew drink this is disgusting its water yeah it's disgusting I've already drink in two or three Mountain Dews today and a rock star so just keeping it real people thanks Gustavo I love that okay what do we got now this is bad ba Samuel oh seven okay all right he's from living in Texas should my family LLC be a series LLC or should our primary LLC own a series LLC okay now I'm hoping V Sam well oh seven is when he graduated from high school or college and wasn't born in Oh seven or else he's a 12 year old asking a question some of you should be asking so I'm gonna assume a little older be a Samuel so he says he's in Texas let's get it on the table he throws out another strategy and I love this when people how many LLC's should you have va Samuel is saying oh I'm down in Texas should I use a series LLC okay I'm doing this question and one more all right okay now listen everybody this is important everybody says how many LLC's do I need I've got four options ready I could let's do it this way this is your operations ordinary side I'm not gonna worry about that so I'm just expanding your passive side all right you could have one LLC and you could have three rentals in it and I could be like uh I forgot our name already in New Jersey I could have a New Jersey LLC registered in North Carolina and in Florida so I get Abbott LLC registered in three states and have three different properties or I could have one LLC in each state or three LLC's in the same state with three different properties now what's the pros and cons here the pro here is I've got one LLC cheaper easier simpler and I'm only maintaining one LLC and possibly even one tax return if I'd go a two-member route the what's the cond all my eggs one basket if this cute little rental that's just an adorable meth lab yeah it's gonna have problems you just know it is some kind sometimes they call them drug dealers I call them entrepreneurs but they're in this little deal and they're having a hard time and the house blows up another Breaking Bad example and so we've got all the rentals threatened because they're all in the same LLC well let's go to option two so now I set up an LLC for every rental that could be overkill these could be three crappy little rentals and I could put all three in the same little LLC but if this is a golfcourse rental this is an Airbnb VRBO ski-in ski-out rental and here's my meth lab rental I'm gonna want them in different buckets option three in some states you can have what's called a series LLC and this is what be a sample of brought up you have one parent LLC and you can have as many baby subs as you want no extra cost forget about a California doesn't work for you but I can have a series LLC and have as many subs as I want but once setup one tax return simpler and I get protection is if I had option two series LLC's are very affordable so BA Samuel what I'd say to you is how many rentals do you have how many you gonna buy if we only have two rentals and that's all you're gonna do I'd stick with option one or two if you're gonna buy five or ten rentals I'm gonna go option three now let me tell you what states allow for series LLC's I'm giving this book away you can all go to Amazon right now or to my website Mark J Kohler com buy the book you can go to Amazon and buy it and let me tell you in the table in the back I've got all sorts of tables 28 game changing strategy chapters that's really fun here's the states that are series LLC's Alabama Delaware District Columbia Illinois Iowa Kansas Minnesota Missouri Montana Nevada North Dakota Oklahoma Tennessee Texas Utah and Wisconsin if you're in any of those states I listed then you can use option 3 now just to make the is very special for that person who's gonna win this book by sharing this broadcast I'm gonna put a little smiley face here and say thank you for listening so now this is for you you all you have to do is share this and then Rosalie is gonna draw someone's name in the morning and then she's gonna email you go you won the book and so it's here BAM I want you to make this your target for reading hit it you got to do it okay fourth option now I only bring fourth option in a play when I have a client worth a million bucks or ten or twenty rentals but the sad thing is there's companies primarily out of Nevada selling this structure to freaking everybody and it makes me mad and it hurts it really does but what we would do for my more advanced clients as we graduate up to it which is fine I set up a holding company in a charging order protection state whole chapter in my book gold you two-bit coke it's a coke LLC they're extra extra protective in their very private and I set up a co policy I only charge eight hundred bucks for a coke the coke owns other LLC's and other states and I can have all these baby LLC's with two layers of protection I do that for my advanced clients I usually set up my copes in Wyoming I can hide you there very affordable not using Nevada stay away all right well apparently I've got to wrap it up I was having too much fun and got carried away I need definitely need to go get another diet do thanks Gustavo for that reminder who I'd share this now I'm gonna be in Chicago next Saturday on the 12th couple hundred bucks fly-in it's a tax write-off come in come to the workshop only about ten seats left and I got a newsletter at my site marked red color calm go sign up for that please on the YouTube channel hit the bell subscribe and every time I shoot a new video you get a pink so you know what's going on and finally if this is helpful at all share it with your family your friends your business partners a lot of people would appreciate this clear straightforward tax on legal advice I'll be here in two weeks until then get my newsletter with many many other videos and articles at my website and on you thanks everybody keep living the dream

Channel: Mark J Kohler

Views: 107,185

Rating: 4.9499402 out of 5

Keywords: tax, legal, entrepreneur, asset protection, wealth building, cpa, attorney, lawfirm, mark j kohler, mark kohler, mark, kohler, Tax tip, Legal tip, tax advice, legal advice, tax and legal tip, Tax and Legal advice, rentals, rental real estate, tax planning, tax savings, saving on taxes, rental real estate taxes, structure, structuring law, Entrepreneur, entrepreneurship, KKOS, K&E, MJK

Id: QJmhkoI2ECs

Length: 42min 40sec (2560 seconds)

Published: Thu Oct 03 2019