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Real Estate Investing: Are Rental Properties worth the Admiration?

Investing in Rental Properties

Real Estate Investing, in Rental properties gets a lot of admiration because of, passive income.  Usually there is positive cash flow in, rental properties.

Joke of the day Rental properties 

A young woman, pursuing a graduate degree in art history, was going to Italy to study the country’s greatest works of art.
Since there was no one to look after her grandmother while she was away, she took the old lady with her.
At the Sistine Chapel in the Vatican, she pointed to the painting on the ceiling. ‘Grandma, it took Michelangelo a full four years to get that ceiling painted.’
‘Oh my, ‘the grandmother says.
‘He and I must have the same landlord!’

A few weeks ago I interviewed my co host Trevor Evans on the topic “The path to Financial Freedom” We received such an overwhelming response to that topic that I decided to have a spin off on, Real Estate Investing. This is episode #2 in the series: Real estate investing, “Funding, Fixing and Flipping. Is Owning, rental properties, worth the headache?

As a realtor for over 17 years, investing in, rental properties, has been my space up to this point. I own several rental properties and I also manage several rental properties.

My co-host for this podcast is Trevor Evans: Speaker/Trainer for Legacy Education Alliance and Rich Dad Education. Trevor is also an Entrepreneur, Real Estate Investor. Banker and Founder of Personal Awakening Brand “Being Normal Sucks.”

I met Trevor earlier in the year when I attended a Get Motivated Seminar and signed up for a 3 day, real estate investing, seminar. I met my co host Trevor Evans at this program and let’s say his vast knowledge on the subject of, real estate investing,  and, real estate, opened my mind to new opportunities.

I didn’t know what I didn’t know!

His knowledge base was extensive. I immediately enrolled in the Legacy Education Alliance, investing in real estate, training program.

Real Estate tip of the week

What is your best choice as a, real estate investment? From the book “Your money and how to keep it by Brian Costello”

Real Estate, will be a natural choice for many as an, real estate investment, vehicle. Generally, real estate, can be counted on to rise in value over a period of time. If you want short term investments, you can use short term investment vehicles like treasury bills. Other options are gold, commodities and the options market. Small investors are now also switching to Mutual funds because they offer a great deal of flexibility, and they can be cashed in at any time.
So, the best investment choice depends on your country laws as it relates to Capital Gains tax vs interest tax. In the USA and Canada, interest is taxable while you can make a lot of money tax free with capital gains.

Todays episode of Fund, Fix and Flip is sponsored by, Myrna Young Realtor 

Are you looking to invest in the south Florida market? The time is ripe for investors. Call Myrna Young  at Century 21 Selling Paradise 239-542-5777 for all your Wholesale or Rehab purchases, Buy and Hold, rental properties, or Property Management services. We are licensed in real estate and property management services and can also buy or lease your home. Don’t delay, Call today 239-542-5777

“Is Owning Rental properties worth the headache?” Show notes:

What are investors doing that is causing the headache?

  1. Not properly screening the tenant.
    Most investors are stressed to put a tenant into, rental  properties, because it costs to have a vacant property.
    That is the underlying reason that they short the screening process or decide to take a risk with a tenant. But it costs more to have the tenant removed and evicted, so the pain of a bad tenant lingers for a long time.
  2. Not understanding the renters mindset
    A renter does not have an owners mindset to take care of a property.
    The environment the rental is living in determines the mindset of the tenant. If you have a tenant in a single family home that is costing over $1500 per month.  That tenant has an owner’s mindset and would usually take care of the, rental property, as his own because he or she is probably an executive and is not renting because they can’t afford to buy.
  3. Know your tenant
    That allows you to skip inappropriate steps.
  4. Understanding the positive cash flow cycle
  5. Buy only properties that need remodeling instead of renovations
  6. Setting up warranty or replacement work directly with local scratch and dent shops
  7. Paying a flat fee to a Property Management company

Additional resources

Some resources for Real Estate Investors:
BiggerPockets: The Real Estate Investing Social Network. There are many free articles and forum threads all for free on how to get started in real estate investing.

https://www.mashvisor.com Use analytics to find lucrative traditional or Airbnb properties in a matter of minutes.

https://myhelpsrealestateinvestments.com/ – list of off market properties at discounted prices in Fort Myers, Fl and West Palm beach, Florida

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Is Starting A Real Estate Investment LLC A Good Idea?

Real Estate Investing LLC

This week on The Mindset Transformation Radio show and Podcast with Coach Myrna and Rich Dad trainer Trevor Evans, we discuss the topic “Is Starting A Real Estate Investment LLC A Good Idea?”

This is the 6th episode in our Funding, Fixing, and Flipping Series:
Listen in to understand how important setting up your Real Estate Investment business with the right tax structure, would allow you to keep most of your investment income and not pay all of it to the tax man!

Tip of the week from Coach Myrna: Landlord LLC benefits
If you hold and rent Real Estate, this article could offer massive insight on one possible way to structure your company. We are not giving legal advice, just questions for you to ask you asset protection attorney.
Keeping in mind the risks associated with opening your business as a sole proprietorship, consider using this scenario for your business.

Open an LLC, purchase a property, but don’t manage it. That’s right, don’t be the one to manage the property. You can use the combination of a C-Corp and an LLC. Let the C-Corp manage the company. This is good to reduce liabilities. How? Let’s take an example.

For the last four months, the tenants have been complaining that the parking lot in the complex you own is too dark. They don’t feel safe walking to and from their cars at night and want to have you install more street lights to brighten up the area. They continue to complain to the management company, the C-Corp, letting them know of the issue. Having not addressed the concerns, the parking lot remains dark and one night, while walking in from her car, a young mother of two who live in your property is robbed at gun point in the dark parking lot. When she sues, who is liable? The LLC? They own the property, so it would be them, right? Wrong.
The C-Corp, as the managing entity, is the responsible party when it comes to any damages and liabilities incurred because of this incident.
The LLC, having limited liability, is protected. This is something very important to keep in mind when making the decision on which type of entity you wish to use.

For more information on setting up the structure of your Real Estate Investment business, check out this Connected Investor Blog post

http://connectedinvestors.com/blog/real-estate-investment-llc-vs-s-corp/

So, What are the Pro’s and Con’s of LLC for Real Estate Investing? Is starting a Real Estate Investment LLC a good idea?
Tune in to hear Trevor’s answer.

What exactly are the major differences between an S-Corp, C-Corp and an LLC as it relates to real estate investing?

A C-Corp is a management entity. As per my tip of the week. Use your C-Corp to manage your rental properties.
So, in case you are sued for negligence, the C-Corp would be the benefactor of the law suit and you as the owner would have no liability.
The C-Corp also has more leniency in regards to what expenses can be written off; but the biggest benefit of having a C-Corp manage your rental properties, is the ability for the C-Corp to collect rental revenues and pay the HOA dues and other expenses from these revenues. You as the owner of the property, would only be responsible for your positive cash flow at the end of the month.

If you were collecting the rents in your personal name then you would have to claim the entire amount as income.

LLC – A single member LLC offers no asset protection and is charged with self employment tax.
A multiple member LLC has asset protection.
A multiple member LLC, members are not liable for debt incurred by the LLC
A multiple member LLC can be viewed by the IRS as a partnership and as such the members can determine the split or who gets what.

S-Corp or self corporation is a flow through entity.
Used primarily to expense big ticket items that cannot be expensed by the LLC.
The S-corp does not pay taxes, its members file a K1 for any income not written off and that income is taxed at their income level.

Some other questions answered by Trevor:
I have a rental property in my personal name, can you tell me the pros and cons of transferring that property in an LLC?

I have no mortgage on this property. Could I have transferred it into an LLC if I had a mortgage on it?

What are the states that have the most conducive laws that benefit the Real Estate Investor and protect the LLC?
Can you explain some of the benefits of incorporating or forming an LLC in Florida?

For additional reading, here is an article on “Is Starting A Real Estate Investment LLC In Your Future?
As Investopedia so eloquently puts it LLCs are a “corporate structure whereby the members of the company cannot be held personally liable for the company’s debts or liabilities. Limited liability companies are essentially hybrid entities that combine the characteristics of a corporation and a partnership or sole proprietorship.”

If you found this blog post and podcast inspiring, please Subscribe, rate, and review this podcast, then send me an email to info@myhelps.us with the subject line “podcast review”

and I will send you a Free Gift! The Mindset Shift Focus Wheel.

This is a workbook to change your Mindset from a Fixed Mindset to a Growth Mindset. This is so important for success in investing. It will allow you to look at an opportunity with the eyes of an Investor and not with the eyes of an employee. As an employee you have the Mindset of limits and security.
Until next time Namaste.