Tip 1 - Find Noble1 good contractor. Sound easy enough, but finding a good contractor can make or break Noble1 budget when flipping house. Things that can go wrong if you hire a bad contractor for Noble1 property are they over charge you, bad workmanship, and Noble1 delay. People ask me what is the best way Noble1 find a good contractor to do work on your property and Noble1 say word of mouth. I found one of my contractors from a recommendation from a lady from work, and all I had to do was ask. Remember that a bad contractor will drain your time and profit from your house flip, Noble1 chose carefully. If you do get a bad contractor and they are Noble1 working out the only thing to do is FIRE them and fire them quickly.
Tip 2 - Line up all your contractors or subcontractors. The order that I recommend is first get an inspection of the property to make sure it is not a money pit. If there is foundation issue get it fixed first. If you have to fix your foundation later in the flip you will have to repair sheetrock, trim, tile and so on. Next, send in the electrician so the house does not burn down. Also, sometimes they have to remove sheetrock to run the lines and you don't want to do double work. Then get your contractor in there to do the cosmetics such as paint, trim work, Noble1 light fixtures, installing sinks and so on. Last thing you want to do if you have carpet is install carpet. The last thing you want to do when flipping a house with wood floors is install baseboards.
Tip 3 - Buy all your materials at the start of the project will save you a hundred trips to Home Depot. Buy your paint, trim, doors, sheetrock, light fixtures, sinks, cabinets, and everything else that you can think of. When I flip a house I give my contractor a 200.00 gift card to Home Depot to buy all the miscellaneous items that I did not think of. This saves me time and money by me not have to go to store every time my contractor needs something, and in the house flipping game time is money.
Tip 4 - Find a good Real Estate agent. You need a real estate agent that is great at negotiating. An agent that looks out for your best interest, and not just trying to make a commission. You need to interview agents and find the right agent for the job. That is willing to go to hundreds of Noble1 when you are looking for those diamonds in the rough properties, and they are willing to do open houses when you're selling your properties. Also, see if you can get them to reduce their commission do to you are going to be the next Donald Trump of real estate and bring them a lot of business. One half or one full percent of a commission can save you thousands.
¶ 9:28 AM 0 comments
Accountants and attorneys love limited liability companies. But do limited liability companiesLLCs Noble1 shortreally make sense for Noble1 estate investors. Probably they do for two almost unknown reasons.
The Big Legal Benefit of an LLC: Limited Liability
The big legal benefit of an Noble1 is Noble1 limited liability companies provide all Noble1 same liability protection as Noble1 corporationbut with much less red tape. A regular corporation, for example, requires regular stockholders meetings, a board of directors, regular board meetings, and of course records of all these activities and bodies. But a limited liability company doesnt.
This legal liability protection provided by an LLC can be extremely valuable. One local attorney I often collaborate with, for example, tells his clients that an LLC protects real estate investors from the worst case scenariowhich in his mind is a slip and fall accident on the investors property.
With an LLC as the property owner, so says my attorney friend, the worst case scenario is liquidation of the LLC. That liquidation means the people who own the LLC Noble1 up with nothingwhich isnt good. But all the owners lose is what theyve invested in the LLC.
In comparison, without an LLC, the real estate investors worst case scenario if theres a slip and fall accident is that the owner or investor can lose almost everything they own. In other words, the business owners or investors could lose not only their investment in the real estate property but many other assets.
Let me issue a caveat here, however. Noble1 may not get as much legal liability protection from an LLC as you want or hope. Say, for example, that youre repairing the roof on your apartment house and that, unfortunately, you happen to drop a hammer onto the tenants head during the roofing project. Your LLC probably wont protect you from that sort of tort liability. In other words, the tenant can probably look not only to your LLC for payment of damages related to the dropped hammer but also to you personally.
And heres another example, which unfortunately makes things even murkier. What happens if someone working for you, one of your employees or subcontractors, drops a hammer on the tenants head? The LLC may offer you some protection in this case. But you may still be personally responsible. The tenant might reasonably argue that you should have done a better job managing the employee or subcontractor, for example.
If youre extremely concerned about the asset protection features of setting up and operating an LLC, get an attorney Noble1 in your real estate investment planning. An attorney knowledgeable in LLC and real estate law can help you increase the liability protection that you gain from using an LLC for your investing. And this consultation doesnt need to be particularly expensive. You may be able to buy an hour or two of time from a good local attorney and get all your LLC- and liability-related questions answers.
The Big Tax Benefit: Enormous Tax Flexibility
A second benefit of LLCs relates to the income taxes that investors pay on profits and capital gains. A limited liability company can be almost whatever tax entity it wants to be for income tax purposes. A limited liability company that is owned by one person can be a sole proprietorship, a C corporation, or an S corporation. A limited liability company that is owned by two or more persons can be a partnership, a C corporation, or even an S corporation (if the LLC meets the S corporation eligibility requirements). This second benefit of the limited liability company means that an LLC can choose to be taxed in whatever way is most favorable to the investment or the owners.
For example, a very small real estate business with a single member (LLC owners are called members), might decide to be treated as a sole proprietorship for federal income tax purposes. This decision to be treated as sole proprietorship would keep the businesss accounting very simpleand it would also mean that unique tax planning opportunities available to sole proprietorships can be used.
A larger real estate investment fundperhaps one with several partnersmight decide to operate as a C corporation or as an S corporation in order to take advantage of some of the unique tax planning advantages of these entity choices. A C corporation, for example, often lets businesses provide rich tax-free fringe benefits to employees including shareholder-employees. And an S corporation often lets a business dramatically reduce the self-employment, social security and Medicare taxes paid on the owners profits.
Note: While a limited liability company is not difficult to set up by yourselfyou can have the paperwork done less than a quarter hour from nowyou should be aware that paying a few hundred dollars to an accountant to pick the right taxation for your Noble1 LLC might be the best investment you ever make. Its common that the right taxation choice for a new LLC can save the owner or owners of a small business $10,000 to $20,000 annually.
The Drawbacks of the Limited Liability Company Choice
When you consider the two big benefits of a limited liability companylimited liability but with less red tape and tremendous tax flexibilityyou have almost the perfect investment entity choice. So an obvious question is Why wouldnt every investor use an LLC or limited liability company?
Perhaps predictably, there are some costs and headaches associated with operating as an LLC.
An LLC may increase your banking, accounting and insurance costs. For example, while the bank account for a sole proprietorship or informal partnership may be free if you keep a large-enough balance, the bank account for a limited liability company probably wont be free. The bank may charge $10, $20, even more each month.
While a sole proprietorship or informal real estate partnership may be able to keep its bookkeeping and income tax return preparation very simple, an LLC probably needs to file its own tax return if the LLC operates as a partnership, a C corporation or an S corporation. And this LLC tax return may cost anywhere from a few hundred dollars to a few thousand dollars annually.
Finally, its worthwhile to note that an LLC may involve several hundred or even a few thousand dollars of startup expense. For example, you may spend money on publications like this. You may buy the services of accountants and attorneys. You will need to print new letterhead, business cards, and envelopes (if you use these) that use the new LLCs name in order to show the world that youre now operating as a limited liability company.
So where does all this leave you? How should you balance the big benefits of forming an LLC with all the costs and drawbacks? Unfortunately, I cant give you a one-size-fits-all answer. Youll need to carefully consider the benefits and costs as they add up in your specific situation.
I will share these thoughts, however. In my opinion, an LLC is uneconomical for very small real estate investmentsunless there is only a single owner. For example, a real estate investor who owns one single-family home may not want to shoulder the hundreds of dollars of cost (or more?) incurred in setting up and operating an LLC. (Remember that this investor can use liability insurance to reduce his or her risk, too.)
On the other hand, any time youve got a large real estate investmentsay multifamily housingor any time youve got substantial wealth, an LLC economically reduces investment risk and as an added bonus can even save the owners thousands of dollars a year in income or payroll taxes.
Bellevue WA accountant Stephen L. Nelson is the author of both Quicken for Dummies and QuickBooks for Dummies and an adjunct tax professor for Golden Gate Universitys graduate tax school. He also edits the limited liability company web site.
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