A Real Estate Investor must chose an investor classification from three allowable classes.  Each class provides certain benefits and requirements that should be considered when determining the best tax strategy.

One of the often cited benefits for investing in real estate is the tax treatment.  Investors are able to expense, interest payments, operating expenses, capital improvements and depreciation.  

Depreciation is an accounting expense that is realized when filing and paying income taxes.  Expenses lower the taxable income, benefiting the real estate investor taxpayer with a lower tax obligation.

Investor Classification Options

Passive: This is the least beneficial.  Allows the investor to take real estate losses and depreciation to the extent of the income generated from real estate.  

Active: An investor who materially participates in the investments and owns at least 10% of the investment, can count upto an additional $25,000 of losses against ordinary income.  Additional losses for real estate investors phase out when the adjusted gross income breaches $150,000 for a married couple filing jointly.

Professional: This is the most advantageous for tax purposes.  To qualify, the real estate investor must spend the majority of their time in real estate, and a minimum of 750 hours per year. The professional classification allows the investor to expense all of their real estate expenses for the year.  

The ability to count expenses against income should not be the sole reason for choosing a classification.  In all three cases, unrecognized losses can be carried forward and used against future gains realized when the property is sold.

Additional considerations include whether or not to create an LLC or S Corp.  The difference will determine if income is subject to self employment tax or a distribution.  

In all cases, real estate investors should seek counsel of a tax professional to determine the best option to meet their goals.

For more, go to:

Patrick Camuso, CPA

Camuso CPA PLLC

www.camusocpa.com

Patrick.camuso@camusocpa.com

Real Estate is segmented into asset classes; single family, multifamily, office, retail, warehouse, etc.  One overlooked asset class with big returns is Mobile Home Parks.  

Kevin Bupp is an experienced real estate investor who survived the crash, and has since devoted all of his efforts into buying and operating mobile home parks with great cash flow.  

Consider the following reasons and you will see why mobile home parks make sense:

• Diminishing supply: municipalities do not like these, and they are not permitting new parks.  Unlike multifamly or single family, there is not the risk of a newer, nicer, nearby park to woo your tenants away.
• Fractured marketplace: unlike more established asset classes, mobile home parks still lack the organization and recognition of others, which provides opportunities to the educated buyer.
• Aging parks and owners: while the supply is not growing, the owners are getting older, and looking for a way out.  Today may not be the day, but there is a day coming when these operators will want to sell.
• Demand: mobile home parks are affordable housing.  There is tremendous demand for more affordable housing.  The estimated national average space rent is around $300 per month.
• Management: with an onsite manager, you can manage the asset from anywhere.  
• Expenses: ideally, the tenant owns their unit, and rent the ground from you.  So, the typical maintenance expenses associated with housing fall on the tenant to maintain their home.  That leaves streets, curbs, common spaces to you.
• Tenant turnover: it cost around $3,000 to move a single wide mobile home.  This does not include setup, utilities, tie down, and skirt at the new location.  Most tenants do not have the means to pay for an expensive move, and will likely not move.

Mobile home parks are more plentiful in the rural parts of the United States.  In these tertiary and rural market, people are accustomed to regularly drive thirty minutes for their work commute and shopping.  

Pride of ownership can be provided to people who otherwise are unable to purchase their home.  

To learn more, goto:

Links: http://www.kevinbupp.com/

Email: kevin@kevinbupp.com

Podcast:

http://mobilehomeparkacademy.com/

What is a Delaware Statutory Trust?  

Download a summary Delaware Statutory Trust FREE

Real estate investors focus so much time and effort on getting into the deal.  Once they have a deal, it's all about creating cash flow, net operating income, and profit at a future sale.  

For the investor who has held a property for twenty years and depreciated it to near zero, a conversation with your accountant can be shocking when you realize the potential tax consequence of selling.  

If this is you, the depreciation recapture and capital gains tax can leave you feeling trapped and asking yourself, “How can I keep my profits?”

Most real estate investors have heard of the 1031 Exchange.  In its simplest terms, the 1031 Exchange allows you to defer paying taxes from the sale of an investment property if you abide by the 1031 Exchange requirements including:

• Same taxpayer provision: the entity purchasing the new property must be the same entity that sold the property creating the tax event
• Balance your trade: the purchase price of the new property must be of greater value, with equal or greater debt than the property that was sold.
• Qualified intermediary: profits from sale cannot be received by you, and must be transferred from the old property to the new property through a neutral third party.
• Timeline: In 45 days the replacement property must be identified and the transaction must close within 180 days.

Tenant in Common or Delaware Statutory Trust.

In order to invest with other investors, you must choose one of two structure options to preserve the 1031 exchange.

The Tenant in Common notable limitations include:

• Participating investor count can not exceed 35.
• The requirement of unanimous consent.

The Delaware Statutory Trust characteristics / requirements for Investors:

• The Investor cannot be active in the decision making and must remain passive.
• The DST cannot invest in new development and must invest in a stable investment with financing already in place.
• An investor holds a “beneficial interest” in the Delaware Statutory Trust, which provides all of the traditional benefits of a 1031 Exchange, including the allowance for subsequent 1031 Exchange.

Typical Delaware Statutory Trust Risk Profile

DST eligible properties will controlled by the sponsor/ operator, stabilized and provide consistent income.  Financing will be in place.  The property will be a Class A asset that is newer, larger, and located in a major metro area.  

The investors considering a DST looks more at risk avoidance and principal preservation, than appreciation.  

If your goal is to preserve your principal, gain consistent income, and get into a larger, newer, stabilized asset, a Delaware Statutory Trust might be the answer.

For more go to:

https://www.realized1031.com/

Call Drew: (512)827-3654

*Realized 1031 is not an Investment Adviser or CPA and does not provide investment or tax advice. Any information presented in the podcast or other materials is for illustrative purposes only. Securities offered through the Realized Marketplace are exclusively through WealthForge Securities, LLC, a registered broker/dealer and member of FINRA/SIPC (“WealthForge”). Certain members of Realized are registered representatives of WealthForge.

Investing in real estate for passive income in retirement may seem risky to investors who would rather trust their retirement funds to fund managers and mutual funds.   

Bill Manassero, host of the popular Old Dawgs REI Network Podcast, found that there are at least seven reasons for seniors to invest in real estate.

Seven Reasons Why Real Estate Investing

is the Best Way for Seniors to Make Money: http://olddawgsreinetwork.com/crepnradio

Bill started investing in real estate after he turned sixty.  As veteran stock market investor, the decision to invest in real estate was easy, based on the opportunity to create passive income and preserve capital.    

Once he got started, he realized he could accomplish a lot more with additional units.  So, he set a goal to acquire 1000 units within six years to allow him the passive income he wanted and leave a legacy for his children, grandchildren and Haitian charity.  

Before making your first real estate investment, Bill recommends taking four steps:

• Education: Get your education.  There are tons of free and low cost resources available.  Go to the local REIA group, check out https://www.biggerpockets.com/ and listen to podcasts focused on real estate to learn how others are doing it.   
• Mentor: Find an experienced real estate investor and get to know how they do it.  Offer to help them for free.  Learn first hand how they go about investing.
• Plan:  Create a plan based on what you have learned, and input from your mentor.  Beware of Analysis paralysis!
• Action: All the education will without action will never get you closer to your goals.

The most important question to ask before investing:

Experience is the most valuable teacher.  Look to an experienced investor who can mentor you.  Any investor with multiple properties and years experience investing can provide stories and lessons they learned the hard way, so you won’t have too.

For more information:

http://olddawgsreinetwork.com/

Podcast: http://olddawgsreinetwork.com/podcasts/