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Real Estate Investors, Stock Traders, and Business Owners guide to preserve their wealth, protect their assets, and prosper in the future.
Episodes
Tuesday Oct 18, 2022
Tuesday Oct 18, 2022
Today’s Tax Tuesday episode is focused on bookkeeping. Toby Mathis hosts with special guest Troy Butler, Executive Manager of our bookkeeping department at Anderson Advisors, and some of the bookkeeping staff from Anderson including Patty, Ander, Matthew, Eliot, Dana, Trisha, Blanca, Landsey, Kiera, and Cindy, are all online today to help answer your questions. You’ll hear our advice on things like what bookkeeping software to use, expense reimbursement and mileage, grouping your businesses using “classes,” and even some detailed information on how you can become an Anderson Advisors client and the services you’ll have access to. Submit your tax question to taxtuesday@andersonadvisors.
Highlights/Topics:
- If I request an EIN so I can open up a bank account for my disregarded single member LLC, do I have to file a tax return or can I somehow inform the IRS the EIN is for a disregarded entity? – Any EIN should be on “a” tax return, but doesn’t have to have it’s own return.
- If I paid for something on behalf of my C-corp and it didn’t have enough funds to reimburse me, how do I account for it? – First of all, if you paid for something on behalf of your corporation, I would make sure that I'm submitting a reimbursement sheet. I would do that monthly where I'm putting together everything I paid for personally, putting it on a sheet, and submitting that to my company for reimbursement. Step 1 - Do it monthly or quarterly. Step 2 - You can have a revolving line of credit.If it's an IOU, it's a loan. It's a liability of the company. It would be an asset to you as the shareholder.
- What is the best way to record, handle reimbursement for business expenses that were charged on the owner's personal credit card to avoid giving the IRS concerns about the legitimacy of the business?" – Again, you would want to submit those charges that were business related on a reimbursement sheet. What you don't want to do is you don't want to put that credit card that's in my personal name on your company's books. That can be looked at as co-mingling. It's a business expense that you’re getting reimbursed for.
- Can I deduct other courses I take that are general business-type classes, not specific to real estate investing, and if they are for the purpose of helping me build my business? – General business if it's you're improving your current lines of business. I don't see an issue with that.
- What is the smartest tax advantage way to pay the kids for helping the S-corp? Can I reimburse myself for the payments I have made to them from my personal account? – There are a couple of options here. I am a believer in payroll. The reason for that is if they're on payroll, if they make less than the standard deduction as employees, they're not required to file a tax return. You can also pay them by putting money in their Roth - they’ll never pay tax, or do a 1099.
- How do I not pay taxes at the end of the year?- This is what everyone wants to know!! My reply is, either don’t make any money, live on borrowed money, have someone else make the money, or buy real estate as a real estate professional which unlocks passive losses.
- I have a three-member LLC taxed as a partnership. The members want to take a distribution each of $100,000. How is that taxed and how is it recorded in the books? – That's not a taxable event. It's a distribution. That's an equity transaction. The $100,000 is not a taxable event. The taxable event is the numbers that come on that K-1 and say, you made profit of “X” or you made loss of “X”.
- How does the Anderson bookkeeping service integrate with the accounting service, et cetera? – We work very closely between teams! …we have full service monthly, or quarterly “virtual” service that uses QuickBooks. Virtual bookkeeping is $995 for a year for the first set of books and then $495 for each additional set of books.
- Can you please discuss some big-picture strategies to help with bookkeeping automation, AI, we should be considering? Botkeeper is one AI we’ve learned about. They can’t do complex things. It's much cheaper to use a human being right now. Maybe that changes at some point.
- What is the best way to keep track of miles? MileIQ is an app, it works well and creates good reports. There is also a function within QuickBooks works reasonably well. And Timr is easy to use, but it is $100 a year
- Best software for doing bookkeeping? There are thousands, and thousands, and thousands of accounting softwares out there. Most of them do a pretty good job. We use QuickBooks online for all Anderson clients.
- I'm trying to figure out how to property log and transfer friends from the property LLC to the holding LLC and vice versa. (1) how to capture my personal mortgage loan into the property LLC and then to the holding LLC? – It's an investment expense that I'm going to show on my Schedule E, which is going to allow me to take that deduction against my rental income if it's real estate. (2) how to record all transactions from the property LLCs throughout the year and distribute to the holding LLC for tax filing. –Like Toby's saying, for each tax return that you file, you need a set of books. But if you have entities that are disregarded to a holding company, they can be within one set of books. If you have 10 properties, you're going to have 10 classes on one set of books, and it's all going to flow up.
- Platinum members: Log on to our bookkeeping office hours, Thursdays, 3:00 Pacific Standard Time. We’re live and answering all your bookkeeping questions!
Resources:
taxtuesday@andersonadvisors.com
Tax and Asset Protection Events
https://andersonadvisors.com/real-estate-asset-protection-workshop-training/
https://andersonadvisors.com/
https://www.youtube.com/channel/UCaL-wApuVYi2Va5dWzyTYVw
Thursday Oct 06, 2022
Thursday Oct 06, 2022
If you’re an investor and you’re worried about interest rates, and don’t have a ton of cash, what products are out there for financing your purchase?
On today’s episode, Clint Coons of Anderson Business Advisors talks to Rick Floyd, Executive Vice President of Homebridge Financial Services. Rick explains some of the basics that you’ll find in the agency space, such as the typical Fannie/Freddie guidelines, but there are also options out there for investors such as the non-qualified mortgage that has very different requirements and doesn’t carry some of the limits and restrictions you may find in the Fannie/Freddie underwriting.
Highlights/Topics:
- Background on Homebridge Financial
- The traditional Fannie and Freddie guidelines
- Avoid common mistakes investors make - talk with your advisor, make sure they are looking at your ‘big picture’
- How important is ‘seasoning’ of cash - it should be able to be sourced
- Portfolio loans use Fannie and Freddie guidelines
- Non-qualified mortgages - qualifying, terms, cap limits, rates and other details
- HELOCs- only on primary residences, not on investment properties
- What does the next year look like for investors? Lack of inventory is the biggest problem
- One last question -nonQM property transfers- it’s not an issue
Resources:
https://www.linkedin.com/in/rickfloydremn/
https://www.homebridge.com/
https://andersonadvisors.com/clint-coons/
https://andersonadvisors.com/
https://www.youtube.com/channel/UCaL-wApuVYi2Va5dWzyTYVw
Tuesday Oct 04, 2022
Tuesday Oct 04, 2022
Several of today’s tax questions address bonus depreciation and when you can take it on single and multiple property groupings, including on short term rentals. Toby Mathis and Elliot Thomas, tax attorney, of Anderson Advisors, discuss the detailed specifics relating to several different tax scenarios involving bonus depreciation. They also discuss cost segregation and frontloading depreciation deductions for real estate assets into the early years of ownership. Submit your tax question to taxtuesday@andersonadvisors.
Highlights/Topics:
- Taking the 5,7, or 15-year depreciation - You can only choose one, but you can spread them out over different years and different properties.
- Bonus depreciation - equipment leasing company rents to a) a construction company and b) another company with no employees. Should they add a third? - No, adding would have the opposite effect. If you wanted to group a and b together, you probably could. This is active income and if you want to avoid self-employment tax, pay yourself a small salary.
- A listener rents a single family property on flat lot that gets a lot of rain/water damage, can they deduct rain barrels/hardware? Yes, you can do it all in the first year, bonus depreciation, as it is not an “improvement” and it’s under $2500 per line item.
- Can I group short term rental activities if one property has an out-of-state property manager? This falls under passive activity loss rules - a STR can be passive if you’re not participating. Each rental is a business, like a pizza parlor. This is a trader business. Make a statement for aggregation on your return.
- Can I amend my 2021 taxes to do cost segregation? Yes you can, the deadline is Oct. 17th- send us how much you saved!
- A US citizen gets gift of property in another country. Do I need to report to IRS? Typically no, and you pay no tax, but fill out a form if property value is over $100K and foreign. You have to list it on Form 3520.
- Bonus depreciation on rental, if taken in first year of service, can I use any of depreciation for next year? It’s only the first year that you break out that property.
- If a CPA does your taxes, and you get revised/audited, it’s ultimately only your responsibility at the end of the day.
- Shout out to the staff for helping to answer questions in the middle of tax season
Resources:
taxtuesday@andersonadvisors.com
Tax and Asset Protection Events
https://andersonadvisors.com/real-estate-asset-protection-workshop-training/
https://andersonadvisors.com/
https://www.youtube.com/channel/UCaL-wApuVYi2Va5dWzyTYVw
Tuesday Sep 27, 2022
Tuesday Sep 27, 2022
In this episode of Anderson Business Advisors, Toby Mathis speaks with Jeff Mason and Chris Hammond about cash balance pension plans for business owners. This is not a 401(k), it’s not an IRA, it’s a way to defer and even reduce a portion of the taxes you might need to pay and set yourself up with an annual income when you retire - if you are a business owner.
This is for all business entities. True pass-throughs, S Corps, sole proprietorships, and partnerships work best in this savings scenario. Many people that have even heard of defined benefit plans, or cash balance plans, might think you can’t start contributing until later in life, and that used to be true, but now people like Chris and Jeff are designing plans for people in their 30s.
Jeff and Chris will go over what the benefits, timelines, and rules are regarding these plans, give you some sample scenarios with actual clients they have helped, and also answer some specific questions that Toby has about their validity, value and future potential for participants.
Highlights/Topics:
- The basics - How business owners can set up an income for themselves at retirement, the requirements to contribute, how much you can put in, how much you can take out and the tax implications
- Some examples of Jeff’s clients and the actual numbers they are working with
- Deadlines and potential increases in contribution limits from the IRS
- Are Jeff and Chris going to try to “sell you” stuff if you go to them for help? No- the retirement community is very small, everyone would know if you were operating in an unethical way. We want more referrals, not less, so everything is highly ethical and we don’t take advantage of people
- Get in touch with Jeff and Chris - there’s no cost for your initial consultation and even developing a sample plan - they just want to see if their services can help you!
Resources:
jmason@redwoodrs.com
Call Jeff Mason 815-516-0560
https://andersonadvisors.com/
https://www.youtube.com/channel/UCaL-wApuVYi2Va5dWzyTYVw
Thursday Sep 22, 2022
Thursday Sep 22, 2022
In this episode, Clint Coons of Anderson Business Advisors welcomes Kim Lalande, Founder and CEO of Key.
Key is a ‘one-stop shop’ that partners with quality vacation rental homes (usually 3+ bedrooms and a certain aesthetic) to take all of the “concierge” burden off of the host or homeowner’s plate and provides one place to book all the in-home services to enhance each guest’s stay. Before launching KEY.co in 2015, Kim was the Director of Business Development for DLA Piper, a law firm representing many leading technology companies.
I talk with Kim about some of the reasons that investors who own or are looking for short-term rental properties should use this type of service. From my own experience with a rental in Hawaii that I sold because I hated doing all the work with guests, it is obvious what a relief this service would be to any short-term property owner. Kim says that naturally most of the “vacation destinations” with beaches like Hawaii, Florida, Nantucket, and The Hamptons are perfect spots to invest, but there are also some up-and-coming areas such as Austin, Nashville and Charlotte that are hotspots for short-term rentals. You’ll get better reviews and more bookings when you offer a concierge service such as Key, and there are a number of tax benefits as well.
Highlights/Topics:
- Kim came up with the idea for Key during one of her own short-term rental stays
- The types of “quality” homes Key represents - they personally vet every home
- The most attractive markets: Data shows lake, beach, Florida, Hawaii, Austin, Nantucket, Hamptons, mostly vacation destinations
- How should a person stage their rental? Think high end hotel
- Using Key services - what’s the return on cost of your services?
- At Anderson, we say if you spend 100 hours managing it, you can accelerate the depreciation. Key shares all their marketing and promotion with each homeowner to increase bookings
- Today’s short term rental market is even getting large hotel chains participating. If you DON’T have a service like this, it’s harder and harder to compete
- Each type of renter needs different services - families vs. couples vs. bachelorette party. Flexible service is best, trips types are so different
- Cleaning, pre-arrival groceries should be automatically included, along with a “mid-stay” cleaning
- Smaller properties (condos, townhomes) will have high volume, large homes may only need to rent out six times a year with their higher cost
- Make sure your rental is in the “center” of local activities (beach, skiing), people don’t want to drive on vacation
- Outlier homes, drive to go anywhere, ppl don’t want to go driving, not nec city center, lake? Boat rentals/beach, center of activities.
- The pandemic took many rentals off the market - people moved out of city centers to their second homes
- It’s important with today’s hybrid/remote workers to include highspeed internet and a desk/office area – consider adding a cool background wall for video calls!
Resources:
https://www.linkedin.com/in/kimshrum/
https://partners.key.co/
https://andersonadvisors.com/
https://www.youtube.com/channel/UCaL-wApuVYi2Va5dWzyTYVw
Tuesday Sep 20, 2022
Tuesday Sep 20, 2022
Several of today’s tax questions are related to STRs (Short-term rentals) like Airbnb and VRBO. Toby Mathis and Jeff Webb of Anderson Advisors discuss the differences between passive or active income on these popular investment properties, and answer additional tax-related questions. Submit your tax question to taxtuesday@andersonadvisors.
Highlights/Topics:
- Investing in multiple family syndications - I think when you make an aggregation election, you're electing to treat all your rental activities as one activity
- Setting up ongoing support for 501(c)(3) organizations that support the advancement of religion - Make it a private foundation. Spell out your values and then say, here are the organizations that I believe meet that at this time- but understand how wildly society and religion might change over time
- Short-term rentals/hotel syndications - active or passive income? Unless you’re an employee like the general manager of the investment property, you’re passive. This is not a rental activity, period. Hotel syndication or short-term rental, just remove the ‘rental’ and it’s a regular business
- A real estate investor pays almost no taxes, but her husband is a 1099 contractor with a huge tax burden. Should they put some properties in his name? If you’re filing jointly, it won’t matter. You could also donate a property for a community service/non profit to get the deduction of the full market value
- There are still actions you can take if you’re getting killed on 2021 taxes, the clock has not stopped on 2021yet!
Resources:
taxtuesday@andersonadvisors.com
https://www.amazon.com/Next-Level-Estate-Asset-Protection/dp/1950863883
Tax and Asset Protection Events
https://andersonadvisors.com/real-estate-asset-protection-workshop-training/
https://andersonadvisors.com/
https://www.youtube.com/channel/UCaL-wApuVYi2Va5dWzyTYVw
Thursday Sep 15, 2022
Thursday Sep 15, 2022
Is the housing market actually in trouble? All the clickbait articles and doomsayers would have you believe so, but the facts are very different.
In this episode, Toby Mathis of Anderson Business Advisors welcomes Neal Bawa back to the show. Neal is the founder and CEO of Grocapitus, a commercial real estate investment company, and CEO of MultifamilyU, an apartment investing education company. He’s known as the Mad Scientist of Multifamily and uses the power of numbers to acquire properties and create profit for investors.
Neal walks us through the facts and data surrounding our economy right now, and looks at historical trends to predict that by mid to late 2023, we will probably be looking at much better interest rates than we’re seeing currently. People may not realize that in the global economy, the U.S. is still one of the cheapest real estate markets, relative to individual salaries, and Neal explains that we’re actually lucky that we have a Fed that can help correct our markets when they begin to spiral out of control.
Highlights/Topics:
- Fed rates: look at nine past recessions to see how the market corrects
- Freight costs: watch container costs from China to predict global demand
- S. economy: we are the strongest in the world, other countries are much worse off than we are currently
- Clickbait: ignore the noise and alarmist articles you see on social media, look for the data and facts
- Unemployment and housing demand: demand will return to normal, but prices will remain high
- Retail and Travel: performing/demand is better than ever
- Europe’s housing market: the majority of properties are owned by investors
- Looking at historical data: the 2007/08 bubble is the only anomaly of the last 100 years!
- Liquidity: get yours in line now while it’s cheap
- The U.S. real estate market: compared to India, China, Europe, it’s the cheapest in the world relative to individual salaries
Resources:
https://www.grocapitus.com/
https://multifamilyu.com/
Listen to Neal’s previous appearance
https://andersonadvisors.com/podcast/real-estate-investing-with-analytics/
https://fbx.freightos.com/
https://andersonadvisors.com/
https://www.youtube.com/channel/UCaL-wApuVYi2Va5dWzyTYVw
Tuesday Sep 13, 2022
Tuesday Sep 13, 2022
How do you get started in house hacking? There’s several strategies for brand new investors getting started and the biggest investors in the industry looking to pocket some serious change and save a buck or make an extra buck.
Today, Clint Coons of Anderson Business Advisors talks to Kelton Todd with Women's Real Estate Investor Network. Also, Kelton is co-owner of Todd Team Investments.
Whether mentoring one-on-one or delivering a keynote presentation, there is one word that describes Kelton’s goals—results. Kelton inspires others to take action and change the direction of their lives through creating their own financial freedom. He is now offering Empire Academy, a fully comprehensive, results-oriented real estate investing education program.
Highlights/Topics:
- College Roommate Strategy: Buy a house, live rent-free in bedroom, rent out the rest
- Vacation Home: Rent out just a bedroom or entire place temporarily to generate revenue
- Challenges: Look out for drugs, parties, and things like that in college towns
- Relationships: Know if you can live with person; different personalities create conflict
- American Dream Strategy: Buy property using government-backed loans with little down
- FHA: Via same loan process, acquire duplex, triplex, or quadplex and rent out other units
- Women's Real Estate Investors Network: Good foundation, education, understanding
- Ultimate Empire Builder Strategy: Buy something small and turn it into something big
- Moving Up: You become the Joneses that everyone’s trying to keep up with
- Risks: You must be willing to take some risk to make money—inflation isn't slowing down
Resources:
Women's Real Estate Investors Network
https://womensrein.com/
Women's Real Estate Investors Network Terms of Use
https://withoutfearofherfuture.com/
https://www.airbnb.com/
https://www.vrbo.com/
https://homeaway-com.com/
https://www.law.cornell.edu/uscode/text/26/121
https://andersonadvisors.com/clint-coons/
https://andersonadvisors.com/
https://www.youtube.com/channel/UCaL-wApuVYi2Va5dWzyTYVw
Tuesday Sep 06, 2022
Tuesday Sep 06, 2022
If you are into Airbnb or VRBO, what are the top tax benefits and loopholes for short-term rentals? Toby Mathis and Jeff Webb of Anderson Advisors answer your tax questions. Submit your tax question to taxtuesday@andersonadvisors.
Highlights/Topics:
- We have to clean the short-term rental the first year to get the hours necessary for active/material participation. It is a 90-to-120 (minute or mile) drive one way. Since we will be working, can we stay in the unit that night without counting it as personal use? You can include the travel time. However, staying the night will not count toward working on it. It definitely counts as personal use.
- I have a beach house that I'm starting to rent out, so I got a DBA business name. I've been renovating and fixing it up to make it more attractive. I have a regular job and was told that if I made more than $150,000, I would not be able to write off my expenses and costs associated with my rental. Is this true? It depends on if it’s a rental or residential investment. Also, in some states and counties, the DBA is a fictitious name, and it offers no kind of protection or benefit at all.
- Can you explain the short-term rental tax benefit and how to get 100 hours of material participation? If short-term rentals are seven days or less, it's a business. Determine if it’s 1245 or 1250 property and passive or active/material participation income.
- I have a four-unit that I want to live in and rent out the other three units. What are all the tax deductions and write-offs I can use to zero out earnings? Bifurcate it into two properties. One unit would be your personal residence and the other 75% would be rental properties. Any expenses related to your rental unit would go against your real estate taxes and mortgage interest.
For all questions/answers discussed, sign up to be a Platinum member to view the replay!
Go to iTunes to leave a review of the Tax Tuesday podcast.
Resources:
Next Level Real Estate Asset Protection by Clint Coons
https://www.amazon.com/Next-Level-Estate-Asset-Protection/dp/1950863883
https://aba.link/CSA
Real Estate Professional Status
https://www.irs.gov/pub/irs-utl/33-Real%20Estate%20Professionals.pdf
Capital Gains, Losses, and Sale of Home
https://www.irs.gov/faqs/capital-gains-losses-and-sale-of-home
https://www.law.cornell.edu/uscode/text/26/121
https://www.irs.gov/forms-pubs/about-schedule-e-form-1040
https://andersonadvisors.com/
Anderson Business Advisors on YouTube
http://aba.link/YouTube
Anderson Business Advisors on Facebook
https://www.facebook.com/AndersonBusinessAdvisors/
Anderson Business Advisors Podcast
https://andersonadvisors.com/podcast/
Thursday Aug 25, 2022
Thursday Aug 25, 2022
Small multifamily real estate does exist. You don’t have to have hundreds of units, syndicate, bring in investors, and make it complicated. So, how do you get started investing in small multifamily real estate and produce cash flow?
Today, Clint Coons of Anderson Business Advisors talks to Jen and Stacy Conkey, Founders of Warriors of Wealth and the Remote Multifamily Investing Academy™. They are two experts who know how to get into smaller deals that generate massive cash flow.
Jen and Stacy Conkey have more than 20 years of experience as entrepreneurs and real estate investors. Through their diverse real estate experiences, Jen and Stacy know what it takes to identify deals and make offers on properties that build long-lasting wealth. Also, Jen and Stacy share their knowledge and experience by teaching people what it takes to succeed in multifamily real estate investing with actionable strategies that make cash flow real estate fun and easy.
Highlights/Topics:
- Multifamily Impediments: Too big, too expensive, too much inventory, too competitive
- Where did Jen and Stacy start finding smaller deals? Education and just doing it
- Multifamily: More than big apartment buildings—anything more than a single unit/home
- Multifamily Categories: Get a good deal, good cash flow to learn process, then build up
- Four Units & Under: Build relationships with realtors in local markets to find deals
- Path of Progress: As things build out, it drives the value of other homes via BRRRR
- BRRRR Strategy: Buy, renovate, rent, refinance value-add project and maximize capital
- Stabilized vs. Value-add Strategy: When evaluating quad, is it a good investment?
- Why Jen and Stacy never visit their properties, but do everything online/on the phone
- Where do Jen and Stacy find contractors? Get them to go to a locked property and bid
- How do they find a property manager? Google and then find and call all of them
Resources
https://www.warriorsofwealth.com/
Remote Multifamily Investing Academy
https://www.wowaua.com/home
Facebook Group: https://www.facebook.com/groups/PassiveIncomeRealEstateInvesting
https://www.thumbtack.com/
https://www.homeadvisor.com/
https://www.angi.com/
https://www.marcopolo.me/
https://andersonadvisors.com/clint-coons/
https://andersonadvisors.com/
https://www.youtube.com/channel/UCaL-wApuVYi2Va5dWzyTYVw