Rental Real Estate


W

Weibel

I have a couple of rental proerties and i am setting up accounts for each
property so that I can download that information into a schedule E at the end
of the year. Some of the rental are owned by a partnership in which there is
one bank account for 4 properties. The other are owned by me individuall.
My three questions are:
1)What type of account should I set up for each rental property?
2)Can anyone give me some advice on this and other suggestions to track
expenses?
3) Can you share 1 bank account with multiple real estate investments?

Thanks in advance for any help-

Jeff
 
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D

Dick Watson

Accounts should match real world things. Each property should have an asset
account and any associated loan accounts. But the expense for, say, a window
repair, comes from whatever account you used to pay the expense. That
account likely has nothing to do with the property.

Classification (see online help) is the best mechanism Money provides to
help here. With it, you can have, say, an expense in your Checking account
for the window entered like:

Account: My Checking
Payee: Bob's Glass
Amount: $150
Memo: replace glass, again, at 123 Trailer Park Circle
Category: Rental Property: Maintenance
Class: Rental Properties: 123 Trailer Park Circle

With the addition of the classification information (in this case, I assumed
classification 1 was defined as Class:Subclass) you can report by Class then
Category to get different kinds of expenses and incomes associated with each
property separated out by property.

Now, if you are asking if you should have a partnership's accounts mixed
with your personal accounts, that's a harder question. My answer would
generally be no, but the alternative has its own headaches as well.
 
D

Dick Watson

This would be clearer had I written it as:

Now, if you are asking if you should have a partnership's accounts mixed
with your personal accounts in the same Money data file, that's a harder
question.
 
G

Garfield

I'll try this again.

As an investor you need to ensure that legal action against properties that
you own can not spill over against your own personal assets (car / house /
bank account). So you should NEVER hold property that has tenants in your own
name. The best way that I know of to provide this liability protection is by
transfering title into a properly established and maintained legal structure
(entity - LLC, Corp, etc.).

In order to get the best tax benefits of real estate investments, you should
set up a separate entity with it's own bank account for each group of
properties owned by the same group of investors.

I could on for pages with the lessons learned, but the most important thing
is to get a liability shield between you and your tenants ASAP.

Good luck,
Gary
 
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R

Richard Barndt

Garfield said:
I'll try this again.

As an investor you need to ensure that legal action against properties
that
you own can not spill over against your own personal assets (car / house /
bank account). So you should NEVER hold property that has tenants in your
own
name. The best way that I know of to provide this liability protection is
by
transfering title into a properly established and maintained legal
structure
(entity - LLC, Corp, etc.).

In order to get the best tax benefits of real estate investments, you
should
set up a separate entity with it's own bank account for each group of
properties owned by the same group of investors.

I could on for pages with the lessons learned, but the most important
thing
is to get a liability shield between you and your tenants ASAP.

Good luck,
Gary
Gary,

My brother-in-law just purchased rental property. They live in one unit
while renting out the other two. One unit carried over a tenant from the
previous owner. The other is currently empty and they are doing some
cleaning, painting, etc. to get it ready.

I encouraged them to set up ownership in a business name and to keep all
transactions separate between business and personal accounts. My parents
have owned rental property for years in their own name (Schedule E on form
1040) and we simply followed their example.

In my state, in order to have a bank account in a business name the name
must be registered with the Secretary of State. This allows them to ensure
that duplicate names are not used and establishes a trail for collecting
taxes. So, if they already have to apply for a business name, it makes sense
to set it up correctly the first time.

One advisor told me that the best way to combine asset protection with tax
savings is to set it up in a two-layer system. The property should be owned
by a Limited Partnership but then leased to a C-Corp which then manages it.
This gives you the tax advantages of a C-Corp while protecting the actual
assets from lawsuit. This advisor was against LLC because they have not been
as thoroughly tested in courts while the Limited Partnership has been proven
sound.

My opinion on all this was that it sounds good once you got 3-4 properties
but seems very complex when starting out with the first property. Plus,
forming a corporation has an extra set of expenses, filing requirements,
etc. So, we would need a lawyer and an accountant too?

Protection from legal action is important to me, I am just unsure of how to
proceed. What have you set up for yourself? What extra expenses would I need
to plan for? Can they transfer the title to the property to this new entity
without disrupting the FHA loan they used to acquire it? Are the rules
different in this case since they are owner-occupant of 1/3 of the property?

Thanks in advance for taking time to answer my questions.
 

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