Video instructions and help with filling out and completing How Form 5495 Estates

Instructions and Help about How Form 5495 Estates

The best legal entity for real estate investing is hi I'm Phil outs with freedom mentor calm I'm a full time real estate investor real estate mentor I've been a part of a whole lot of deals over the last ten years and in this video I am going to share with you what is very helpful to know when contemplating the idea of setting up an LLC or a corporation if you're gonna be real estate investing and one big disclaimer I am NOT giving you legal advice in this video nor might giving you accounting advice either I am going to recommend prior to you setting up anything that you speak with a qualified attorney as well as accountant to make the best decision on if and when and what type of entities you need to create if you're going to be real estate investing but since I'm not an attorney I'm not an accountant I'm probably to tell you stuff they wouldn't tell you and what I'm going to share with you comes from the school of hard knocks comes from a lot of years of making good and bad decisions and this is the kind of stuff that I didn't read in books in fact I'm going to probably and in this training here I'm going to probably contradict some things you may have read in some other famous books because it is interesting what happens in the real world with this stuff so let me put myself in your shoes for a moment maybe you're first getting started or you're contemplating becoming a real estate investor and maybe you're trying to consider what you need to do as far as an LLC to set one up when do you set it up they even set up an LLC what is an LLC do you set up a corporation I mean so I'm gonna try to answer some of those questions pretty briefly and then I'm going to get into more of what it means to a real estate investor okay the first thing I think this is extremely important is that in business if you do not set up an entity and you start doing business you are by default a sole proprietor Pro oh boy I'm about to embarrass myself because I don't know if I spelt that right or sole proprietorship spell check that can do wonders right so this is your if you're doing business any kind of business real estate mission or otherwise you're automatically a sole proprietorship that's just with a law works and so when I was living out of my truck and I was flat broke and homeless my first few real estate deals I did them as a sole proprietorship now I'm most attorneys and accountants they freak out and they gasp when you mention the idea of doing business in the sole proprietorship because of one main missing element what you're missing from a sole proprietorship is what they call liability protection okay liability protection we break that down for a second it's not that scary to understand the concept the concept is this if if you do something in business and you're operating as a sole proprietorship which you could you could have a business name you could name your business you know of successful investments but if you don't have a legal energy setup you're still operating as a sole proprietorship and if something goes wrong you know somebody Sue's you something happens they can sue you personally and take all of your personal assets along with whatever happened the business now when I first got started I was homeless broke whatever uh I didn't have anything to lose so you know I mean if somebody sued me well they gonna get nothing right so when you're first contemplating this if you are absolutely flat broke and have nothing at all just keep in mind that yes is it's still important to consider getting a legal entity set up yes but it's not the end of the world because you don't have a bunch of things to protect however what if you are already have a pretty significant set of assets and you're looking at getting a real estate investing so let's talk about the different kinds of entities and what can what can happen well here's the first thing on what some investors do is they continue to operate in a sole proprietorship huh let me explain but what they do is they get liability insurance okay so they would talk to an insurance broker and they would get an insurance policy that protects them up to say two million or three million so they get a liability protection policy and they continue to operate the sole proprietorship why why would any real estate investor in their right mind operate like this interestingly enough in most cases you actually do better from a tax perspective if you operate out of a sole proprietorship I bet you didn't know that because you file all your expenses on the schedule see any accounting people would know what I mean but so I for example there's a gentleman I know that he owns over uh over 350 single-family home rentals he owns them all free and clear and there are a lot of Murray kind of Junkers in the ghetto but he owns all of them in a sole proprietorship why because in his state if he owns real estate in a sole proprietorship he doesn't have to pay an excise tax estate excise tax however if he owned that real estate in an LLC or a corporation he would have to pay an excise tax does that make sense so certain taxes can get triggered on a state level not a federal level but at the state level if you own real estate in certain entities and that's one of them is LLC's or