TAX LOOPHOLES For Real Estate + Asset Protection Strategies
You gain authority by actually having a business, not just you, Joe Schmoe going out there and flipping homes between all of these and there’s others, it really is imperative that you set yourself up an LLC first, before anything gets started.
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Yo, yo, what is up everybody what is up? Welcome back to the science of flipping podcast. I’m your host, Justin Colby. And I get one main question for all people looking to get into the space of real estate is where do I start? What’s the first thing I need to do? And my answer is get yourself in LLC. Now I’ll show you exactly how to do that towards the end of my video, but I want to talk about why that needs to be the very first thing that you do. Now, if you’re listening to this podcast or watching it on YouTube this week, just know that there still are some general admission tickets left to the REI masterclass event, June 24 25th in Scottsdale, Arizona. If you are concerned about the economy, about what’s happening with interest rates, about the yield curve, about inflation, about gas prices, about what’s going to happen in the real estate space, make sure you’re there, myself and several top experts in the industry are gonna tell you what we are seeing and how we are pivoting in the space of real estate investing. So whether you are building a seven or eight figure business, whether you’re making a side hustle, or you just want to take advantage of some good deals, make sure you’re at this two day live event in Scottsdale, Arizona, June 24 25th, go to thereimasterclass.com. Make sure you get yourself a ticket now as there’s still a couple seats available. All right. So the very first thing anyone should be doing is setting up an LLC. And there’s a handful of reasons why this should be the first thing you do. Okay, I’m going to be able to show you how to set that up for free at the end of this video, so make sure you stay tuned.
Now, why do you need to start with an LLC? Well, first and foremost, you want to make sure you have asset protection. Now the reason why I say that is whether you own rentals or not, the liability of flipping homes or being in real estate or owning a business can have some major impact. And what I mean by that is someone who’s been doing this for 15 years, I’ve been in my own handful of lawsuits. And what I’ll tell you is, I had an LLC to protect me, meaning my personal liability was not at stake. They couldn’t come after my homes or any of my assets, they could only come after what the LLC had. So I was protected with the LLC umbrella. Now that makes the business liable. And if you guys are building a business and making it a business, you might have several reasons why you get into a lawsuit. Some of them, many of them aren’t even gonna be your fault. I say this all the time to my students, people can sue anyone for any reason, these days, people are sue happy. So if nothing else, immediately get an LLC set up as it’s a way to protect yourself personally against any type of liability that the business may incur.
Now, point number two, which is actually one of my favorites, is really the tax benefits from there. Now, I’m not a licensed accountant, and quite honestly not even authorized to give you tax advice in that way. But I will tell you based around what my accountant has told me, and that is by setting up the proper LLC with a proper formation with a tax structure, then you actually can save a lot in taxes. So let me give you an example of one of my LLCs and how we have set it up. Again, I’m not authorized to give advice. I’m just telling you how my accountant told me to set this up, I have an LLC that is owned and operated by an S corporation, which means I’m taxed as an S corporation. So I’m saving roughly 14% on my taxes because of how I am set up. Now there are several different ways to set these up. That is not the only way. And in fact, depending upon what you’re trying to do in real estate specifically, that may not even be the best way. Meaning I would advise you talk to your accountant and explain to them what you’re trying to do. If you are wholesaling and flipping homes. My guess is that’s how they did would suggest it. In fact, my partner that is gonna help you set up your LLC for free. They also have accountants on staff that can actually help advise what is the proper entity structuring based around what you’re actually trying to do in this business.
The other part about having an LLC is you can actually start to build business credit now. This isn’t overnight so when once you Start an LLC, it’s not immediate, that you’re gonna have this ability to get lines of credit or credit cards. But if you do it correctly the way I did it, over time, you’re gonna have this opportunity to get business lines of credit because you have good business credit. So for example, I get in the mail and emailed almost weekly opportunities to take business lines of credit out on my business. When COVID hit one of the big things that most people took advantage of were the business SBA loans that were given out. Some of them were PPP loans, and some were really just grants, both were given out. Now, if you didn’t have a business, and you were just doing this as a side hustle under your own name, you wouldn’t have had the opportunity to get any of those. Now, conversely, you also have this opportunity to get real loans, some by the SBA, but others are just simply business lines of credit business loans. For example, having a business American Express Platinum Card can really afford you a lot of availability in terms of lines of credit and things that you’re able to do. Now once I show you here in a moment or two about setting up a complimentary consultation with one of my partners. To help you understand personal and business lines of credit, help you understand the tax strategy that goes along with setting up an LLC and setting up an LLC for free, all you have to pay for is the state fees, then you’re really gonna understand what’s going to be the best thing for you. Now, one thing I’ve really appreciated about having my entity set up is there are now lenders that will lend directly to my entity, a lot of the banks are going to put you through a lot of hoops to try to get a loan directly to your entity. But nowadays, there are a lot of hard money lenders that will actually lend directly to your entity for long term loans. As a matter of fact, I just got 14 more loans for my portfolio that are actually 30 year loans at 5% interest. Now we all understand that interest rates are rising, and you may or may not be able to qualify for 5%. But the loans are under my LLC, they are not under me personally. So if something were to go wrong, again, my LLC would be on the hook. This gives another advantage and a layer of protection when having an LLC rather than you personally guaranteeing these loans.
And lastly, what I like to call as authority. If you have an LLC or an entity that you can have a webpage, set up for over I use Minute Pages (minutepages.com), that you can now be the authority in your space. So you can actually have a webpage. When people look you up. There’s an actual LinkedIn profile, there’s a web page, there’s an actual entity, you gain authority by actually having a business, not just you, Joe Schmoe going out there and flipping homes between all of these and there’s others, it really is imperative that you set yourself up an LLC first, before anything gets started. Now, as I mentioned, I’ve partnered with prime Corporate Services, that they will give you a complimentary call right now today, if you book on this link, primecorporateservices.com/tsof, the link is right there for you primecorporateservices.com/tsof. Complimentary call, they will go over things like how should I structure my LLC, they will actually set up your LLC for free minus the fact that you will have to pay for the state filing fees, everyone has to pay for it, there’s no way around that. But they will not upcharge you or cost any money to do that for you. They will help you understand how to build a business lines of credit, they will also help you understand the financing space. Now, this is really advantageous because this is the first thing to get your business running doesn’t mean you can’t go get a deal and put it on your personal name. But the very first thing that you should be doing is getting your LLC set up, I encourage you to book a complimentary called prime, again, primecorporateservices.com/tsof. It is complimentary and they will help you set all this up for no additional cost, just the state filing fees. Now there are more advanced strategies and we can go into talking about putting properties and trusts excetera. Having a holding account or a holding entity in a trust. That’s way more advanced. But for most of you who are just getting started, or maybe just want to know more about you know the LLC tax strategies, business credit, book yourself a call, this is the first thing that you must do. They will be very helpful, they’ll put you in the right position to win. And that is my advice when just getting started. Or the very first thing that you’re going to have to do. I hope this was helpful. If it was make sure you’re giving a like and subscribe to my YouTube channel and I’ll see you guys on the next podcast. Peace.