Seth Williams Ah yes. I can see how if I knew which state I was going to for land investing, I would look at that state's tax assessment. However, know the state first has been my challenge. I was looking at the smartasset.com as sort of "taking the side door" approach to help my interest in an affordable state, shall I end up holding onto it for awhile. My thoughts on that is, learning just to get a Tax D Roll is taking me lots more research than I thought, so I can only imagine what I'll have to put into the next phase of closing a deal..........etc after that. Not only that, I'm finding myself stretching my wings far beyond what I used the internet for my life before. There are layers upon layers of interaction practice I've been engaging in. I realized today that for my sanity and confidence not to beat myself down, I will keep a sheet at the front of my binder logging what I learned each day. That could be 7-20 or more different new things each week! I thought that was insightful
Not legal advice here but here is what I would do:
But and resell the two lots in your personal name now. If you already opened title and signed Purchase agreement under your name, then it will be hard to close in an LLC now that you are going to create (you would need to assign the contract to the LLC).
Sell those lots and see how the process is and if it works for you. Why incur more expense and work until you know for sure you want to be in this business?
As to the LLC. You can set up and LLC in any state and run the business remotely. You can also buy and sell vacant land in another state in most cases without needing to register as a foreign company in that state. (Unless you are doing more serious deals/ rental properties/ or ALL your deals there)
Personally I have a WY LLC. It it super cheap, the state has no income tax, and provides privacy protection for who owns the LLC. It has worked fine for my land business. I run another real estate business with rental homes in IL and have an LLC there and lets just say that baby is a LOT more expensive to run.
I don't know exactly how this impacts people like us when requesting a delinquent tax list, but in terms of finding sold comps, you're not going to have much luck in that state unless you have access to the MLS.
If you elect to treat it as a passthrough entity (as you probably should) the income will be passive (i.e. no se tax) and depreciation/interest/expenses should offset most if not all of the income assuming this is a residential property.
wanted to offer an update on this, in case anyone was curious or it’s helpful to
anyone at some point. Back in late October I spoke with the seller
again (who lives out of the country, is not a US citizen, and does not
have access to email or fax) by phone, and he agreed that he would sign a
new purchase and sale agreement at $30,000 at the office of a notary public
local to him, if I found one who would assist us. FYI, it appears that in
Germany their "Notar" or notary public are actually the closest
equivalent to our title/closing companies, and this is not a status given to
just anyone who files the paperwork and pays a small fee as they
essentially are in most states in the US.
In addition to the substantially higher price (which still leaves $10k margin for me on my double-closing to my end Buyer), I also added the following language to my revised PSA, so that I'd have better recourse if the Seller tries to back out again, like Jaren Barnes suggested above in this thread:
"DEFAULT; DISPUTES: If for any reason other than failure
of Seller to make Seller's title marketable after diligent effort, Seller
fails, refuses or neglects to perform this Contract, Buyer may choose to seek
damages or to seek specific performance, per this agreement. In a civil action
to enforce this agreement, the prevailing party to the action shall be entitled
to recover from the non-prevailing party reasonable attorneys' fees, costs and
always, I'm not a lawyer and anyone might use the above language, or not, in
any of their own agreements, at their own risk.
I also rewrote the agreement to have the Seller covering most of the closing costs now, instead of my doing so as I normally do with a Seller that’s not a complete pain in my... Unfortunately, though, as I was originally concerned about and as others such as Jason Wollbrink also called out above, after the Seller verbally agreed to the above approach, on the phone, and I found a Notar local to him who would assist us (within probably 3 or 4 days of speaking with the Seller), the Seller then ghosted me (and the Notar) for over a month.
point, like Charlie Brown who had the football pulled away again, I cursed
myself for falling for it and for wasting my time, and was ready to just
walk away, finally. Although my agreement with my Buyer, who's been
incredibly patient throughout this, doesn't expire until the end of this
month, I contacted him and gave him the option to cancel it early and get his EMD back, or wait for another month to see if the Seller happened to come out of coma and start responding.
However, the Buyer declined to cancel and said he would still very much like to buy the
property, so out of equal parts of shame for disappointing my Buyer and
frustration at the Seller for lying about never receiving (or signing and
returning along with handwritten letters) various documents, I decided to take
one last swing at it. Last week, I FedEx'ed (again, no email, no fax) a
package to the Seller with copies of our original fully executed PSA at $17.5k,
his handwritten note which he returned with the PSA asking about next steps in
the transaction process, and his hand-addressed/labeled envelope in which he mailed me these documents, along with a copy of the Notice
of Claim that I filed with the county against the property, and a new letter
that I wrote explaining that he needed to contact the Notar and sign the new
PSA for $30k as we'd last agreed to on the phone, or I’d have to pursue all legal
recourse to enforce our original agreement at $17.5k.
morning I woke up to a signed (and notarized, this time) PSA in my inbox, from
the notary public’s office! Still have
to get actual closing docs redrawn up and executed, but at least now if he backs
out, I could pursue specific performance of the contract, with the legal
expenses coming out of his $30k. We’ll
see what happens next.
I have an LLC in another state than my residence which required my LLC to file as a Foreign LLC. I am selling land in another state where the LLC has not yet registered. I have gotten different opinions from various investors. Many have said if you don't have a physical presence in the state you don't need to register. My research has found however, that if your LLC is sued or needs to take legal action, it cannot be represented in court unless it is registered as a Foreign LLC and has a Registered Agent (may vary based upon which state).
Dustin Karels Hey Dustin. Take a look at a Schedule C tax form. Taxable money = Net profit. Use Schedule C regardless of entity. In other words, it is self-employment income. Unless you are a corp the net profit "passes thru" to your Form 1040 - Personal Income Tax Form. Yes, price of the property is a capital expense. Generally that expense is taken when you sell as Cost of Goods Sold. All other expenses are taken in the tax year in which they occur as is all Revenue/Sales. So, the basic formula is Sales minus Cost of Goods Sold (COGS) minus expenses equals Net Profit.
Don YostGeoffrey Pierce, thanks for the very helpful replies! I haven't verified this with my accountant yet, but am thinking this should be a non-issue with my one seller-financed deal, so far, due to the factors that you both raised, in that the amount that I financed on this property fell under $10k, and this was an arms length deal (to the general public) under terms consistent with what I intend to be customary my customary business practices (when seller-financing).
(3) "Commercial solicitation" means contact by telephone, mail, or electronic mail for the purpose of selling or marketing a consumer product or service.
After I read that, my immediate question becomes,
Are we "selling or marketing a consumer product or service"?
We're clearly not asking consumers to pay us anything in exchange for a product or service, but we are trying to elicit a response from them. "Selling" could be a bit subjective... but I think most reasonable people could agree that what we're doing doesn't quite fit that description.
However, even if we go out on a limb and assume for a moment that we are indeed selling something... what are we selling exactly?
Are we dealing with a consumer product? No.
Are we offering a consumer service? I suppose it depends whose definition we're going by, but if we look at what Investopedia or Wikipedia have to say about it, it doesn't even come close to what a real estate investor is trying to do with direct mail.
Our objective is not to receive money from the people we're sending mail to. We're trying to do the exact opposite.
I'm no attorney, but based on what I'm reading on the SC website (if you have the patience to pick through the statutes and decipher what it's saying), I can't see how any reasonable person would put what we're doing into the commercial solicitation bucket. Not as SC defines it, anyway.
I just started following this thread, and wanted to say thanks to all of you for the great info! I'm thinking of shifting IRA funds into something more productive, but want to avoid all the land mines. Anyone have an opinion of Anderson Advisors or Damien Lupo?
Karl James hi and thanks for reaching out. What you suggest is actually already stated in the PA we both signed. I could now tell him to simply check with his CPA about it or to provide him with some basic information on what those forms are and how to file them, actually nothing more than what i learned from Seth Williams on this subject (all info to be checked with his tax expert in any case). It would cost me a little effort and would make him probably happy (so far it was a pleasure to discuss business with him, otherwise I wouldn't dare for sure...).
Whatever the decision though, I'm stll curious to understand, as I may find myself to file those same forms as seller if and when it will be the time and I'll have the chance to sell in bulk too. When it will happen, my CPA will likely/hopefully take care of them but still.....😁