April 27, 2006
Flipping Startup Hurdle #2: Tax & Accounting Issues
Not the most riveting topic, I know, but taxes and bookkeeping are clearly tremendously important issues in the universe of real estate
investment. There are countless books and seminars on both points within this category, so I don’t expect anyone to glean any earth-shattering insights from anything I post here (WARNING: I am neither a tax attorney nor a qualified accountant!!). What I expect will be interesting is following the real life trajectory of my successes and failures in this arena. From the reading I’ve done to-date (a few examples here and here), I think I’ll setup an LLC taxable as an S Corporation for the flipping enterprise. I’m in the process of setting up a few interviews with accountants and real estate/tax lawyers, so I’ll report back with the end result after I have a team assembled and paperwork filed. Fast-forward three years into the future and I’m either paying $5 dollars in taxes per year and enjoying life on a tropical island, or I’m deep in the red after closing a number of seemingly profitable deals only to find out that everything was a net loss after taxes. Wish I had a crystal ball…
Irrelevant side note: The first accountant I am meeting sounds like a lovely, intelligent woman over the phone — an impression that is strongly reinforced by her raging British accent. Charming as this may be, it gives me pause in seeking her services because in order to develop such a thick accent, I would assume she must have grown up in an equally raging part of the United Kingdom (or one of its many former colonies and protectorates). I would think that growing up listening to your parents rant and rave against all-things-IRS every April would be a necessary condition for having a strong understanding of the outrageously byzantine US Tax Code and practicing accounting, but I guess I can test that theory next week when I chat with Lady Tax Advice directly.
found that hardly any of the existing authors of these materials are in the northeast. Is it too cold here for any of these real estate barons to spend their time, or is it impossible to make a profit in this region for some undisclosed reason? I certainly hope it’s not the latter.