Tax advantages of an LLC over a corporation?

[RichardtheFrog]

I want to invest in rental real estate. Someone told me that an LLC would prevent "double taxation."

Can someone explain this to me in a little more detail? I am very familiar with tax forms and business structure so don't dumb it down.

[tallen]

LLC's are dis-regarded entities as far as the IRS is concerned, meaning they are treated as if they were sole-proprietorships (single member LLC 's), partnerships (multi-member LLC's) or S-corporations (if the members of the LLC qualify and the LLC elects this treatment). These are all "pass-through" entities, meaning that profits of the LLC are not taxed directly, but are counted as part of the income of the person(s) to whom the profits are passed and taxed on that basis. Note that the profits are taxed as income to the "shareholders" even if no "dividend" is actually paid and all monies are retained by the LLC (or S-corp).

On the other hand, a C-corporation is a separate entity and its profits are taxed as income to the corporation, and then when those profits are passed on to the shareholders of the corporation as dividends, they are taxed again as income to the shareholders. Of course, if the Corporation retains those profits (i.e. for re-investment in the business) and doesn't pay them out as dividends to the shareholders, the shareholders do not get taxed on dividends they did not receive.

At least that is my understanding. Of the businesses I am currently involved with, some are S-corporations and others are sole proprietorships. I'm not really sure about the relative advantages or disadvantages of an LLC vs. an S-corp, and it likely depends on your local laws, the type of business you are in, and who-all is involved in the business (i.e. the number of partners in the business, and their relative contributions to the enterprise).

[RichardtheFrog]

In that case, why would anyone start a corporation over an LLC?

It is going to be a real estate business where I own my properties under an LLC. I would be the only member.

I have started s-corp's in the past.

So let's say I take all of my rental income and don't give it to myself, but keep it in the bank account of the LLC. Then, it never gets taxed at all?

[tallen]

In that case, why would anyone start a corporation over an LLC?

People still form C-corps because there are limitations on LLCs and S-corps (who can be a member, how many members there can be, etc...)


So let's say I take all of my rental income and don't give it to myself, but keep it in the bank account of the LLC. Then, it never gets taxed at all?

Since your LLC will be a pass-through entity, YOU will pay taxes on any profit the LLC makes regardless of whether the money stays in the LLC's bank account or is transferred to your personal bank account.

[huggytree]

these are all questions for your accountant...not strangers on the internet

most new businesses are LLCs
most small businesses file S corp
most larger businesses file C corp

[RichardtheFrog]

It is not worth it to waste money on an accountant for easy topics such as this. I can fill out the tax forms myself, I just would like to know ahead of time if anyone could say why it's an advantage, which someone did.

Plus, I would just get a book from the library before hiring someone anyway.

[Freelancier]

It is not worth it to waste money on an accountant for easy topics such as this.I'm seeing a recurring theme here.

[RichardtheFrog]

It makes sense to me. Does anyone on here pay for a tax attorney when IRS forms all come with instructions?

[Harold Mansfield]

It makes sense to me. Does anyone on here pay for a tax attorney when IRS forms all come with instructions?

Yeah, I do. And it's not always about whether or not I CAN do it myself, it's about how much time do I want to spend doing it.

I pay someone because I don't want to do it myself, and would rather have someone who specializes in this so that I'm sure I'm getting all of my deductions, am paying the best possible rate, and don't have to worry about making mistakes.
I don't care how well you read the instructions, you're not going to be as good or efficient as a trained and licensed professional who does it for a living.

In business just like in life: You will either learn how to do it yourself, or pay someone to do it.

How much is your time worth? If you're one of those people who will spend all weekend on something just to save $125, more power to you. For most people their time is worth more than that.

[RichardtheFrog]

To each his own I suppose. And to be fair, I have never shopped for a tax attorney and have no idea what they cost.

[Wozcreative]

It is not worth it to waste money on an accountant for easy topics such as this.

ahahaha WOOOW! Now I'm convinces you're trolling us.

[Owen]

It is not worth it to waste money on an accountant for easy topics such as this. I can fill out the tax forms myself, I just would like to know ahead of time if anyone could say why it's an advantage, which someone did.

Plus, I would just get a book from the library before hiring someone anyway.


I hope you understand accountants are dirt cheap...? You pay them a lot of money in the beginning. Accountants sometimes get paid yearly, AND the amount you paid them gets filed on your Federal Tax Return. The money basically gets refunded at the end of the year :)

[RichardtheFrog]

I passed 5th grade math class, so I can be my own accountant. Maybe you are just not as good at math as me, Woz!

It is pretty much the most simple concepts in the world, is it not?

But I still don't want to get kicked off for being antagonistic.

I'm confused as to why anyone would NOT do their own accounting and their own taxes when it is so easy to figure out. That's what makes sense to me.

[Fulcrum]

I passed 5th grade math class, so I can be my own accountant. Maybe you are just not as good at math as me, Woz!

It is pretty much the most simple concepts in the world, is it not?

But I still don't want to get kicked off for being antagonistic.

I'm confused as to why anyone would NOT do their own accounting and their own taxes when it is so easy to figure out. That's what makes sense to me.

My accountant costs me around $2,000/year. This is all year end bookkeeping, payroll and taxes. Over the course of the year this would probably take me an accumulated 3-4 weeks. My time is worth a lot more selling/working on the floor rather than doing this stuff.

I would think everyone here has passed 5th grade math. In fact, I'm willing to bet that most of us have passed at least some level of college/university math as well.

[Harold Mansfield]

I passed 5th grade math class, so I can be my own accountant. Maybe you are just not as good at math as me, Woz!

It is pretty much the most simple concepts in the world, is it not?

But I still don't want to get kicked off for being antagonistic.

I'm confused as to why anyone would NOT do their own accounting and their own taxes when it is so easy to figure out. That's what makes sense to me.
Maybe your taxes and accounting are simple and that's why you can't understand why others who have more complex accounting, higher incomes and tax rates pay a professional.
Everyone isn't you. Most people wouldn't trust their taxes and accounting to someone with a 5th grade level understanding of math.

If what you do for you, works for you, good for you. But your situation is not applicable to everyone else. You don't need to understand why others hire professionals, but you should be able to understand this: You're on a business forum asking advice of people who are actually IN business. You should be able to understand that maybe, just maybe, we've been where you are and have a better understanding of how and why sometimes it's best to use the services of someone who knows more than you do.

Doesn't mean you have to take that advice, but we're where you are trying to be. We didn't get here by thinking we were smart enough to do everything on our own and most of us are smart enough to know where our time and talents are better spent so that we can continue to be successful.

From reading your posts, you're not as smart in matters of finance as you think you are, or you wouldn't be here asking such basic questions about finance. Part of being successful is being honest with yourself about your strengths and weaknesses and using your time and budget wisely. If you go into everything with the attitude that it's easy and you can do it all yourself, you will fail over and over again. No one is as smart as you claim to be about everything.

[RichardtheFrog]

True that my finances are simple at the moment. I bet I will have multiple income-producing properties one year from now, but I could be wrong. And you can bet I will keep you posted.

Or maybe I will be too tired from doing repairs and dealing with tenants to come on here.

[Harold Mansfield]

True that my finances are simple at the moment. I bet I will have multiple income-producing properties one year from now, but I could be wrong. And you can bet I will keep you posted.

Or maybe I will be too tired from doing repairs and dealing with tenants to come on here.
I hope you do. And I'm willing to bet if that happens that it will be worth the peace of mind and your time to hire a professional to do certain tasks for you.

[RichardtheFrog]

We will have to see. I can't see myself hiring someone to do taxes. Even all the deductions are listed right there on the instructions sheet.

[Harold Mansfield]

We will have to see. I can't see myself hiring someone to do taxes. Even all the deductions are listed right there on the instructions sheet.
When you start a business and actually start making money as a self employed person, owning property, have investments and other grown up things you won't be using 1040-EZ anymore.

This is what I keep trying to tell you, but I can see that you have no concept of anything other than what you see right this second. You will learn for yourself and you'll remember that we tried to tell you.

[RichardtheFrog]

"Grown up things?" I just got out of the ICU with a broken neck. This childish stuff?

1040, 1065, 1120. They all come with instructions.

[tallen]

Yes, all the forms come with instructions. Sometimes those instructions are as clear as mud. Often the instructions reference another publication, which in turn references yet another publication. Even with all of that, there is often still room for interpretation. If you get it wrong, you could be in big trouble.

All that said, I do my own accounting, bookkeeping, and tax preparation -- including payroll (federal and state), and state sales taxes. Most of it is not hard, it just requires attention to detail and timeliness. Like you, I'm a DIY kind of guy, and it doesn't hurt that I have a head for numbers (as they say). Could my time be better spent? Sometimes, but I enjoy some aspects of the work, and it really helps me to have my finger on the pulse of my businesses every day.

But the strategic decision making, that's where prior experience -- and/or the hiring of professional help -- really comes to the fore. There are choices to be made, ways of structuring certain transactions, and so on, that can make a real difference in the ultimate outcome. While seeking opinions and advice (for free) from strangers on the internet is not necessarily a bad thing (I do it myself), I am not sure you would want to rely solely on such sources. Do your research and seek corroboration from sources that you really trust, even if you have to pay them.

[Harold Mansfield]

"Grown up things?" I just got out of the ICU with a broken neck. This childish stuff?

1040, 1065, 1120. They all come with instructions.


I'm done man. I have no idea why you keep asking questions because all you do is cherry pick part of the answer, and then tell everyone that they are wrong. It's like you're looking for a disagreement.

[Wozcreative]

My accountant costs me about $230/year and he has helped me figure out various benefits that I have in my situation that would bring down my costs... I can go to him anytime and ask him questions and he will find out for me and knows the legality of everything he's dealing with.

Sure it's not HARD if you have the time to real through all those instructions. I'd rather save time because that's worth more to me.

[RichardtheFrog]

Yes, I would just feel uncomfortable handing any part of it to anyone else when I didn't absolutely have to.

And also the fact that I am not saying what I do, I am saying what I WOULD do in the theoretical world that I actually had a business to run. But I actually have done this stuff just for "practice" in the past and have read the majority of the tax forms that would be necessary.

[Paul]

I passed 5th grade math class, so I can be my own accountant. ...............I'm confused as to why anyone would NOT do their own accounting and their own taxes when it is so easy to figure out. That's what makes sense to me.

Are you sure?

Are you using a cash or accrual system? Do you know how to depreciate property? Is inventory an expense, profit or asset? Capital gains? Deferred income? Are rent deposits income, assets or liabilities? Is the interest on deposit accounts income or liability? Are repairs expenses or capital improvements? Loss carry forward? Like-kind exchange? Etc.Etc…..and on and on.

For business that may become complex such as real estate investments the purpose of an accountant isn’t just doing the taxes. It is also about planning. You need to know a lot to be efficient and profitable.

You can of course learn it all yourself, but then you might as well be an accountant!

[RichardtheFrog]

Yes, I might as well be an accountant. I know how to read a tax form, read the instructions, and anything I don't know from there, google could probably help me or other forums.

I would be hard pressed to ever pay someone to do something I know I could do myself.

I almost considered talking to one over that solicitations thing, but then I found the information I needed online.

[Harold Mansfield]

Yes, I might as well be an accountant. I know how to read a tax form, read the instructions, and anything I don't know from there, google could probably help me or other forums.

I would be hard pressed to ever pay someone to do something I know I could do myself.

I almost considered talking to one over that solicitations thing, but then I found the information I needed online.

Richard, all I can say is I've been on this forum and this earth a long time and you aren't the first know it all to come along and completely discount the help and advice that we're all trying to give you..which you asked for by the way.

Obviously we're all stupid. No one has ever been where you are, had the same attitude as you, and we apparently aren't as smart as you think you are, so we can't possibly know what we're talking about to help you avoid the mistakes that we see you making.

Learning is part of being in business. We all have had to do it and continue doing it.

But you've been on the forum a short time and in that time you've asked a bunch of questions and one by one you've told everyone who's answered and attempted to help you including web professionals, lawyers, property managers, investors, and accountants..who are all offering you free advice based on experience...that you know better than them because you read a few things online.

We all have access to the internet dude. We all know how to read. It's not a special talent that only you posses. If all the keys to business success were online, wouldn't everyone with a computer be a zillionaire?

You are nowhere near as smart as you think you are. There are so many holes in your logic a truck can fit through it every time to speak. I'm just one of the few people dumb enough to keep responding to you. Everyone else is just sitting back watching and laughing at your arrogance because so many of us used to be you..and then we grew up and started actually making some money.

As much as I'd like to be there when you get your rude awakening to reality and the real world, participating in any conversations started by you is a waste of time because you dismiss anyone who doesn't tell you what you want to hear.

I have no idea why you're here because all you're doing is telling everyone else that they're wrong and listening to yourself talk.

[RichardtheFrog]

I didn't disagree with everyone. What about the guy who told me about fiverr? I see no appreciable differences between the web sites you make and the one I got. Not worth $975 anyway.

I will let you know when I start buying houses. And also, you assume I don't know things that I know, and I don't always feel like proving that I know what I know.

Why do people say that it wouldn't be a good idea to take out a loan to buy a house and then rent it out. Even if you only make $200/month, it is still something. Then, you sell the whole thing 30 years later when the mortgage is paid off. I know people that do this. It's not risk if you've looked in to it. You can find the going rental rates, you can get a good inspection, and of course things will break, but you only need to repair a roof or a/c once in a few decades.

That non-profit thing was just for fun. I don't plan to make anything off of that anyway.

[Harold Mansfield]

I see no appreciable differences between the web sites you make and the one I got. Not worth $975 anyway.

That's because you have no idea what you're doing.
And just for the record, don't try and apply your warped view of what you think the web is, to me and what I do.




Why do people say that it wouldn't be a good idea to take out a loan to buy a house and then rent it out. Even if you only make $200/month, it is still something.

I think you should do it. $200 a month should be plenty to cover the fictitious mortgage that you have no idea what the payments will be, insurance, taxes, up keep and maintenance. And as the owner should you need to pay water and sewage, trash pickup and any association fees I'm sure there's plenty in there for that too because $200 is a lot of money in the real world.

I hear property is cheap in Chernobyl. You should be able to find something nice there in that range.

[RichardtheFrog]

How do you know what I know? I don't have a mortgage calculator? I don't know what homeowner's insurance costs? I don't that you pay 1% of the mortgage for the premium and 1.15%/12 per month? (according to the company I talked to). I don't know about property tax rates? Are you sure about this?

I know all about the web. ICANN. Domain name registrars, etc.

This is why I don't always listen to what you say. I "have no idea what they payment will be?" Are you sure about that? And what makes you assume that?

[Harold Mansfield]

How do you know what I know? I don't have a mortgage calculator? I don't know what homeowner's insurance costs? I don't that you pay 1% of the mortgage for the premium and 1.15%/12 per month? (according to the company I talked to). I don't know about property tax rates? Are you sure about this?

Dude, YOU HAVE NO HOUSE! How the hell can you know what your mortgage and insurance will be on a fictitious property with no price, based on a down payment that you don't even have, and a bank that hasn't even approved you for anything? But you're positive that $200 a month is going to cover it.

$200 a month is not money. Even if we are talking about the cheapest, run down slum in the worst city in America, $200 is not going to pay a mortgage and insurance for anything bigger than a shoe box. And I mean an actual shoe box.

This is what I mean by you're just pulling sh*t out of your ass to try and sound smart. You don't even have a real concept of money and what things cost. We all see it, and you just keep doubling down as if we're all stupid.

In one thread you're saying that you have bad credit, no money, and a crappy job..but you think you're going to get the prime rate? What world are you living in man?

And doing your own repairs? Are you insane? You're not a licensed contractor, electrician, or plumber. You don't know anything about safety regulations, or codes. If you think you're going to do your own repairs with a few Google searches, I can guran-damn-tee you that you are going to do something substandard that injures someone ( or worse yet, causes a fire) and you will get sued back into the stone age...if you don't get thrown in jail. You are negligence just waiting to happen.


I know all about the web. ICANN. Domain name registrars, etc.

This is why I don't always listen to what you say. I "have no idea what they payment will be?" Are you sure about that? And what makes you assume that?

I'm reading what you are writing. This how I know you have no idea what you're talking about, because I do know what I'm talking about and what you're saying is a bunch of gibberish. You've read a few things, skimmed over this and that, know a few terms and buzz words but you honestly have no idea what it all means, what else there is to it, and you make a crap load of assumptions about everything.

If that's not frustrating enough, you know more about things you've never done than the people who do it for a living. And you don't even see how ridiculous you sound saying it.
Seriously, how old are you? Because I'm really starting to think this is just some big game and we're talking to some 13 year old kid in his parents basement. Because that is seriously the only kind of person who can think that $200 a month is enough money for anything besides a phone bill or a bar tab.

[RichardtheFrog]

Because I have a cosigner. Not all repairs require a contractor.

I bet I know more about how a computer works than you do. Can you explain to me how a processor works? I could explain it to you. Transistors, MOSFETs, logic circuits. But what is USEFUL knowledge anyway.

Okay I'll let you know when I am renting that house. And then when I'm renting the other ones.

[Harold Mansfield]

Because I have a cosigner.
I seriously doubt that. In one thread you said "You think" you may be able to get a cosigner. In another you're talking about borrowing the money yourself. In yet another you started a thread titled "How do I finance a Real Estate Business?".
http://www.small-business-forum.net/financing-your-small-business/12826-how-do-i-finance-real-estate-business.html

Which is it?

Besides, what does having a co-signer have to do with the fact that you can't even begin to estimate any kind of cost, payments, taxes or upkeep on a fictitious house with no price tag? You need more than fantasy and "if's" to calculate actual numbers. You can't just grab a number out of the air and say "That should be enough to cover it". Cover what?


Not all repairs require a contractor.
Maybe not, but there will be quite a few that do and you won't be able to do them yourself.


I bet I know more about how a computer works than you do. Can you explain to me how a processor works? I could explain it to you. Transistors, MOSFETs, logic circuits. But what is USEFUL knowledge anyway.
Really? Cause based on how much you know about everything else you claim to be proficient in, I feel pretty confident saying that you probably don't. When did we start talking about that anyway? Once again you're just throwing words together, but not making any coherent sense.

Richard, this is a help forum full of very smart people who are here to discuss business issues, ideas and help others. There are people in all stages from just thinking about it, to planning, to start ups to seasoned professionals that have been in business for years. We welcome anyone who's serious to be a part of this community, but you're not going to get the kind of help and advice that will actually help you succeed from the people who know the ropes if you're constantly BS'ing us. There's no need for it and it's wasting the time of the people who are here trying to help others and give free advice out of the goodness of their hearts.

Maybe you will never get honest with us, but if you don't get honest with yourself you will never succeed. Starting a business is also a personal journey. If your head is in the clouds with a bunch of fantasy, and you don't get a grasp on reality all you'll ever do is dream and make a bunch of excuses about what you could have done.

[RichardtheFrog]

You are saying I don't know the numbers? Are you sure about that? Where did you get that from?

Pick any old numbers and plug them in to a formula and there you have it. And you can get expected rental income by looking at similar properties in the area.

Why is it that you think I don't know the numbers? Or is this just something else you are assuming?

I can't "begin to estimate?" Are you sure about that? What makes you think this?

I really want to know why you think I do not know the numbers?

Who is BS'ing anyone? I don't recall being dishonest.

[Harold Mansfield]

You are saying I don't know the numbers? Are you sure about that? Where did you get that from?

Pick any old numbers and plug them in to a formula and there you have it. And you can get expected rental income by looking at similar properties in the area.

Why is it that you think I don't know the numbers? Or is this just something else you are assuming?

I can't "begin to estimate?" Are you sure about that? What makes you think this?

I really want to know why you think I do not know the numbers?

Who is BS'ing anyone? I don't recall being dishonest.

Yes, anyone can put fake numbers into a mortgage calculator using best case scenario, prime rate, and a fantasy down payment until they get the results that they want. And that's great to get an idea or a goal to shoot for.

But you won't know actual numbers until you have a property with a price, know what the actual rate is that you're paying, know exactly what kind of down payment you can scape together, and see the actual tax history of the property you are buying.

And until you know actual numbers you can't make definitive statements like $200 a month will cover it. I don't care what you buy and rent out, $200 a month is not enough money to sustain a rental property. You aren't being realistic and you refuse to listen to people who are doing it.

You say you know people that do it, but you obviously haven't learned anything from them because all of your statements are assumptions. The bottom line is you have no idea how to do this, what kind of costs are involved, or how to manage it. Normally that would be OK. A lot of people start a business and have to learn all kinds of things. That's normal.

The difference with you is, you haven't done anything but think you know all about how to do everything better than everyone else. That doesn't make you very smart and until you start living in the real world you will keep falling on your face because you're too arrogant to listen to anyone, and too impatient to learn how to do anything properly.

Ever heard the saying, "Jack of all trades, master of none."?

[RichardtheFrog]

Well we'll see how it goes.

The $200/month was after the expected costs for repairs. So that is what I would (theoretically) pocket.

[RichardtheFrog]

And when I say "expected repairs" I am going by something like this...

"A roof should be good for 15 years...then you can put another layer on it. A roof with a new second layer should be good for 10 years.

You cannot put a third layer on. Against building codes.

In Florida the roof must be rated for 100 mph winds.

The A/C should last 15 years and much longer if you take good care to keep the maintenance up. Same with the furnace. Figure 5-7 years on a hot water heater. I have gotten 20 years out of a hot water heater...but..After 15 years had a new one in storage waiting for the day it dropped dead.

Most appliances will be around 10 years depending on the abuse they get That is stoves/ovens, washers, and the like." -KK

which was a response to another forum that I'm on.

[Freelancier]

Most appliances will be around 10 years depending on the abuse they get That is stoves/ovens, washers, and the like." -KKDoesn't mean they won't require repairs a couple of times a year... they will get used and abused and things breaks like the magnetron in a microwave or the ice maker in a refrigerator. You can hold things together for a while, but it costs money to do that anyway.

[RichardtheFrog]

That is true.

But I think my tenants would have their own microwaves. Refrigerator would be mine, though.

[Harold Mansfield]

Sounds like you're coming back down to earth. I'm not trying to discourage you, but there's nothing worse that not being prepared. It all looks easy when you're siting around fantasizing about it and going over things in your head where you can envision best case scenarios for everything with maybe a hiccup or two. But it's never like that when you get going.

Lots of unexpected expenses come up that you don't plan on and start up budgets never stay on budget. As a matter of fact, if there is one thing you can depend on it's things not going according to plan.
Especially with real estate and rentals and all of the codes that you have to follow and be inspected for.

You can buy a rental that's been a rental for years, yet when you go to get your inspection they find a bunch of stuff that they didn't make the last guy do because he hadn't been inspected in 10 years. Now you're stuck with it. Happens all the time.

I don't know what kind of area you're looking to do rentals in, but around here it's not out of line to find house rentals that do not have stove and refrigerators. Years ago a rented a 5 bdrm that had no appliances. That's pretty common for home rentals in nice neighborhoods out here. Not so much for apartments and condos, but it really depends on the neighborhood. The higher the rental price, the better the chance that there are no appliances.

You have a lot to think about, but plenty of time. You said yourself that your first step is to get your credit on par. Who knows what prices and interest rates will be by then? Anything could happen.

[RichardtheFrog]

Other than roof, a/c, furnace, water heater, refrigerator, stove, plumbing, and septic maintenance if it is on septic, is there anything I'm not thinking of?

[tallen]

doors and windows

[Freelancier]

Floors and flooring. Nothing more irritating than getting someone out after a year's lease and spending $3000 to replace all the cat-urine-stained carpets. Or repainting everything to cover up the nicotine stains on the walls.

[Harold Mansfield]

Other than roof, a/c, furnace, water heater, refrigerator, stove, plumbing, and septic maintenance if it is on septic, is there anything I'm not thinking of?
Most property owners have additional insurance for maintenance and repairs as well as keep a reserve for unexpected issues.

You can't always put your finger on unknowns. I've probably opened 10 bars in my life as both an employee and a manager, and each time I learn of something that comes up that's completely unexpected that the owner needs to fork out money for before they can open. It doesn't matter how experienced they are, or how many times they've done it.

I've rented homes from people who were completely unprepared, and rented from people who had a management company handle everything. The single owners that tired to handle everything on their own were the worst. Things went unfixed for weeks, even months, and they always seemed to be struggling with the maintenance expenses. Especially the ones who had a mortgage on the property and thought that they could buy something, rent it out to pay the mortgage and make a few bucks and then sell the property for a profit later. That takes a considerable amount of knowledge to pull off.

It's not as easy as it looks on HGTV. Those people are pros with a bank roll behind them. If you notice they have a steady banker, title company, contractors, and real estate agents that they deal with. They aren't winging it. It's a full fledged business.

Yeah, they all started somewhere and if you pay attention they'll sometimes mention the hard times, mistakes they made, and the money they lost simply by not knowing what they were doing at first. Many of them also have experience in the real estate industry is some way.

This is why everyone is telling you that targeting low income people is a bad idea. Yes, they need housing too. Yes, there can be money in low income rentals. But high income rentals attract a better class of people. I know that's unfair and not all low income people are bad tenants, but high income rentals usually do credit checks, criminal background checks, employment checks, ask for references and get more money up front. Most people aren't going to punch holes in the walls, or take off in the middle of a lease when the scrutiny and expense to get in is that high.

But you have to start somewhere. So low to med is probably going to be it. Just be prepared. It's not just collecting rent checks and fixing a step every now and then.

So yes, there are things you aren't considering and things that you won't be able to account for that are just going to happen.

[Wozcreative]

Living in places where landlords want to fix it themselves is the WORST. It never gets done properly or it takes forever, especially if they have multiple locations to care for.

I definitely made mistakes as a landlord that I had to pay for, thankfully it was only $2,000 - $3,000 only. Even with having professionals on my side (accountants, and agents to find me tenants), I still managed to make mistakes because I didn't know everything or had the experience to know it yet.

[RichardtheFrog]

Yea, I'm sure there will be pitfalls.

Another thing is, I'm planning on doing all the repairs myself that don't require a licensed contractor. I don't even know how to do that yet, but I know I can learn.