Stephen Kim, Evercore ISI, joins ‘Power Lunch’ to discuss the state of the housing market and if it’s safe to bet on homebuilders.
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Ryan Amoils
Every generation has had its share of successful young entrepreneurs; now, it’s the turn of Gen Z, launching innovative startups from their bedrooms and transitioning to the boardroom.
Buying and selling is something that Ryan Amoils has been doing since high school. His passion for dirt bike riding goes back even further, to the tender age of four. Combining the two sparked the idea for MX Locker, the P2P marketplace for buying and selling motocross riding gear, bike parts, and dirt bikes that he launched straight out of college.
Amoils says: “I was always fascinated by buying and selling, especially e-commerce, and being able to reach customers worldwide. At school, I sold everything from sneakers to snapback hats; I was always at the post office shipping out boxes. That ended when my parents stopped me selling sneakers almost full time and made me focus on getting into college.”
He went on to study marketing at the University of Florida but never gave up on his entrepreneurial ambitions. Still a serious dirt bike rider, he knew from personal experience how expensive the gear and equipment could be, so he decided to apply what he had learned from selling sneakers and apply it to the dirt bike industry.
He says: “My dad would never buy me the top pair of bike boots, so I made it my goal to get one. I knew that companies sponsored many top athletes in this industry, who got to keep their gear at the end of the season, and would then sell it. As I did with sneakers, I would scour eBay for opportunities to buy in bulk and sell two or three sets for a profit, which covered the cost of keeping a set for myself. It made me realize there was a large market for this, and the idea for MK Locker was born.”
On graduating from college in 2020, Amoils’ parents gave him a year to make his fledgling business work or find a job. He teamed up with his college friend and computer science graduate Andrew Walker and, together, built a new e-commerce platform. The following year they launched MX Locker.
The biggest challenge in their startup journey, says Amoils, was hacking supply and demand. “Sellers aren’t going to sell on your platform if you don’t have enough traffic, and buyers aren’t going to find your platform if you don’t have enough sellers,” he says. “What helped was that we had our own supply, albeit a pretty small one of around 200 items.”
They knew their business had traction when it started earning $100,000 a month. Walker joined the business full-time, and within two years, MX Locker’s user numbers had grown from 7,000 to the current 160,000. Registration for sellers is free, and revenue is generated by taking 11% from each sale.
A lack of experience in running a marketplace was another challenge. “All I had was a basic knowledge of how money should flow between users, how a checkout process should work, and how the selling process should work as a seller,” says Amoils. “Perfecting the model has involved a lot of learnings this past couple of years. Fundamentally it’s about listening to our customers, getting their feedback, and then building tools that enable them to create their own mini website within our platform to succeed online.”
The business was entirely bootstrapped until last year when Amoils raised a pre-seed round of $750,000 with the help of family, friends and business angels. He has his sights set on venture capital for their next funding round.
MX Locker
With the global off-road motorcycle market valued at $103.53 billion in 2022 and expected to reach $151.80 billion by 2030, MX Locker is moving into a new growth phase. The business has a team of six and an increasingly global community, with users in the U.S., Europe and the Far East. New projects include shipments of dirt bikes sold via the marketplace and expansion into crossover markets.
“Our users aren’t just into their bike riding; they’re into many other sports,” says Amoils. “Given the marketplace, we have created, it makes sense for us to expand into some of these crossover industries.”
In as much as Amoils’ entrepreneurial success has been very self-driven, he has rallied support from a legend of the bike riding business, Jeff Emig. One of the top AMA Motocross and Supercross riders of the 1990s, Emig has partnered with the industry’s top brands for decades as a racer, ambassador and influencer, making him an ideal mentor and advisor for Amoils.
Emig says: “MX Locker fills a massive void in the circular chain of motocross products. For decades, people have had limited options for selling goods, used apparel, parts and motorcycles. Far too many have their shops and garages full of good stuff that other consumers want, only for it to end up collecting dust. MX Locker is a cutting-edge online marketplace created and run by MX riders who know the space inside and out. I have no doubt that under Ryan’s leadership, MXL will become one of the most important consumer retail businesses in the motocross industry around the globe.”
Meanwhile, Amoils’ best advice to other youngsters with ambitions to launch a successful business is to be bold and unafraid of taking risks. He says: “It’s tough, but you must be prepared to take the risk. When you have a clear vision, you have to focus on it, but first, you have to put something out there to consumers and the world to ensure it will work.”
Meet The Young Entrepreneur Riding High In The Motocross Business Read More »
Foreclosures across the U.S. are on the rise and nearing pre-pandemic levels, according to real estate data firm ATTOM.
ATTOM’s midyear foreclosure activity report found that foreclosure activity has been gradually increasing over the last few quarters as COVID-related policies have ended.
Across the U.S., 0.13% of all housing units foreclosed in the first half of 2023. Foreclosures are up 13% from the same period in 2022 and up 185% from the same period two years ago.
“Similar to the first half of 2022, foreclosures activity across the United States maintained its upward trajectory, gradually approaching pre-pandemic levels in the first half of 2023,” Rob Barber, CEO of ATTOM, said in a statement.
One of the reasons for the rise in foreclosures is that housing relief measures put in place during 2020 to assist homeowners struggling to pay their mortgages ended in May.
While foreclosures in the second quarter of 2023 are below pre-2008 recession levels in 78% of major markets, there’s been a notable uptick in the last six months. A total of 97,608 properties filed for foreclosure during the second quarter of 2023, far below pre-Great Recession quarter averages of 278,912.
Still, the rise in foreclosures could continue, said Barber. Properties that have started the foreclosure process were up 15% from the first half of 2021 and up 36% from the first half of 2020.
“Although overall foreclosure activity remains below historical norms, the notable surge in foreclosure starts indicates that we may continue to see a rise in foreclosure activity in the coming years,” Barber said.
Lenders foreclosed on a total of 22,672 properties in the first half of 2023, which was up 9% from the first half of 2022 and 133% from the first half of 2021, but down 40% from the first half of 2020.
So, which states saw the greatest increase in foreclosure activity in the first half of the year when compared to year-over-year numbers? That would be Maryland, which saw an uptick of 100%, followed by:
The states with the highest foreclosure rates were Illinois, which saw 0.25% of all housing units with a foreclosure filing. New Jersey, Maryland, Delaware, and Ohio also all had high foreclosure rates.
While foreclosure activity was below pre-recession averages for most metro areas, it was above average in:
Cleveland and Atlantic City, New Jersey tied for the largest foreclosure filing among the 223 metropolitan statistical areas with a population of at least 200,000 in the first half of the year, at 0.33%, followed by Fayetteville, North Carolina, and Columbia, South Carolina at 0.30% and 0.29, respectively.
California, Florida, Texas, New York, and Illinois all had the greatest number of foreclosure starts, which indicates there could be an increase in foreclosures in those states in the coming quarters.
| State Name | Total Properties With Filings | % of Housing Units | % Increase from Jan – June 2022 | % Increase from Jan – June 2021 |
|---|---|---|---|---|
| Illinois | 13,619 | 0.25 | -3.32 | 175.47 |
| New Jersey | 9,094 | 0.24 | -0.9 | 241.88 |
| Maryland | 5,858 | 0.23 | 99.66 | 410.72 |
| Delaware | 1,004 | 0.23 | 11.18 | 123.61 |
| Ohio | 10,546 | 0.2 | -4.37 | 156.03 |
| South Carolina | 4,511 | 0.19 | -1.25 | 173.73 |
| Florida | 18,530 | 0.19 | 5.14 | 136.02 |
| Nevada | 2,402 | 0.19 | 6.33 | 161.94 |
| Indiana | 5,254 | 0.18 | 8.96 | 142.12 |
| Connecticut | 2,437 | 0.16 | 23.14 | 191.51 |
While foreclosures rose in the first half of 2023, we are still far below the average foreclosure rates seen before the 2008 recession. It’s likely that we will see a rise in foreclosures in the coming quarters or even years as homeowners adjust to pandemic relief measures ending, but there’s no reason to think that the real estate market is crashing anytime soon.
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Note By BiggerPockets: These are opinions written by the author and do not necessarily represent the opinions of BiggerPockets.
Foreclosure Activity Continues to Steadily Increase as COVID-Era Policies End Read More »
“The fear of interest rate increases has influenced people’s thinking — it’s not just the homeowners, it’s new buyers who wanted to get in before the interest rates went up even more,” says Robert Shiller, professor of economics at Yale University.
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A decade-long rally in U.S. home prices could finally come to an end once the Federal Reserve stops its rate-hiking cycle, said Robert Shiller, professor of economics at Yale University.
Home prices have made steady gains since 2012, according to the S&P CoreLogic Case-Shiller U.S. National Home Price Index.
“The fear of interest rate increases has influenced people’s thinking — it’s not just the homeowners, it’s new buyers who wanted to get in before the interest rates went up even more,” Shiller recently told CNBC’s “Squawk Box Asia.”
“They wanted to lock in. So that’s been a positive influence on the market. But it’s coming to an end,” he added.
Shiller noted that the index reflected “unusual behavior” in the last six months, saying prices “seemed to be fine and then it started to go up.”
U.S. home prices notched a record high in May, rising 0.7% nationally from April at a seasonally adjusted rate, according to data from another benchmark, the Black Knight Home Price Index.
“I think … people don’t know what to make of the ‘what is the Fed going to do?’ situation,” Shiller said.
The Fed indicated during its June meeting that further tightening is likely, but at a slower pace than the rate increases that characterized monetary policy since early 2022.
“We’ve seen a dramatic increase in interest rates since a couple of years ago. And I think there’s a sense that that’s enough,” the professor said, adding that a soft landing is a possibility, though it’s unlikely to be a “perfect” one.
Shiller added, however, that he’s “not panicking,” saying part of the recent spike in home prices is “just seasonal,” noting that prices typically go up in the summer.
The Fed is scheduled to meet this week and announce a rate decision Wednesday. Economists polled by Reuters forecast an interest rate hike of 25 basis points.
10 years of rally in U.S. house prices could end, says Robert Shiller Read More »
Computers at desk displaying growth charts
If you run a small, local business, chances are you’ve got some sort of a website. You may even be set up to sell a few products online, here and there. But you may not have tapped the massive potential of building out a real e-commerce arm for your business. And you might not realize just how easy — or how lucrative — it’s become for small, local businesses to move online.
If you’re still mostly bound to brick-and-mortar, it’s time to consider a change. Here are some low-risk, high-reward ways to successfully scale into the digital world.
As noted, you may already have a great website or even a decent online store. But it’s likely you could be doing much more to make it competitive with other e-commerce sites in your niche.
If it isn’t already, your site should be hosted on—or at least integrated with—a platform that’s designed for e-commerce, like Shopify, Squarespace or BigCommerce. Make sure it’s easy to use, intuitive to navigate and has a clean, simple design. It might be worth having a specialist conduct a user experience audit.
Perhaps most importantly, ensure your site is optimized for mobile users. Remember that 91% of Americans ages 18 to 49—likely the bulk of your target customers—shop on their smartphones. Most web design platforms let you convert your desktop designs to mobile layouts almost automatically. But you still need to make sure the mobile version is attractive and usable.
Getting good product reviews on your site and on other platforms can do wonders for your business. Consumers don’t trust brands, but they trust other people’s experience of a brand or product. Positive reviews can be just as effective as hearing directly from people they know in real life.
Smallbiz Technology recommends that businesses feature reviews and testimonials directly on their website and social media channels, natch. But they also note that positive reviews on third-party sites like Google, Yelp, and Trustpilot can generate tons of traffic.
To encourage customers to write reviews, they suggest offering customers free products or discounts as incentives. But note that if you sell products through a marketplace like Amazon, exchanging gifts for reviews could violate their policies. Alternatively, you can reach out and simply ask customers who like your product to take a moment to do a short write-up.
Your customer won’t buy from you online if you don’t make it as easy for them as shopping on Amazon. It’s imperative to offer fast, free or cheap shipping and eliminate any trace of friction from the shopping experience. The smallest details can send a customer packing even when they were already pretty serious about making a purchase.
Whatever you do, don’t force your customers to create an account before checkout. That’s one of the fastest ways to turn a ready-to-buy customer into one who’s just closed your site’s browser tab. It’s also vital to offer a number of convenient payment options, including PayPal, Apple Pay and Google Pay in addition to the standard credit cards.
Packing and shipping your own orders in-house may save you money when you’re just starting out. But as a small business, you don’t have the infrastructure to keep doing that at scale. Eventually, you’ll need to contract with a third-party fulfillment service. Shopify offers its own in-house option and maintains a list of other recommended fulfillment services you can try.
One advantage you have as a small local business owner is that you already have a devoted following. You’ve got people in your corner who support your business and want to see it flourish. If you create content that speaks to your biggest champions, they’ll be excited to share it with others.
Email marketing remains one of the best ways to drive engagement and sales for your brand. After all, it’s one of the few forms of brand communication that customers actually enjoy receiving. Still, carefully consider your content—you don’t want to irritate your loyal fans with ads for the same old products. Use email to make announcements, share informative blog posts or offer valuable discounts. That’s the kind of content your devotees will be happy to pass along to their friends.
Social media is likewise a powerful tool for bonding with current customers and reaching new ones. This is especially true if you actively engage with users, such as responding to Instagram comments or stitching videos on TikTok. Partnering with influencers through a platform like Grin or Afluencer could also help drive engagement.
As recently as five or 10 years ago, small businesses had to transition to e-commerce on their own. They needed their own systems for everything from packing and shipping to handling customer service to accepting credit card payments.
All that has changed. Now, there’s an easy, affordable third-party solution for just about any e-commerce problem you can think of. You’ve already got a small, likely overworked staff. Don’t make them—or yourself—create systems from scratch when there’s probably a ready-made solution a short Google search away.
A real estate attorney is required at closing in many states. Even if your state doesn’t demand that a real estate lawyer appear, having a legal professional representing your interests is usually a good idea.
When you’re investing in real estate, finding the right lawyer is essential. Your real estate attorney assists you in navigating every aspect of the process. If legal issues arise in real estate transactions, you have someone who knows real estate laws fighting for you.
As with doctors, lawyers have their own areas of specialization. While some attorneys are generalists, when buying and selling property, you should hire a true real estate lawyer to advise you and protect your interests. Such an attorney is well-versed in property law concerning state laws.
If you are considering investing out of state, look for attorneys licensed to practice in other states.
A real estate attorney represents you in all matters related to real estate law. Your real estate attorney’s role may include the following tasks:
Even simple real estate transactions can involve substantial paperwork. More complicated situations only increase the sheer volume of legal documents.
For instance, a real estate lawyer arranges with a title company to conduct a title search. The property must have a clear title with no third-party claims. Once the title company provides a report, your real estate attorney reviews it and works with your mortgage lender or other relevant parties if any title issues exist.
Ensuring all legal documentation is correct is a primary role of real estate attorneys. Real estate is likely your biggest investment. Working with a licensed attorney is critical.
During the review process, your lawyer should catch any errors in closing and other documents involved in the real estate transaction. The start of the deal is the real estate contract.
Often, a real estate agent draws up the initial contract. Real estate lawyers must review the purchase contract carefully, as it sets forth the buyer and seller’s obligations. The attorney then drafts riders, also known as amendments, for their clients’ needs. These amendments may involve financing and appraisal contingencies, personal property included or excluded, and unique provisions affecting the property in question.
Real estate transactions don’t always run smoothly. Perhaps there is a lien on the property, a title issue, or a boundary question. Your real estate lawyer works to resolve these disputes so you can move forward with your real estate transaction.
Using the right business formation for investment properties protects you from liability. Your real estate lawyer will work with you to determine whether an LLC, partnership, or some other type of business entity is best for your legal needs.
A real estate attorney may advise you on mortgage financing and when to refinance your mortgage loan. They may work with a mortgage lender or commercial real estate lender to help with financing.
Real estate attorneys also guide you on related legal matters, such as tax implications when selling property.
Real estate lawyers assist clients in the structure and management of their equity and debt, focusing on maximizing their returns.
Your real estate lawyer should draft a strong lease agreement for tenants to avoid potential disputes. All parties benefit from a clear lease agreement that protects their interests.
You could simply use a boilerplate lease agreement and save some money as a landlord. That’s a penny-wise and pound-foolish, as a professional with a thorough knowledge of real estate law ensures your real property is as fully protected as the law allows.
When a tenant complains, you must know whether that complaint is legitimate according to the terms of the lease or applicable local, state, or federal law. Your lawyer will explain landlords’ and tenants’ legal rights and responsibilities and whether the complaint breaches the lease agreement.
The attorney will act to resolve the complaint before it escalates into costly litigation.
Real property ownership means paying property taxes. Your current property taxes may not reflect the realities of the market. Your lawyer can advise you about filing a property tax appeal to fight an overvalued assessment.
When you partner with a real estate attorney for your investment properties, they can handle virtually all of the process. That leaves you, as the investor, more time to concentrate on obtaining a good return on the investment.
If problems arise before, during, or after the purchase of a property, you can rely on your real estate lawyer to sort them out.
Real estate attorneys will advise you about backing out of a deal and avoiding a costly mistake.
The bottom line is that the real estate attorney you hire is always working to protect your best interests.
A real estate attorney’s services may be inexpensive, but remember, you get what you pay for. How much you can afford in legal fees is one of the first things you should determine when considering hiring a lawyer for your investment team.
A real estate lawyer may charge you hourly or flat rates. Remember that while a more experienced real estate attorney will charge higher fees, their expertise is worth it.
You can always find a real estate attorney online. Googling is a great way to get started, but the goal is to find a good real estate lawyer, not an average attorney.
Your best bet is often asking for recommendations from those in the real estate industry, such as a real estate agent or fellow real estate investor. They know the best real estate attorneys in your area. Friends or family with real estate experience are another good source of advice.
Look for lawyers with experience in your particular field. For instance, if you’re investing in commercial property, look for attorneys specializing in that domain. Some real estate lawyers are generalists, doing whatever real estate work comes their way. Because the various realms of real estate investing are so different, these attorneys are more likely to make mistakes. They are not necessarily experts in real estate law.
Rather than go with a larger firm, check out smaller practices. You will work directly with one attorney rather than being delegated to less experienced associates at larger firms.
Conduct interviews before deciding on whom to hire as a real estate attorney. You seek a long-term professional advisor, so you must know exactly what to expect. Ask the following questions:
Legal fees aren’t cheap, but they are far less expensive than losing a property due to an avoidable legal problem. After all, real estate investing aims to maximize profits while reducing risks. The right real estate attorney helps to fulfill both objectives.
By hiring a real estate attorney as part of your investment team, you should save money over the long term. That’s because the work of the attorney you hire can limit future problems.
Once a real estate attorney is hired, you have someone to advise you on every aspect of your investment strategy while protecting your interests. Smart investors know how valuable the services of a lawyer are when dealing with complicated legal matters pertaining to property.
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Note By BiggerPockets: These are opinions written by the author and do not necessarily represent the opinions of BiggerPockets.
Why You Need a Real Estate Attorney on Your Investment Team Read More »
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Despite a sizeable elderly and disabled population in the U.S., there is not enough affordable housing to accommodate those individuals.
“For millions of Americans, adequate housing is more of an aspiration than a reality,” said Sen. Bob Casey, D-Pa., who serves as chairman of the Senate Special Committee on Aging, at a Thursday hearing.
“In particular, too many older adults and people with disabilities cannot afford accessible housing,” Casey said.
About 26% of the U.S. population — or about 61 million people — have a disability, Casey said. At the same time, 1 in 5 Americans will be older than 65 by 2030.
Accessible homes — which offer specific features or technologies — can help older and disabled individuals continue to live in their own homes or in communities they choose. That may include wider doorways, lower counters and sinks and accessible bathrooms.
Yet less than 5% of the national housing supply is accessible, Casey said. Moreover, less than 1% of housing is available to wheelchairs.
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Leaders on both sides of the political aisle agree the shortage of adequate housing is a problem.
The U.S. is between 3 million and 6 million houses short of what the market needs, noted Sen. Mike Braun, R-Ind., ranking member of the Senate aging committee.
The problem has been complicated by state and federal regulatory burdens, higher infrastructure costs, supply chain constraints, work force shortages and increased materials costs due to inflation, Braun noted.
“Sometimes we’re at odds in terms of what we should do, but there’s always practical legislation in the middle, and I’d hope that we can have those conversations that get us there,” Braun said.
Suggestions for improvements emerged during Thursday’s hearing.
For Dominique Howell, a disability housing advocate based in Philadelphia, finding an adequate place to call home that can accommodate her disability has been a struggle, she testified at Thursday’s hearing.
Five years ago, Howell said, she was “wrongfully evicted” from her home, along with her daughter, who was 3 years old at the time, and her grandmother.
Howell was initially prohibited from entering a shelter, due to the home- and community-based services she receives. After finding legal representation, she was able to enter the shelter, though she slept in her power wheelchair for a year.
Today, Howell and her daughter have found a home. However, it still has accessibility challenges, she said. When the elevator breaks, she and other residents are sometimes forced to spend weeks in their homes.
“Housing is a human right and unfortunately for too many Americans, especially people with disabilities, are not being equally granted the right of housing they can afford that is accessible,” Howell said.
To address the situation, Pennsylvania and other states should “develop affordable accessible housing to match the needs of residents,” she said.
Retrofitting older homes to update them and improve accessibility may be one solution, said Jenny Schuetz, a senior fellow at Brookings Metro. However, updating millions of homes is an “enormous task” that would require both private and public capital, she said.
Making homes more affordable for elderly and disabled populations is crucial, said Allie Cannington, senior manager of advocacy at The Kelsey, a disability-forward housing developer.
“For people with disabilities who rely on Supplemental Security Income and other forms of federal assistance, there is no U.S. housing market where rent is affordable,” Cannington said, an issue that affects more than 4.8 million people with disabilities.
The U.S. has not built enough housing since the Great Recession to keep up with job and population growth, noted Schuetz. To fill the gap, the U.S. needs about 3.8 million additional homes nationally, according to estimates, she said.
Local markets are also feeling the effects. In Indiana, for example, 18,000 to 22,000 new houses per year are needed in order to meet average demand, according to Rick Wajda, chief executive of the Indiana Builders Association. Yet the state only reached those levels of production in 2020 for the first time since 2007, he said.
To reverse the “underbuilding” trend that has been prevalent since the Great Recession, there should be financial incentives for local governments to revise zoning to allow for more kinds of structures, Schuetz said.
Regulations may be relaxed to shorten delays that often lead to increased building costs, according to Wajda. Permit, hookup or impact fees, as well as development and construction standards, may get in the way of development, he said.
Restrictive building codes may also add thousands of dollars to a house’s cost, thereby adding thousands of dollars to the cost of a house, Wajda said.
“All regulations should be examined for their impact on housing affordability,” he said.
To address the shortage of accessible and affordable housing for vulnerable populations, Casey has proposed a bill that would require a percentage of homes built through the Low-Income Housing Tax Credit Program to meet accessibility standards.
It remains to be seen whether the proposal will receive the support needed to become law.
Less than 5% of housing is accessible to older, disabled Americans Read More »
Although filling out IRS tax forms each year isn’t any fun, it is a necessary part of real estate investing. Thankfully, the tax forms for rental properties aren’t complicated. If you are investing as a member of a partnership or as an S corporation, you will need to report your earnings on Form 8825.
Making sure you fill out Form 8825 correctly is vitally important. Accurate financial reporting is required and could help you determine if you qualify for certain tax deductions.
IRS Form 8825 is a special tax form specifically for reporting the rental income and expenses of a partnership or S corporation. The form allows you to record the financial information for eight different properties. If you have more than eight, the additional properties can be reported on a second Form 8825.
Form 8825 is not to be used by sole proprietors or single-member LLCs. If you are filing as a sole proprietor or single-member LLC, you will record your rental real estate activities on Schedule E (Form 1040), which is used to report supplemental rental real estate income and expenses.
Form 8825 reports the rental income of partnerships or S corporations in the United States. Suppose your S corporation owns two apartment buildings, a self-storage facility, and three single-family rental homes. In that case, you will need to include the income and expenses of each property on the form.
If you are reporting partnership income, Form 8825 should be attached to Form 1065 (U.S. Return of Partnership Income). If you report S corporation income, Form 8825 should be attached to Form 1120S (U.S. Income Tax Return for an S Corporation).
It’s important to point out that Form 8825 can be used if your partnership is an LLC, but it doesn’t have to be used for all LLCs. A single-member LLC, for example, would use Schedule E (Form 1040).
The IRS only taxes rental real estate activity on the net income earned. Net income simply refers to gross income less expenses. To derive the taxable net income, Form 8825 includes lines to enter certain expenses, which include:
If you aren’t sure whether a particular operating expense qualifies, check the Internal Revenue Service website. You can also consult a tax professional like a CPA to clarify the issue.
Although IRS form 8825 may appear somewhat intimidating when you first look at it, it’s not complicated. The form is logical and easy to follow. The required information for each line is clearly labeled, and the instructions are included when you download the form.
The best way to understand how to fill out Form 8825 is with a practical example. Let’s say you are in a real estate partnership that owns the following properties:
Because you are in a partnership and your rental real estate activities are not from a sole proprietor or single-member LLC, you must complete Form 8825 to report your rental real estate income.
After filling out the name and EIN number on Form 8825, you will enter each property’s physical address and the number of days it was used as a rental in rows A-H. Be sure to list each of the single-family homes and self-storage facilities separately.
You will then enter your gross rental income and expenses for each property in columns A-H to obtain your net gain or loss. Next, enter the income or loss from Schedule K-1 on line 20a. Enter the name of each partner and the EIN, and then combine lines 18a-20a. You will then enter the result on either Form 1065 (for partnerships) or Form 1120S (for S corporations).
That’s all there is to it. Although many tax forms have earned reputations for being difficult and time-consuming, Form 8825 is simple and easy.
Many real estate investment partnerships form limited liability companies (LLCs) to protect their personal assets in case they are sued. If someone slips and falls in a rental unit, the owner’s bank accounts, homes, and other personal assets are protected if the suit is successful. LLCs can be either single-member (one owner) or multi-member.
Because Form 8825 is only for partnerships or S corporations, you will only list LLCs on the form that are either partnerships or S corporations for tax purposes. If you have a single-member LLC, rental income will be reported on Schedule E (Form 1040).
Form 8825 and Schedule E (Form 1040) are similar insofar as they are used to report rental real estate income. They are, however, two separate and distinct forms.
The primary difference between the two forms is that Form 8825 is used if you declare on behalf of a partnership or S-corporation. On the other hand, Schedule E is used to report an individual owner’s earnings. Schedule E is also used to report other forms of supplemental income.
The process for reporting rental real estate income and expenses on Schedule E is similar to Form 8825. You must include the physical address of each property and its type and the number of days it was used as a rental. You will then enter your gross rental income and itemize your expenses to determine your profit or loss for each property.
Schedule K-1 is a form you will need to fill out to obtain important information included on Form 8825. The form determines the net income or loss from rental real estate activities from partnerships, estates, and trusts. Instead of reporting the full income or loss, Schedule K-1 determines each partner’s share.
Let’s assume a partnership has four members and earns $200,000 annually. Each partner will complete a Schedule K-1 to report $50,000 in individual earnings (assuming the profit is split evenly). This amount is then transferred to line 20a of Form 8825.
If you are a sole proprietor or a single-member LLC, you don’t have to worry about Form 8825. If your rental real estate activities are part of a partnership or your business is an S corporation for tax purposes, however, you must include the form when submitting your income taxes.
Thankfully, Form 8825 isn’t complicated or difficult to understand. It can be filled out in just a few minutes, which allows you to finish your taxes and get back to doing what you do best—closing more deals and growing your portfolio.
Dreading tax season?
Not sure how to maximize deductions for your real estate business? In The Book on Tax Strategies for the Savvy Real Estate Investor, CPAs Amanda Han and Matthew MacFarland share the practical information you need to not only do your taxes this year—but to also prepare an ongoing strategy that will make your next tax season that much easier.
Note By BiggerPockets: These are opinions written by the author and do not necessarily represent the opinions of BiggerPockets.
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Survival
In the dynamic corporate landscape of that will be 2024, leaders’ and founders’ roles have evolved significantly. Leading a company is more than just about managing teams or bottom-line growth. Leaders must exhibit adaptability, resilience, and an empathetic understanding of their teams while maintaining mental and emotional health. Their responsibility to their mission, vision, and team goes far beyond their profit
Seeing the Future
Leaders today must navigate a world transformed by global uncertainties, technological advancements, changing business models, increased regulatory scrutiny, and a renewed focus on sustainability and corporate social responsibility. Leaders have a lot of minefields to navigate today. However, these challenges also serve as catalysts for personal growth, leadership development, and increased resilience, equipping executives with the necessary skills to thrive in complex environments.
These challenges are coupled with the pressure of maintaining a company’s financial health and employee well-being, which can often have significant implications on an executive’s mental and physical health. Executives and leaders often feel the pressure to maintain an image of strength and competence, which can lead to reluctance in acknowledging or seeking the help and support they need. For all of these components to be on their shoulders, our leaders must have the resources, skills, and knowledge to thrive and adapt in our ever-changing future.
10 Areas of Focus for Survival
1. Prioritize Your Mental and Physical Health: Leaders must prioritize their mental health and physical health to stay resilient. According to the American Psychiatric Association in workplace statistics, employers throughout America lose $44 billion because of insufficient resources for mental health problems. Regular exercise, balanced nutrition, sufficient rest, mindfulness practices, and consultations with mental health professionals can improve stress management and overall mental well-being.
2. Embrace Continuous Learning: With technology rapidly transforming business operations and models, leaders must commit to lifelong learning. Carving out time each day to stay up-to-date with industry trends, emerging technologies, and evolving consumer behavior is no longer a luxury—it’s a necessity. Aside from daily news feeds, Online courses, industry-specific webinars, workshops, and professional networking events are essential resources.
“The important thing is not to stop questioning. Curiosity has its own reason for existing.” —Albert Einstein
3. Cultivate Emotional Intelligence: Emotional intelligence is crucial for effective leadership. It allows executives to perceive, use, and manage their emotions as well as their team members’ emotions. EQ is so effective that the overall success of the business can improve by 37.2% within the first year. Therefore, fostering an environment of empathy, trust, and effective communication directly impacts the bottom line. Regular introspection, mindfulness practices, and emotional intelligence training can enhance these skills.
4. Promote Diversity and Inclusion: A diverse and inclusive work culture promotes innovation and strengthens the company’s reputation. Leaders should strive to create a work environment where employees of all backgrounds feel valued and heard. Training on unconscious bias, implementing fair hiring practices, and promoting diverse voices in decision-making can enhance inclusivity.
5. Foster Innovation and Agility: In a rapidly changing business environment, leaders must foster a culture of innovation and agility within their teams. Encourage creative thinking, be open to new ideas, show vulnerability, and facilitate an environment that sees failures as opportunities for learning.
6. Invest in Employee Well-being: Employee well-being is intrinsically linked to company performance. Executives should promote initiatives for physical health, mental health, and work-life balance. Flexible work schedules, wellness programs, and open dialogues about mental health can contribute to a healthier, more productive workforce.
7. Prioritize Sustainability and Corporate Social Responsibility (CSR): Leaders should incorporate sustainability and CSR into their business strategies. This enhances the company’s global influence and reputation, risk mitigation, attracts elite performers, and appeals to modern consumers and investors who prioritize companies with firm commitments to sustainable practices.
8. Nurture a Robust Network: Building a strong network of trusted peers, mentors, and advisors can provide critical support and guidance. This network can be a breeding ground for synergy and ingenuity as well as a sounding board for ideas, a source of valuable insights, and a form of reassurance during challenging times.
9. Develop Crisis Management Skills and Plan: If we have learned anything over the past few years, being prepared for a crisis of any magnitude is critical. Crises are inevitable in an uncertain business climate. Companies that do not have a crisis management plan run the risk of harming employees, reputation damage, financial loss, and legal issues. Leaders must develop robust crisis management skills, focusing on proactive strategies, effective communication, and recovery plans.
10. Be Proactive on Social Issues: Weave your corporate values and mission around your position on today’s social issues before you are forced to take a position publicly. In other words, take a position on DEI. Take a position on Climate Change. That way, you can refer to your company’s values/mission/policies and not make up a position when under fire. Taking the time to develop policies and positions that align with your values and that your employees can support will save you time and energy in the long run.
The Corporate Ecosystem’s Role
The corporate ecosystem plays a critical role in an executive’s survival. A supportive organizational culture that encourages work-life balance, professional development, and open conversations about mental health creates a more resilient leadership team. Mental health days, flexible work schedules, professional development opportunities, and accessible mental health resources can significantly contribute to maintaining a leader’s mental and emotional health.
Leading a company in 2024 will be a demanding yet rewarding venture. Executives can skillfully navigate their challenges by adopting this comprehensive survival guide—emphasizing continuous learning, emotional intelligence, diversity and inclusion, innovation, employee well-being, sustainability, networking, crisis management, and mental health.
Leadership in the modern corporate world is not just about guiding teams—it’s about setting the right example of balanced success. And to thrive in this ever-evolving landscape, executives must prioritize their company’s progress and personal well-being. If you take these recommendations to heart and give them focus and attention you can not only survive this year but thrive.
Contributing to this article: Mandy Morris and Elizabeth Hocker
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