Surviving Self-Employment

Ellen Hendrix Confronts What It's Really Like To Make It On Your Own

believes Hendrix can qualify for programs that offer 100% financing and no money down. Once she finds a property and flips it, Hendrix ought to pay off the car note, the credit card debt, and begin contributing regularly to her IRAs to build up retirement income.

Set up a single member limited liability company to hold real estate. Laylock says Hendrix needs to separate her video editing business from her real estate ventures. “You don’t want to commingle that stuff,” he cautions, noting that she may need to show the records of her real estate business in order to qualify for additional credit in the future.

An L.L.C. will shield Hendrix’s personal assets. She currently owns the investment property as a sole proprietor. If something were to happen–say a tenant slips and falls–that person could come after her home, car, and other assets in a lawsuit. An L.L.C. is limited only to those assets held by the company. Moreover, she could enlist her mother or other investors to help purchase real estate down the road. She would simply have to negotiate partnership interest, whereas with an S corporation or regular corporation, an investment is in proportion to the number of shares or stock ownership.

Create an estate plan. Since she is single, it is very important that Hendrix set up her estate documents to guard against disaster. She needs a power of attorney for healthcare, assets, and medical directives. She should also have a living will with an irrevocable living trust. This way, Laylock says, she will have designated specific people whom she trusts to safeguard her person or assets should tragedy strike. Equally important, she needs to purchase disability insurance once her cash flow improves.

Financial Snapshot: Ellen Hendrix

HOUSEHOLD INCOME

Full Time $35,000

ASS
ETS

Checking $5,000
Savings 4,000
U.S. Savings Bond 25
Roth IRA 3,500
Rollover IRA 12,200
Primary Home Market Value 85,000
Rental Home Market Value 57,000
Car Market Value 9,000
Total $175,725

LIABILITIES

Mortgage Primary Home $62,500
Mortgage Rental Home 37,000
Home Equity Line of Credit 9,000
Credit Card Debt 2,500
Auto Loan 13,000
Total $124,000
NET WORTH $51,725
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