True Square Financial
Dan Mahoney founded True Square Financial in 2017. After more than 15 years in the financial services industry, Dan knows that fee-only financial advice, delivered by an expert, can meaningfully improve most families’ lives. Unfortunately, this kind of high quality, individualized advice has historically been restricted to only the wealthiest families. He built True Square Financial around the idea that technology now makes it possible to deliver highly customized financial advice to a larger number of families at a reasonable cost.
Dan is a CERTIFIED FINANCIAL PLANNER™ professional. He is also the proud father of triplets (two girls and a boy) who started kindergarten in 2016. When he's not wrangling children or nerding out on personal finance and investments, Dan can be found playing squash, smoking meat on the Big Green Egg, or doing something outdoors. His wife, Tucker, is a coastal engineer at FEMA who helps coastal communities assess and mitigate the risk of flooding. They live in Atlanta, Georgia.
Dan earned an A.B. in economics from Dartmouth College and an M.B.A. from the Darden School of Business at the University of Virginia. He is a member of the National Association of Personal Financial Advisors (NAPFA) and the Financial Planning Association (FPA).
BA, Economics, Dartmouth College
MBA, Business Administration, University of Virginia, Darden School of Business
If you've already sold your son the house, there's not much you can do at this point. If you haven't, you could gift the house to your son instead of selling it to him. This would eliminate the capital gain entirely. There are much cheaper ways to help your son build his credit (e.g., adding him as an authorized user on your credit cards).
I can't answer this definitively for you - you should get legal advice. But here is some context for how to think about it.
When Philip Gibson's answer referenced the Series 65 exam, he was talking about the exam you need to pass to be licensed as an Investment Adviser Representative. Will you be acting as an investment adviser? If so you will need to register and be regulated as one. If not, you won't. Some people act as "financial coaches" without registration, but they must be careful that their advice doesn't fall under the regulatory definition of "investment adviser." It seems to me that "securities" is an important word in the definition below as pertains to your potential business.
From the SEC website:
"Subject to certain limited exclusions discussed below, Section 202(a)(11) of the Advisers Act generally defines an "investment adviser" as any person or firm that: (1) for compensation; (2) is engaged in the business of; (3) providing advice, making recommendations, issuing reports, or furnishing analyses on securities, either directly or through publications. A person or firm must satisfy all three elements to be regulated under the Advisers Act."
Based on what you know now, it's not a bad time to invest in equities. Stock prices may go down in the coming months, but they may also go up. You have to make investment decisions before you know what is going to happen.
One way to look at it is: With your long investment horizon, the timing of your initial contribution doesn't matter much. Short-term fluctuations are unlikely to affect the end result, especially if you continue to contribute to the IRA over time.
Another way to look at it is: Where else are you going to put the money? As you point out, equity valuations are historically high, but the alternatives aren't a lot more attractive (e.g., low bond yields, high real estate prices).
There are two separate, but related, questions here.
The first one is what kind of state law entity to create. Each state's laws allow for a variety of entities to be created. The most common entity types are corporation, partnership, LLC and trust. LLCs are popular because they are often inexpensive to register, they are flexible in how they can be structured, and they often may require fewer formalities than corporations (e.g., annual meetings, minute books). It's hard to give more specific advice because each state is different. You should have an attorney help you with structuring the entity correctly.
The second question is how the entity you create will be taxed. At a high level the options are: Disregarded entity (where the IRS does not view the entity as being separate from its owner); partnership; "C" corporation, and "S" corporation. Note that there is no "LLC" tax treatment. If you choose to form an LLC you will have to elect a tax treatment based on the circumstances of your case. If you are the sole member of the LLC (i.e., the only owner) then the default tax treatment will be disregarded entity. If you need to make an election, you'll have to do a bit of fortune telling to know what the economics of the business will look like in the future. If this is always going to be a small side-hustle, then disregarded entity treatment might be ok, and you'll just report the income and loss of the business on Schedule C. If you think it might grow to have significant profits, an S Corp election might reduce your self-employment tax.
I'll second the recommendation that you build up some cash reserves before doing anything. A common failure mode in real estate investing is sinking all your available cash into a deal and then not having enough liquidity to pay for unexpected but typical costs, like vacancy or repair. This is especially true for beach rentals, where you have a long off season. The bank still expects their mortgage payment each month, whether or not you have any revenue coming in.
The other important consideration is that real estate investing is hard work. Operating a vacation rental is like runninng a small business. Your skill and effort will be an important factor in your success or failure. Luck matters, too, but this is very different from investing in stocks and bonds.
To be clear, rental properties can be great investments. They provide a tax-efficient income stream and can add diversification to a broader investment portfolio. Just make sure you have realistic expectations and cash reserves before you buy anything.