Why I Am Considering Legacy Education Elite

Question

Undoubtedly everything can be found for free on the internet, books, and what have you. However, I really want to know all I can about real estate and let my questions and doubts dissipate.

For example, I remember when I knew absolutely nothing about the stock market, not even what a share was, I decided to buy a course that covered almost everything from what a candle stick was, to advanced options strategies, Forex, etc. Though it was costly, it was worth it to me because it put to rest all the questions I had about the stock market and I am also no longer swayed to buy a gurus course on trading. Not saying I know everything, but definitely enough to know that I don’t really want to do that for a living.

Right now with Real Estate, I don’t really know all there is to know. Therefore, I feel like just going all in and paying someone to teach me and if in the end I don’t make any money or decide it’s not my thing, then I can put it behind me and no longer have to wonder “what if” or be curious about another guru’s course.

I’ve been lurking for a long time now in the real estate field, just learning by reading books, attending seminars, and browsing bigger pockets, even purchasing some courses and paying for classes but nothing major. I feel like I’m learning very slow and also not really sure what’s best for my situation. I bounce around from wanting to rent out, fix & flip, wholesale, etc. and thus never get anything done. There are some properties that I am already preapproved to buy and I am tempted to purchase them just to get started but I know if I did, I would only be counting on appreciation to make money which I’ve learned to not lean too heavily on.

I know do it yourself works for some and for a long time I thought I can go this route too but months have turned into year and I still have not gotten started. I really want to just get started and pay for mentors rather than trying to figure out everything myself. As I said before, if I end up paying a lot and in the end I don’t make any money, at least I can put my mind to rest about this whole real estate thing. I would sincerely like to succeed in it though. Any thoughts are welcomed as my mind is not fully made up yet about what I’m actually going to do.

George Blower · Answer

Account Closed

Regarding using your retirement funds to invest in real estate (either via a Self-directed 401k or Self-directed IRA), here are some considerations.

1. If you purchase via an IRA (as opposed to a 401k), you will need to open an IRA account at a specialty trust company which allows for investments in real estate. Unless you invest via an LLC owned by the IRA, you will not have checkbook control over the funds which means you need to run transactions (e.g. income, expenses, etc.) through the trust company who will need time to process the transactions and generally charge fees for each transaction. On the other hand, keep in mind that there are costs associated with maintaining an LLC (such as the $800 annual franchise tax in California).

2. If you are self-employed with no full-time employees, you can set up a Solo 401k through a 401k provider which allows for investing in real estate. In that case, you can simply have the account at a bank or brokerage where you will have direct checkbook control.

3. In either case, all of the income and expenses will need to flow in and out of the retirement account.

4. In either case and if you will use debt to acquire the real estate, it must be non-recourse financing. See more at the following link: https://www.biggerpockets.com/blogs/9552/70408-ira... If debt-financed real estate is acquired via an IRA, any income attributable to such investment will generally be subject to unrelated debt finance income tax.

5. In either case, you can't live on the property or otherwise use it for personal use.

6. In either case, you can't work on the property as it must be a passive investment (e.g. you must hire someone to fix the toilet and can't pay the expense with non-retirement funds).

7. In either case, you must purchase/sell real estate from/to an unrelated person and the real estate can't be titled in your name personally (e.g. in the case of the 401k, it would be titled in the name of the 401k and you would sign as trustee of the 401k).

8. In either case, you should verify that you are eligible to transfer the funds from your existing retirement account (e.g. if the funds are in your current employer 401k, you will likely not be able to transfer until you quit your job).

Justin Windham · Answer

Account Closed

That's correct, disqualified persons are lineal ascendants as well as lineal descendants and their spouses.

Despite how strange some of the rules may be, it is wise to keep in mind future compliance and not focus solely on the present. This sometimes applies to determining Solo 401k eligibility too. We've had interested parties that had self-employment activity and were considering setting up a plan, but they were unsure how long their self-employment activity would last. That needed to be taken into consideration.

Account Closed · Answer

There is legitimate stuff that is inaccessible unless one pays, but most of it is available only to the wealthy ("the rich really do get richer").  If you can't find a thread or podcast about a topic related to real estate on BiggerPockets, it's either an investment scam or it's something your team of lawyers and accountants will tell you about when you are wealthy enough to afford their high-priced talent.

With the Internet, more legitimate choices are available to retail investors.  For example, you can find plenty of information on BiggerPockets about how to own real estate in your retirement account or earn a high rate of interest paying other people's delinquent property taxes.  Twenty years ago, these alternatives were "little known secrets" previously available only to the rich.  Making these types of investments does take skill and they get expensive taxwise if you mess things up.  But you get to decide if you want to pursue them.

With crowdfunding made legal by the JOBS Act or 2012, even more choices are available to retail investors today.  Threads on BiggerPockets discuss some of these asset classes (many are outside the realm of real estate).  Whether you want to invest in any of these types of assets is another matter, but they are available to you if you choose to pursue them.

Account Closed · Answer

I have the same high-class problem you have in terms of I can't figure out what I want to do next with my life.  The best solution I've found is to do nothing except continue to roam the Internet for ideas and do what-if planning.  Keeping a journal of ideas is a good way I've found to keep track of this search because you never know when one of them is going to be the answer to a problem you have down the road.

You'll know when the high-class problem is no longer high-class when you have this urgency.  The first rule of engineering (my background) is when something isn't broken, don't fix it.  But when something breaks, you have to take quick action and fix it.  Doing all this legwork ahead of time speeds up the implementation of your life repair (although it never seems this way when you are in the middle of the crisis).

In my case, my problems turned out to be a career change (sometimes the best answer is to move on, even when you're not quite sure what you want to do next) and my midlife crisis.   Because my bank account was running out of cash fast in these situations, I didn't have the luxury of dawdling.  Focused action was required.  Luckily, I had a copy of The Greatest Secret in the World by Og Mandino in my bookshelf.  I bought the book earlier in my life because it seemed like something I might be able to use at some point in the future.  But is was the low-cost solution.  I would never pay big money to attend prestigious training events because I would never know what or when my payback would be.

So count your blessings if you are still roaming around looking for something to do.  To be ready should something ever hit the fan, keep building up your savings (a high-yield savings account paying a 2% rate of interest is one idea) and avoid investing fecklessly in something you're not sure about.  You'll have resources at your disposal to help you get through the crisis when it happens.

BTW, the BiggerPockets Forums have been a source of wealth to me.  I've pretended to be a landlord by immersing myself in the questions asked and wondering how I would deal with them if they were my problems.  I've come to the conclusion landlording is not for me.  I can get exposure to real estate other ways (REITs and crowdfund real estate, for example) without having to deal with these issues myself.  Things are easier to get into than get out of.  I've saved myself a lot of money and my tenants (metaphorically speaking) a lot of grief.

Nick C. · Answer

Why not get a job in real estate? You can learn and you get to make money doing it.

Real estate is a job, it's a grind. I never understood why people would do the job and pay someone else. All the jobs I've ever had I've worked and gotten compensation for it, not the other way around.

Is it the inspirational music, the rags to riches success stories, the images of someone sipping mai tais on a beach while the checks keep rolling in? That's not real estate, that's what the gurus are going to be doing using your money.

George Blower · Answer

@Roger Steciak

1) Correct that parents and children are out but siblings are not disqualified persons.

2) I agree that relationships can change and so the daughter could not move into the apartment with the future son in law.

Juan Santos · Answer

@Chris Eidson One subject I’m interested in that they offer is Subject To. I’ve searched Bigger Pockets topics about it and the newest thread is years old and very minimal. Do you happen to know why it’s not a popular subject on this website? Also, my local library has no books at all on Subject To. I resort to YouTube videos and they speak about it in a broad sense but if I want to get my feet wet in it or know the knitty gritty behind structuring contracts and the legal stuff, I have to pay. Substantial amounts too.

But from what I learned about it so far makes me wonder why this is not a more popular choice to acquire real estate since your credit is not at risk and also not much money down is needed except enough to catch up on what’s behind and whatever is agreed upon. Why tie yourself up with traditional loans when options like these are available? Anyway, I kind of went off topic here but some stuff really does seem unaccessible unless one pays. And I’m not complaining about that either.

Account Closed · Answer

Many investment gurus follow the advice of PT Barnum ("there's a sucker born every minute") and WC Fields ("never give a sucker an even break").  For example, the book Where are the Customers' Yachts was written decades ago.  The book is about investment gurus on Wall Street who showed prospective clients their own yachts.  When a prospective client asked to see the yachts of their customers, there was nothing to see because their customers couldn't afford to own yachts.  The gurus had taken all of their money in the form of high fees.

On the other hand, it's OK to outsource some of your wealth-building tasks to others.  Many BiggerPockets threads discuss the benefits of using a property manager rather than trying to be a jack or jill of all trades and trying to do everything yourself.  For those interested in commercial real estate, Congress created REITs in 1960 to allow small investors access to this asset class.  However, Warren Buffett said you can do better with your own commercial real estate portfolio (once you get big enough to where it makes sense to hire your own property managers).  Crowdfunding in recent years has made it feasible for small investors to get exposure to asset classes previously available only to rich folks.

Benjamin Graham made the point in The Intelligent Investor when he observed either you have to know how to do it yourself or you have to know how to hire the right people to do it for you.  But either way, skill is required.  I'm skeptical a high-cost education seminar is going to teach these skills.  Such a seminar might get people fired up, which is a good thing, but I've found less expensive ways to learn these skills.  For example, I keep my exposure low ("toe dipping") so neither a loss nor a gain will move the needle on my net worth.

A "real estate strategist" once suggested I move all of my money from the stock market to direct real estate.  When I refused to do so, he stormed out of the room saying I would "come around."  I came around to the conclusion he was trying to swindle me out of my life savings.  He was more interested in using my money to build his wealth than to build my wealth.

Account Closed · Answer

I've read where you can't rent an IRA home to your parents or children, but brothers and sisters are OK.  Is this correct?

Now for a corner-case scenario:  Your property manager rents your IRA home to a stranger who subsequently meets and marries your daughter.  Does your property manager now have to evict your now son-in-law tenant to maintain the home in your IRA?

Landlords and tenants fall in love sometimes.  A woman in the neighborhood where I once lived in California rented her house to a couple of guys while she lived and worked in another city.  When she returned home, she evicted one of her tenants and married the other.  This wasn't an IRA home situation, but family relationships can change.

The takeaway is stay on top of your investments and how they can be impacted by changing circumstances.

Chris Eidson · Answer

@Juan Santos

I know very little about it, but did a quick search on here and came up with several good threads.  I would recommend identifying folks who have done it personally, to get the nitty gritty.  Check out this thread:

https://www.biggerpockets.com/forums/50/topics/107...

Keep in mind, generally speaking, nothing is as simple as it sounds when someone is trying to sell you something.  If it was, everyone would do it and a lot more people on here would be talking about it.

Why I Am Considering Legacy Education Elite

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