All Forum Posts by: Adam R.

@Brandon Hall undefined I was thinking a capital expenditure could be deducted from the income. I did a little more research on that last night and found that you can't do that. Oops, always learning something new. 

Any suggestions on how to protect my earnings when I go to transfer my investments from stocks/bonds to tangible real estate? 

Bill. 

Thanks for confirming about the 1031. 

Yea, I'm not sure about the dividends being able to be reinvested and considered an expense. My thoughts were that I could write the dividends as income and then an expense would be buying more of the investment property (stocks in this case). But I would really have to talk to an accountant about that one. 

Adam

Almost 2 years ago now, I started my 5 year plan to save up to buy my first house. I decided on a strategy that includes cash, stocks, and bonds to allow my money to grow. As my asset of stocks has grown, it has gained me dividends which I have reinvested into the stocks. I have been paying the normal income rate on this "income" even though I am reinvesting it and plan to eventually invest that into real estate. 

I am looking for a way to protect the growth of this money from the normal income tax rate to allow the money to grow that much faster. I really got the idea from Rich Dad/Poor Dad to look into creating a corporation for the assets. 

Since we don't have any tenants or anyone who our company may be liable for, I was thinking about creating a Partnership with my fiance and combine the money we have saved under the same apron. I would then file an IRS Form 8832 to allow our "association" to be taxed as a corporation which would allow us to count the reinvested money as an expense. 

I am in California and from everything I've read so far there is a minimum of $800/year franchise tax that must be paid by corporations. That would mean that I would have to make over $3700 from my dividends/year to justify this (at ~22% income tax rate). This probably won't happen just with dividends but, assuming stocks keep going the way they have, I should have an appreciable amount of appreciation when I sell the stocks and am looking for a way to protect those earnings since I plan to reinvest them. I don't think a 1031 exchange would be allowed because it is not a "like-kind" property. 

I just wanted to see if anyone had experience doing this or if there was a better way to protect my earnings? 

Thanks for the help

Hello world, my first post....how exciting!!

@Eric T. I feel like we are in the same boat. I am in the very beginning stages of real estate investing doing research on different strategies on analyzing, purchasing, and managing properties. I live in Orange County, CA (way too expensive here or anywhere in the LA Basin, especially to start out) but I am originally from the East Texas area. I have been looking there since I am familiar with the area and have family there who I visit often and could check on the property. Haven't found anything that fits my criteria yet and is in a good enough neighborhood but it doesn't seem like too bad of a market. 

If you haven't already I would check out Podcast 025. They have some interviews with some first time investors; one of which buys an out-of-state property. I feel like there were some good tips there. Also, Podcast 074 says its about first time investors but I have yet to listen to it.  

I would be interested to know how your first one goes when you find a market/house/PM that fits your criteria.