All Forum Posts by: David M.

@Nancy Mills

Make sure you have the person also sign a personal guarantee on the loan --- that's pretty normal.  Otherwise, its just another transaction.  Recommend that you get a servicer to service the loan for you.  Have the borrower pay for any fees and agree to sign up with the same servicer.  this will help with the administrative tasks (e.g. yearly 1099, pay off statements, accounting especially if the borrower pays faster) as well as helping to provide a 3rd party proof of non-payment in case you need to foreclose.

Be sure to use an attorney that specializes in Notes, not necessarily a real estate attorney, to draft the paperwork and protect your interests.

Good luck.

@Alice Goodson

I don't use banks for interest rates.  Use a brokerage account (e.g. schwab, Fidelity, etc.) for the ~5%.  The funds your "deposit" with them sit in a money market fund.  Its completely liquid and you dont have to do anything.  You can electronically transfer the funds around.

Not sure, however, what you are looking for in "...rental property break downs."  hopefully, you aren't doing you bookkeeping "by account."  But, I'd go with any of the major banks since their platforms are generally better.  Plus, you can operate anywhere if you need to.

Hope that helps.  Good luck.

@Philip Benavente I'd sell off and invest elsewhere. STR are very time consuming and mtr/ltr can also be time consuming. Trust me, you don't want these headaches while taking care of your parents. As you are doing, your parents come first.

You could do S&P500, but my opinion is you are willing to learn about investing in real estate, learn about investing in the public markets.  There are high yield funds and securities doing over 8% you can use if you want.

Also, you could take the funds and do private lending at around 12%.  Use a "matchmaker" so its completely passive to you.  Its still real estate if that makes you feel better.

Good luck.

@Joel Hunt

Yup, so as you've surmised, your borrower processed the 1099 incorrectly.  See how fast you can get that corrected so that you can file your taxes.

Going to go out on a limb that this "real estate professional" is just a person, not a "larger company" or whatever nor did you have a servicer (maybe you didn't need one).  Anyway, looks like the person screwed up.  Otherwise, you need to file a 1099 to that person for the principal amount so that you can deduct it from your taxes as an expense to balance out  LOL

Good luck.

@Bill B. Oh okay.  Maybe I misread, too!!  

@Amit M. I would just like to add that comparing to S&P 500 index fund is comparing apples and oranges.  Every reason why a broad sector index fund is recommended is the exact opposite of why one invests in a single property.  I see the public markets as another asset class, or actually series of asset classes, to investigate for investing.

My other pet peeve is regarding taxation of rental sales.  Sounds like you've got it covered, but if you have still have built up PAL, that is great for offsetting your tax liability when you sell.  I've been liquidating my portfolio and have little tax liability.

https://www.biggerpockets.com/forums/48/topics/1169308-equity-rich-need-advice?highlight_post=6659747&page=1#p6659747 If you look at my post here, liquating (albeit a primary residence) to gain a cash position was really cheap --- only 6% as I recall.  But, like I said, it seems like you've worked all this out.  But just in case --- the costs aren't as bad as some would have you believe.

Good luck.

@Bill B. how do you figure?  Its already 2024.  OP would have to go back in time to sell in 2023... LOL

@Andrew Reyes

Your welcome

I just noticed I for some reason didn't mention about your parking.  6+ cars with a 2 car driveway (forget the garage since somebody will be blocked in).  Our lot sizes / frontage in NJ is usually only so big...  so...

Again, lots of issues to work through when trying to use a single family into a "mini-dormitory."

Good luck.

@Art Giacosa

yeah, you have a different situation since time expenditure and cost aren't an issue. Normally, I'd recommend looking at the cost benefit to having insurance for all your LLC's since most people would go broke just defending the corporate veil of their LLC's without the insurance company's legal team to step in for you! But, you don't have that problem --- or you don't consider it a problem. Oh, and personally those who see insurance companies not ready to pay to me means they need to understand their coverage better and/or hire a more reputable company.

The board doesn't even have much of any threads about actually being frivously (is that the term/category we are talking about?) sued.  Its not even in the news cycle about "ambulance chasing laywers" suing high networth individuals.  I only seem to see it here and any investor related "topic."

My main point is to chase down "sampling error" and perhaps confirmation bias.  A few years ago, I listed a property and the sellers were asking about if they could get $40l-$50k more than asking --- it was and still is pretty common in my market.  I pulled the listings for the past 12 months.  Literally half the properties sold for under asking, and half sold over asking.  And yes, there were properties that sold for $50k under asking.  You don't hear about those --- who is going to go onto facebook and brag about that?

While I agree that I think there is a segment of wealthy individuals who pay good money to keep themselves "hidden" --- whatever they do.  I understand the need for privacy.  But, there are plenty of wealthy people out there who aren't hiding.  Take identity theft..  I've been wondering for nearly two decades how famous people survive when their birthdays and entire life story is available on wikipedia.  I don't understand how that isn't some sort of PII violation.  But, life seems to go on for them...

On a slightly different note, I think the nature of your investments may dictate how you structure yourself.  Mine are in "quality" areas that attract "quality" tenants.  I've had police officers, nurses, lawyers (talk about quality, an attorney was one of my evictees...), etc.  Forming a repoire with them I think was beneficial and personally satisfying.  They were more satisfied realizing that I wasn't running just a one-off rental property.  Many times they thought about my concerns and even put them ahead of their own.  On the flip side, if you are in a "rougher" neighborhood where you have to keep responding that you will ask "Mr. Big" that question, well then maybe you need to have a more opaque structure.

Similarly, people have actually told me that they looked me up and saw that I had a number of properties / recordings (not sure if some actually sifted through the public records results).  Bottom line, that was good.  The "spectre" of lack of information usually gives people pause...

Hope that helps give you some perspective.  Good luck.

@Account Closed I think that's why we prefer to find qualified accountants and tax strategists instead of a somebody to do data entry into a piece of software.

@Kevin Luttrell have you been taking these deductions previously?  Or, just do this:  tell your accountant that you don't meet the criteria.  I think one of them is 500 hours per property.  At least from the tax preparer's point of view, I think it'd be a fraudlent return so she'd have to override it.  ... you lost all your records of how many hours you spent on the properties... whatever...  Its a quick google search and you can see the other qualifications.  Silly, dumb software.

But I certainly like your thinking --- have to be long term tax efficient.  Keep the PAL.  Save it up for when you sell.  I've been liquidating my properties and I'm paying less/little tax because of it.  I'm getting access to all my cash and not having it locked up in a 1031.  Been tracking this for over 20years!!