All Forum Posts by: David M.

@Erika Collins

When you are removing the "item," if it has lead paint you will be creating lead paint dust.  If the paint does test positive, you'll need to follow regulated procedures to clean it up (or contract it out).  

FYI:  Part of the reason for the requirements and protocol is because it really doesn't take much to have lead poisoning at all.  Furthermore, the issues (in rehabs) weren't the contractors/workers getting sick, it was the lead paint dust was taken back home on their clothes.  Their kids were becoming lead poisoned and various levels of disabled for life.

The good news is that the closer in time to '78, the less likely hood of have lead paint.  I think the stats way back to 40's have the majority of the paint manufactures using lead as an additive.  So, do the test to be sure and do it right.  Then, you'll know whether precautions and proper cleanup procedures are required.

Hope this helps.  Happy to chat.  Good luck.

@Dmitriy Fomichenko 

No, we are on the same topic. #1 I asssume you are going with $100k (and assuming there are no post tax contributions gobly gook). I just disagree with your assessment of #2. The value of the IRA might be $400k, but you are taking a $500k property out. So your tax liability is $500k. Whether you satisfied the lien doesn't matter.

Lots of examples come to mind.  If we stay on real estate, if you purchase a property for $500k, but use $100k of loans, the property is still worth $500k.  If you looked at a balance sheet for the property, there is $400k of equity --- of course.  But, accounting for tax purposes, that I've done anyway, doesn't care about equity, it cares about sales / proceeds and adjusted cost basis.  Your logic just looks to me like many investors who thinks their capital gains tax has something to do with the amount of loan on the property.

That's why I asked:  why for a self-directed account does the accounting methodology change?

@Andrew Simms

What is your PAL total?  That will offset your tax liability.

What tax bracket do you expect to be in?  While depreciation unrecapture is annoyingly tricky to calc, fed doesn't tax you more than your marginal rate.

Do you have any other capital losses to tax loss harvest?

No, the capitals gain tax rate isn't marginal.  Its just the one percentage.

Yeah, its nice that you have the low rate, but when you have a business opportunity, that's the way things go... Also, doesn't look like its doing very well. STR's are supposed to be cash cows. All this work and it seems to look like a ltr.

@Olga Burninova

Its not a violation.  Just because the loan can be originated with as little as 5% down, doesn't mean that it has to be.  Plenty of people get loans with something other than 5% down.  Lenders can always be "tighter" but can't go the other way if they intend to resell the loan to Fannie Mae, etc.

Did you find out why they said 15% down?  

How did you figure on being able to cover the mortgage?  Did you take into account 75% of the rent?  There is also that provision of what if I think its like if all or but just one of the units is empty (I forget the exact nature or term, but it can be restrictive).

Its this a purchase or refi?

@Don Konipol in addition to what @Chris Seveney said, also there is the financing cost. Legal entities aren't eligible for conforming loans. Now with a LLC you need commercial lending. Yeah, with the big push to dscr the rate differential isn't as bad, but its still there and so is the difference in terms.

Also, people don't know how to operate the LLC. So, it can be a sort of "false protection."

So, yeah it might just a few hundred dollars to form the LLC, but its the additional overhead costs (e.g. separate bookkeeeping) that really drive it up. We see plenty of posts of people trying to get around "doing it right" with a LLC. As a layman, I just see so much alledged co-mingling and alter-ego use...

@Steve Smith Honestly, its tough to figure out how to help you...

over 50 you can contribute more to the ira system.  But, it sounds like you are trying to overdrive the investing side, not the "supply side."  Your verbage jumps back and forth...

otherwise, I'd suggest a se401k (if it can be applied) or similiar to really get the contributions going to ~$70k annually.

If you really want to "juice" the returns, try other asset classes, perhaps...

Good luck.

@Dmitriy Fomichenko

I read it over.  So, why is the taxable amount include the loan amount?  Why is a self-directed account so different that the financing adjusts the taxable amount?

Dealing with them separately?? That’s not a good sign…

@Dmitriy Fomichenko sorry jumping into this a month later, but since when does a loan amount affect either the VALUE of a property or its TAXABLE amount?

Is this a self directed thing?

Hasnt taxable amount always been sales price less cost basis?  Cost basis is roughly purchase price plus closing costs.  You can refi all you want and it doesn’t change the cost basis

Hasn’t value of the property just been the value?  The equity in the property. May change with a loan, but not the value.

Did I miss how these terms are calculated differently for self direct accounts?  Thanks

@Jackie Linne It may be worthless if the earn a "high salary" in their day jobs too...  It could also be worthless if they are only doing long term rentals since its all passive income...