All Forum Posts by: Brandon G.

Nice to see that your persistence paid off. Congrats on your new investment! 

Smart move with the value adds. I imagine that your storage business would be fairly recession proof as well. 

Yes, you can and should do your own title search whenever you want. IRS and Weed liens are going to be your biggest risks most likely. The county will be happy to tell you about their weed lien, but don't expect any other help if its anything like CA. They are not allowed to give "legal" advice and have a canned disclosure/statement usually. Once again, lots of homework for your specific location. And again, really check out that property! I once saw some one pay big for a property that had a negative value (complete tear down, value in lot only). 

Yes, check your state laws and processes. I purchased a SFR this way in CA a few years back and.....well let just say that I can laugh about it now. Its a good investment now. Time can forgiving in real estate right?

All of the standard disclosures and warnings apply! Study the process inside and out and once you have done all your due diligence, do some more. Your working with cash, not going through escrow/title, most likely can not get inside the property for inspections or appraisals. Any mistakes or assumptions can be costly. 

Some of the bigger items that I can suggest to look into/keep in mind when researching your state and county; 

-Research your title. Although tax liens are superior, some other claims may still have standing

-See how marketable your title/deed is after you win

-Do whatever you can (within the law) to see the inside of the property. Talking to the neighbors can be insightful. 

-After the homework, I'm sure you can find some BP specialists to clarify some of the finer points.

Happy Hunting!

For those that are interested, see the new IRS Notice 2019-07 that was just released. After a quick skim (page 7), it looks like we finally have our guidance on possibly claiming the 20% QBI deduction on rental income. 

Safe Harbor for Sec 199A:

A. Keep separate books 

B. 250 or more hours/year service

C. For 2019 and future years, maintain a detailed log as well

Side note; If you have Commercial and Residential, you need to treat them as separate enterprises for this purpose. Also triple net leases not eligible for Safe Harbor. Keep this in mind and adjust your strategies accordingly.  :)

Everyone has good points on this in my opinion. Diversification will always have credibility and be the "norm" in traditional investment theory. This is a basic and fundamental concept, such as risk vs reward.  

With that said, you will find many very successful investors that were not afraid to put all their eggs in one basket. And those which exceed the norm, do not do "normal" things. Of course, no one could recommend that you go out and do that. The common theme that you find with these investors that are successful long-term (not flash in the pan types), is that they educated themselves to the point that they became experts in their field, surrounded themselves with the right people, and they are likely still diversified in that broad assets class.

The truth is, most of us should not be on completely on one side or the other of this diversification scale, but rather somewhere in between. Exactly where we properly lie on that scale is based on our individual risk tolerance, our own expertise and competencies, drive, and our time devotion. Everyone's answer will be different. Ford or Chevy? Republican or Democrat? 

My personal approach, is to increase my real estate holdings proportionately with my knowledge and expertise in the field. The more time I devote in educating myself in the particular investment, the less risk I am taking, and the more comfortable I am in moving money from the traditional assets to real estate.  

For Self Directed IRAs; I would suggest researching before jumping in, but they can be a useful tax tool for sure, depending on your strategy. Some things to consider that I have learned in my experience with these are; look into the fee structure (typically based on the value of the portfolio), and tax advantages vs disadvantages as mentioned by others, the credibility and strength of the custodian (look up American Greed for a fun story), and potential tax return filings each year depending on your structure and investments (ie UBIT/990 and 568/CA LLC).

Regarding the Roth IRA accounts mentioned; for those who look to retire before 59 1/2 years old, look into the "Substantially Equal Periodic Payments" exception. I hope you and I are in the position to use this election soon.

@Michael Swan that's awesome! Thank you for sharing your story-inspiring... 

@ChristopherPhillips and @JeffB. are correct in that these capital expenditures are adjustments to your basis for depreciation if done before placed in service date. If done after placed in service date, they are still depreciated over the appropriate time period if considered capital improvements (rather than repairs). Also keep in mind that your starting point is not necessarily your cost basis. When converting a property to a rental, you need to use the lower of the FMV and cost basis. At that point, you make any appropriate adjustments then back out the land value.

The others are also giving sound advice in that it would be best to hire a professional accountant this year. Doing things correct, the first time, will save you more money than you spent on hiring the professional.

Assuming that both questions pertain to rental properties: 1. Your inspection cost will be added to your basis since your asset was not placed in service yet. 2. Your landscaping is generally depreciated as long as it's not considered cleaning and maintenance. In your case it sounds like you are actually making an improvement. With this said, like question one, if your rental property has not been placed in service yet, then you would add this to your basis rather than expense or depreciate anyways. Congrats on your purchase and desires to educate yourself on the numbers side. That said, considering hiring a good accountant, pay him (or her) his worth, and learn from him. We Can do everything ourselves but it is not always practical or worth it. Just my my two sense and experience. 1. The placed in service aspect of the rental is from your perspective as the tax payer/investor. It doesn't matter what the property was before or after your ownership. My first response was confusing-apologies. You mentioned it was a inspection during the due diligence period, therefore it is part of your acquisition cost and added to your basis. The place in service factor is not relevant for this expense/case. 2. One could argue 7 year (unclassified) or 27.5 years (if SFR and not commercial) in this case. I always take the conservative route (27.5 in this case).

Assuming that both questions pertain to rental properties: 1. Your inspection cost will be added to your basis since your asset was not placed in service yet. 2. Your landscaping is generally depreciated as long as it's not considered cleaning and maintenance. In your case it sounds like you are actually making an improvement. With this said, like question one, if your rental property has not been placed in service yet, then you would add this to your basis rather than expense or depreciate anyways. Congrats on your purchase and desires to educate yourself on the numbers side. That said, considering hiring a good accountant, pay him (or her) his worth, and learn from him. We Can do everything ourselves but it is not always practical or worth it. Just my my two sense and experience.

For all you BP, creative financing experts out there;

Have you ever bought a property via Land Contract/Installment Sale AND took it Subject-To the existing mortgage?

This seems to be a great strategy (if it can be done) to take advantage of existing financing and to spread out the sellers tax bill. What do you think?

Thanks in advance for your experiences/ideas…..

Steven has a great idea. In CA (check your own state laws if you need to of course)your contractor would automatically have protection via a mechanics lien, or you could even record a lien if he wants to see something in writing, then pay pay him at close. You could sweeten the pot by paying him interest . Everyone has their price, right? Chances are that Uncle Sam’s price is MUCH higher.

Also, going forward, you may consider partnering with your SDIRA when buying a property if more funds are needed.