All Forum Posts by: Buddy Holmes

I attended a recent webinar where a syndication principal was cautioning about the 1031 exchange ability of LP and LLC entities.

He was saying the they must have a TIC form in order to conform to the 1031 rules. Specifically that the member or share holder often owns only a portion of an entity which owns Real Estate rather than actually owning Real Estate out right. Thus 1031 is only the exchange of Real Estate not shares in an entity which owes Real Estate. He seemed to say that they had a form of LP or LLC which allowed a TIC position but were able to have financing that did not bring the TIC issues into play.

Expert thoughts, please.  

@David Hughes

My understanding from doing the same thing a few years back...

You can buy the furniture and store it as you build. However you can start taking expenses once the property is "UP FOR RENT".

That is it does not have to be rented, but advertised as available for rent.  So as son as you get your occupancy certificate have an ad somewhere and dated receipt for it.

From what I understand, the "Back Door" conversion is the conversion of a traditional IRA funds to a Roth IRA and paying tax at current year rates. Are there different Roth Conversions?

I read that a current bill in congress is set to eliminate Roth Conversions in 2022.

Anyone know the latest?

@Nathaniel J Mott

You need to find out what the seller needs out of the deal.  Sounds like this may be a lady who wants to donwsize and get out of repairs and maintanence.  She maybe looking at a condo or a retirement home or a place like the Villages.

She may need a fixed sum which she would require out of your offer. She needs and income stream as well, but she may not have considered that as an addition to what ever she is living on now. The Seller financing would give her a fixed income stream she could count on but you need to SELL her on that. So have a conversation. I am sure you want this to be a good deal for both parties so learn what she needs and see if you can offer a win-win contract. Once you have the basics of your off your RE lawyer can write you a contract if you can't find a copy of the local MLS version.

Cheers, Buddy

@Zac Boelkow

Might be great, but I sent a long time on a W2 trying to figure out how to have income without the W2.

Doesn't the self employed SS and Medicare taxes eat up a lot of you benefit in that set up?

@Devin Janke

I'd say yes still worth it but my bet is your issue really is your debt is not high enough.  Sounds like you could REFI and use the cash out to buy another property.   Possible?

@Dave Foster

@Alicia Marks , sorry to hijack the thread a little but there's some potentially dangerous information out here that will confuse some folks. @Venu Vedre , You're just about right. You cannot do a 1031 exchange from a real estate asset into a membership interest in an entity that owns real estate. Except for the vehicle of a delaware statutory trust (which are not nor....

RE Above comment:

Am I correct in that the when the LP or LLC does a 1031 Exchange, Any of the members of the original entity can opt out without any problem, but no new investors can buy in to become members in the new investment?

Cheers,

Buddy

I can't believe this is so confusing to me, but I continue to see different rules in each explanation.  Maybe it is me, maybe I need a picture.   Let's add a cost segregation part way through it's depreciation in just for kicks.  Perhaps we could see who can draw up the clearest diagram?

Cheers

@Mora Clark

I don't know all the input for the calculation but say your place in H'ville is worth $100k today.

And  I assume your mortgage at 5.8% is about $325/mo and you are cash flowing.  Current investment rate are 3.6%.

So a 80% l/v loan of$80k would be $360 or about $35/mo more.  So financing all your closing costs ($5K max) you net

80-50-5=$25K for your project in Denver and still have you rental income and higher value SFR in H'ville. Sounds like there is a real possibility that you can even increase your rental income and cash flow! This looks like a win-win to me.

Good luck.