All Forum Posts by: Carl Fischer

@James CashThe personal 401k is great for all the reasons Curt mentioned.  However, you must be careful if you hire employees.  You also will have to file a tax return for the 401k when it reaches $250k value. No one likes an audit but if you do things according to the rules you should be fine and that goes for whatever vehicle/entity you choose. 

@Curt Smith

I am a third generation real estate investor-learned from my parents and grandparents. I used to manage and fix my own properties until I realized that I could make more money by making deals than doing repairs.  If I did more deals I could afford to hire competent tradesman to do the work and make more money with less liability.  I have a degree in engineering and launched rockets for 18 years and was the biggest control freak I knew(just ask my wife) so I understand how hard it is to make that switch. Structure your business to succeed by doing what you do best. Good luck.

@Tom Jimenez

You have a great posts to think about--you need to pick what works for you and your wife. This is not one size fits all business.  Some people are good flippers, wholesalers, "buy and hold", etc.  Some investors like single family rentals, apartments, office space, retail, land, industrial space, etc. Diversity is good. I will give you my approach to ponder, and I might add it is not necessarily better or worse it just works for me.

I am not a proponent of borrowing or withdrawing from 401ks or IRAs because I have found they are great vehicles to do real estate in as well as other investments. I do agree with Chris Petrillose post- "take control of your investments". If you are in the upper tax brackets you can easily see 50% of your profits go to taxes(fed, state, unemployment, SS, Medicare, etc). I personally work investments in my tax advantaged plans(IRAs, 401Ks, HSAs, etc) and see many individuals who get great ROI on many different asset classes. I feel constrained with the rules surrounding the 1031 exchanges and saw people burned in 2008 from these rules-but that is just me. Michael Swan seems to have the 1031 gig working well for him. If you pay a 10% penalty and double your money and protect it from the tax bite that is a great deal. The real story is how good are your investment returns? 2% on a 5 year CD will make very little difference in anyone's financial life.

In closing, Get a plan with the right people on your team 1. to make great, safe, investments; 2, develop a strategy to minimize taxes; 3, make as much as you can while you can.  There is a plethera of investments (real estate, notes, private placements, etc), there are multiple tax saving strategies(IRAs/401ks, 1031 exchanges, life insurance policies, businesses, etc) spend your time on your plan it pays off in the long & short run then adjust/adapt the plan as conditions change.  Good luck-- I hope this helped.

The problem is paying taxes--the more you make the more you pay --its a fact unless you figure out away to minimize your taxes. Also recognize there are CPAs that are better than others and can help you come up with a plan based on your personal circumstances. 401k's and defined benefit plans are great vehicles to thwart some of the taxes. Brian Eastman,Mark Nolan, and Rob Green make great points. It may also be worth while looking to flip inside those plans although it may also be taxed because the plan may have to pay Unrelated Business Income Tax(UBTI). Knowledge is tantamount to increasing wealth. It is worth talking to a knowledgeable CPA/tax attorney because with a couple of tweaks you could possibly do like Mitt Romney did and make a $100 million dollar IRA. You can then pick up Jay Hinrichs and Douglas Larson in your personal jet and take a few trips with the rich and famous and forget the TV show. Good Luck.

you need to use a non recourse loan if your IRA money is involved and owns the property. You should also understand unrelated business income especially unrelated debt financed income UDFI. You can find out more information by reviewing IRS form 990T.

I personally like to have "buy and hold" property in my Roth IRA. Consider return and tax consequences good luck

I also do "buy and hold" in Roth IRA. If you use leverage it is true you may have to pay UBIT however it is only on the portion you leverage and depreciation can be used in this case. Look at IRS Form 990T. Tax free income for life is great. It removes a variable about wondering what tax you will pay.

You can not borrow funds from an IRA but you may borrow from some 401(k) plans-$50k or half of your 401k balance whatever is less.

If you have income the IRS requires you to report it in most all cases. It is prohibited,in IRAs,  as stated by the BP posters,  to rent to your children as they are disqualified persons. 

I would make sure I had the experience and/or education in real estate arena before I spent my 401k nest egg unless you can afford to lose it. 

Look for education at your local REIA or on line classes. Watch and surround yourself with people who are doing what you want to do. Look to build a team that can fill in where you are lacking. Take your time there'll always be more deals. Be comfortable and knowledgeable about any deal you enter into Good luck

sell the assets in the 401k and buy 15 SFH with more cash flow and/or less debt. Do it all in the 401k or IRA AND LOOK TO CONVERT TO TAX FREE. 😄

just think how nice it would be if half of the real estate discussed were tax free income for life in a Roth IRA/401k.

Not sure much beats producing real estate assets in a Roth.  My best find in the real estate world. 

it is discussed in IRS code. I believe section 4975 but it is late Saturday night. 

Brian has a great answer. I would just add one other issue to consider-- which is a concern if you are considered or have a fiduciary relationship with the partnership or individuals you could be considered a disqualified person. 

Michael E

My father told me early on "use the Keep It Simple Stupid (KISS)principle"--My personal goal is to get a minimum of 15% "cash on cash" return for any real estate that I "buy and hold". Appreciation, tax savings, debt reduction if leveraging, depreciation tax savings, etc should all be included. However I watch the COC --the rest is gravy. I do not usually count appreciation until it occurs and is never a discriminator in purchases. I am an investor not a speculator.

I will take the positive cash flow dollars and do short term private lending or buy some distressed notes like Dave Van Horn talks about. I do not do less than 10% interest,cash on cash, return with notes but again I target 15% COC just to keep it simple. I do most of this in IRAs and I am a big believer in Roths or tax free returns. This Makes the numbers a little simpler. I must confess that I do let some money sit around in case I come across a great deal I can act quickly. I have sources that do overnight loans or transactional funding as well that keeps the lazy money working some while it is sitting around. Each investment stands on its own and is reviewed annually. I hope this answers your questions.