All Forum Posts by: Darryl S.

Is your tenant currently paying on time and does he have a good payment history over the past two yrs? Does the tenant have a will and a substantial life insurance policy? Might set up to get your money after he passes if it is written into the will and their are life insurance funds.  Doubt if I would toss a deathly ill person to the curb to die I would for sure try to get him some help as others have stated. 

Great work on doing your due diligence. It amazes me how many people simply ignore water problems and live in these houses for years and years and then some poor ole investor comes along not paying attention and gets nailed. I think the old saying is correct but I am not sure whom it originated from "YOU MAKE YOUR MONEY WHEN YOU BUY NOT WHEN YOU SALE"   

 I do only one or two deals a year and hold some rental properties. My real job keeps me busy 40 to 60 hours per week. I should have known that the IRS had all the bases covered to make sure they keep the tax dollars flowing. Someone mentioned above if there was a loophole people would be all over it and then of course it would be closed off by the IRS very quickly. It is too bad that you are forced to writh/teist/turn/squeeze/hyperventilate and jump through flaming hoops just to save a bit on taxes. It looks like the IRS has it setup so that it much easier to just go ahead and pay the taxes. If you spend very much time fooling with planning for tax breaks you may find that your time and energy that you need to do deals and MAKE money is used up fooling with a rigged system. Just makes me sick to my stomach. Looks like a lose lose situation LOL.    

Sigh I thought I had the perfect plan but this UBTI tax has totally ruined my ROTH IRA plans. I was hoping that any gains inside the Roth IRA would be nontaxable regardless thanks for the heads up guys. Very disappointing.

This Solo 401k sounds interesting? Never actually heard that term before. I work full time and have a union defined benefit pension plan that my employer pays into on my behalf but I also have some passive income from rental properties. I wonder if I would qualify for that Solo 401k and if that eliminates those nasty UBTI taxes?  

Is anyone here actually using a self directed Roth IRA account for real estate flipping? I am sick of paying these outrageous short term capital gains taxes it really feels like 1 step forward and 1 step back. I looked at the 1031 exchange system but it is just too restrictive to suit my slow moving investing style. I have a current deal that I can pickup for under 50k which will produce around 30k profit shortly. The way I see this working is that I use the ROTH IRA cash to buy at 50k property, flip it and put 75k back in to the Roth IRA account then move on to the next one generating untaxed gains inside the Roth IRA which will be 100% tax free upon withdrawal. I will simply keep building the account balance until I get ready to retire or turn 70 1/2 and have to start withdrawing. Should have several million dollars in there by then................ WHO IS DOING THIS? I need the dirty details please.

I understand the frustration from the OP and I would suggest to just stop and breath. If you own 15 properties free and clear at this point you have a leg up on 99.9% of the people starting out in this real estate business. Have you considered cashing out the weakest ones and reinvesting your cash in higher quality units? It is great to have 50+ leases but sometimes quality is better than quantity.  A construction company that I am familiar with has been working on becoming lean for the last couple of years. Their overall volume per annum went from over 100 million to less than 17 million. However at the 17 million they were actually producing MORE total profit. Lean production methods eliminated waste and duplication I think it is totally amazing.     

Yes I would love to own free and clear rental property. I guess you could look at this as the difference between simply controlling property and owning it. Obviously there is a large amount of money to be made controlling property but as stated previously you greatly increase your risk factor. I personally do not like risk and would wish to own the property. What was the story told in the millionaire mind about the banker stating when looking out the window over a large city. Quote 'We the bank own it all" Somehow there is a lot of truth to that statement LOL    

Well Kelvin you have run YOUR numbers and they indicate a lower price. Ignore your Realtor advice and offer what the property is worth to you. If you feel the need to justify your price to the seller then find a scenario and do a little leg work on a report that shows why the property value is where you are at with your offer. Comps/condition reports/estimated demo and clearing costs from the most expensive companies you can find, you get the picture. There is no way that I would present my secret plan and give away my advantage. The worst deals I have ever done are the ones where the numbers were stretched to make the deal happen because I felt that I had already invested myself into it and HAD to make it happen. Step back a few steps and evaluate from a different angle.     

Jake; after studying the issue I realized what effect this might have on for instance the 1031 exchange business model. It would totally destroy the industry and put a lot of people out of work. If my CPA figures this out it may be best to keep it under wraps. As Jake and others have suggested all you people following this thread need to forget about this and concentrate on other areas. Sorry I brought this up.    

 David; I have only done 25 rehabs so far here in Tennessee but here is a list of what I have seen as being the best for a good return for me on the ones that I have done.

1. Research and due diligence BEFORE you buy. Whatever problems are present you better  know exactly what they are and how much it is going to cost before you make your offer. I like to use a simple excel spreadsheet to estimate hours and materials cost.  

2. Cleaning and Painting. I am not talking about swipe at it cleaning, I mean you can almost eat off of every sg ft of the property inside and out. A couple of trips to your local dollar general store for cleaning supplies on the cheap and lots of elbow grease will make a huge and profitable difference. Paint and painters caulk can be had for reasonable prices and when applied with a skilled hand is awesome.

3. Landscaping. Curb appeal has a huge return as it is easy and cheap if you use your head and are willing to put some elbow grease into it. Draws buyers like a fly to honey.

4. ANYTHING that would prevent the property from going FHA financing. You need the help of your local FHA loan experienced real estate agent on this if you are just starting out. It is the most sickening feeling when you had already reached your budget and you feel good about your current contract and then BOOM the FHA or VA inspector comes back with a huge expensive laundry list of to do items.

5. Kitchens and master baths. Be very careful here, it is possible to do on a budget but it is the easiest thing to get out of control cost wise. If you have done your research and due diligence then you are going to know if that great looking 300 dollar formica countertop and stick on vinyl floor versus the 2000 dollar granite and ceramic tile floor is going to be acceptable in your price range and neighborhood.