All Forum Posts by: Account Closed

Looks like the Brethren have piled up the wood. Have an enjoyable bon fire and toasted mashmallows.

@Don Konipol  you are completely off track - the business of Wholesaling of Houses does not involve Buy and Hold - Only end buyers do that - and that is where 30 days is allowed in the business model although I do not dispute your estimate of 45 to 60 days as being likely. If you refer back to the title of the post you should have picked up the fact that I am not an advocate of Buy and Beholding!

Note: it is the end buyer who pays closing costs NOT the wholesaler. Closing costs are factored in for cases where double closing might be necessary - which is why the $50k is reduced to $45k as a possibility (when assignment of contract is possible there is an additional $5k of profit). 

 There is NO interest holding costs - only short term transactional funding expenses, which is why using your own capital comes in to play. You never need your own money when assignment is available - only some states do not permit that.

Perhaps you should learn more about how wholesaling works instead of disputing my academic credentials - which I can verify when appropriate  - but certainly not to cretins. You have proven that you clearly are at the bottom left hand end of the IQ bell curve.

@Brent Coombs Many years ago I developed sophisticated finance programs, for Corporate clients, Insurance Co.s and Investment Banks - taught thousands of financial planners, advisers and accountants how to negative gear and how to use self-liquidating loans, where the Tax office largely helped pay the interest. Often there were business owners who came to me with liquidity problems -- they were losing heaps in tax and most had short term business loans at massive interest rates (compared to Home Loan rates). By restructuring those business loans to 30 year home loans instead of 5 year P and I business loans there was an immediate improvement in liquidity and the additional capital that released provided the funds needed to be spent on tax deductible items - which lowered tax. There is a lot more in it but that should give you an idea of some of the things which should be done by ALL businesses.

One approach which can be used to meet your living costs is to Borrow the money you need instead of earning income on which you lose a large portion to income tax. Think about it. Say you earn 100 and lose 40 to tax - you have 60 net to spend on your needs. Instead of throwing away the 40 to be left with only 60 - spend the 40 on deductibles or at least retain it, leverage it with a gearing ratio of 4 to 1 and still borrow the 60 for personal needs. 

The servicing cost of the 60 loan can be tax structured - and using an LOC the interest payments are borrowed and capitalized in to the loan. Thus you need not put your hand in your pocket to pay interest ever.

When such an approach is taken it is possible to leave your working capital and all of its earnings intact to compound. Essentially you are borrowing against earnings - deferring cashing in and using the tax savings to generate more capital growth, income and further tax deductions. Yes it is quite radical, and it works. I utilized this very method for well over 30 years - not earning any assessable income during that time and periodically either borrowed against appreciated assets and/or occasionally cashing in some gains where there was no tax on the profits (usually a residence)

Some Life Insurance products can also be used - in conjunction with retirement planning. Returns can be in the order of 1000% based on underlying returns of less than 18% a year - but that is another story!

Note: Each month as your capital builds you choose between buying more expensive homes or simple More homes - some may even be of less value - just prorata the numbers.

@Kevin Coggins The objective is NOT to buy and hold - as Interest expense can be a burden, especially if there are vacancies. I can not see why you are not aware there are many wholesalers making a lot more than the 10% profit per deal - and a lot do more than 4 deals a month. (Not the rank and file - who find it hard to do even one deal).

When flipping is done the right way there is not even a need to borrow money - as contracts can be assigned, or double closed. Having your own cash avoids the need for transactional financing - which can weaken the 10% targeted returns a few points, and that is the only reason for building up your own capital supply. If assignment of contract is used as the main flipping method (*not all states permit it) it avoids the costs which occur in doubling closing,

Of course there are nervous Nellies and doubting Thomases - which is why not everyone will get on board the gravy train. Yes things do fall out of the sky and no matter how much attention you pay to detail Murphy is bound to be around one day - so protect against that instead of gambling (*like some share investors do) 

@Kevin Coggins -  My close friends always call me Dee which I thought may be appropriate here, as elsewhere I am more formal - and Yes I did miss an A when I put in my surname - sticky keyboard - but unable to correct that after pushing the return. Not an issue for me - but apparently you have one?

Back to topic:-

There are a lot of simple rules - and a few complex ones, which when combined can do marvelously well in reducing, deferring and eliminating tax - all quite legally. No need for tax evasion at all.

I had a similar reaction from Accountants when I was first to introduce Mortgage Acceleration. Not a week would go by without an Accountant phoning me out of the blue to tell me it could not work.

Also early on I had a visit from the Tax Office - two nice guys (they were accountants). They were amazed but agreed there was nothing unlawful in what I was doing - they promised to return if they changed their opinion. Never saw them again.

@Kevin Coggins  Of course lay people do not have the training, knowledge and skill to manage tax effectively. That is why even Multinational Corporations employ teams of specialist lawyers and accountants. 

To manage tax in this area I combine all the goodies of Corporate Finance and the special dispensation Congress gives to Home Owners and Property Investors. You might care to spend the same amount of time as I did - 30 years, acquiring an armful of degrees including Masters, post graduate qualifications in Law, Finance and Investment plus working in real estate and the Securities Industry over the same period. 

Note: academic study by itself will not reveal all - it is the practical experience which is the great teacher. For starters You can read the entire Tax Act and Securities Legislation to find the Laws regarding most of what you need. Make sure to also read all the regulations too. You will also need to read a few text books too - and do the homework!

@Brent Coombs No Compound interest is magical (the 8th wonder of the world according to Albert Einstein- a 10% a month compounding doubles in 7 months. Apply the Rule of 72,

Which I why if you aim for a 12% a month return it will double every 6 months so it can quadruple in 12. 

@Anthony Gayden Apologies - I assumed from your approach using cash flow you did not intend to leverage. But on the basis you do then we are not in disagreement. Thanks for the correction.

@Kevin Coggins Certainly Not. There is NO Need to do anything illegal when it comes to tax planning - just you need have the smarts and use the rules set down by Congress instead of sitting in the water like a lame duck letting hunters shoot at you.

@Anthony Gayden What you are saying is what a lot of Investors do. Regrettably they are incorrect in their financial analysis and capital management strategy, regarding the best use of funds. 

Stashing money in to property not leveraged sub-optimizes returns - sterilizing capital which could be better employed to produce more profits. Risk can be managed in two other ways than just holding houses which will all melt when markets retreat - there is Zero protection there from market correction.

Two better approaches to Asset Preservation are: 

1. 1) insurance *Hedging strategies - which should cost about 4%, and there is no need to hedge 100% - only in accordance with the amount of protection you want. 
2. 2) building capital in to a much greater sum - which can only be achieved by putting your money to work and not sending it on a permanent holiday - as Buy and BeHolders do.