All Forum Posts by: Frank M.

@SenseFinancial - I read your articles. Much thanks, no doubt you know your stuff. Two questions -

For the Self Directed 401(k) - I do have some side income and a regular Solo 401. So I'm halfway there. If I transfer a large sum into that account and then move it to a Self Directed 401, is that going to raise suspicion of the IRS? It seems to me that since any side income (for me it's a couple thousand $/yr) can qualify one for the account which then opens the door to moving a lifetime of IRA or old 401k savings into that account.

Once the SD-401k is running, is it possible to move fractions of it to the SD-Roth 401k? e.g. the account has 1 property, no loans, worth $100K, 25% of the property is moved to the Roth side, tax paid from outside funds, and now the Roth owns 25%?

Again, thanks.

When you go to Zillow, you can usually see 3 agents shown, sometimes one is the listing agent. It depends on the listing and whether the agent is a Zillow participant.

Our policy is to respond immediately to a Zillow lead, if a phone number is given, I'll make the call, if it's 8am-9pm. If I see something pop up at midnight, I'll wait till the morning. It's a pay-for-leads service, or rather, pay for impressions, they offer a number of times your ad will show each month for a price. As with any customer service business, there are people who are very responsive and others who seem to have other priorities.

If you are interested in a particular area, it's worth the time to find a realtor who is willing to work with you. Some are better than others at understanding what an investor is going to need. If you are up front about wanting to make multiple offers, all well below listing price, but are able to close on the one that's accepted, that's a legitimate strategy, and an agent should be happy to work with you. The tougher thing for an agent is the buyer who is looking for a combination of low price and owner financing. It's possible, but is likely to burn a lot of BTUs.

Still, when I sat for the classwork to get my license, most people in that room had no job lined up and are going to need to keep busy to find customers when they start working.

Thank you both. I'm considering it for non-leveraged purchases.

Dmitriy - I know UBIT is an issue if leveraging inside the IRA, but I'll read your article to learn the rest.

For my current rental property, I file a Schedule E each year. And I have to track all expenses and income to do so.

Once I set up and fund an SDIRA via transfer from a regular IRA, what are the reporting requirements? When I buy and sell stocks now, there's nothing, the gains stay in the account, and it's only withdrawals I'll be paying tax on. Is it the same with the SDIRA, one time paperwork, and then only report withdrawals, or is it more complex than this?

I just read through this thread. Good details, but clearly, a tough topic, misunderstanding is easy given the convoluted nature of IRAs, 401(k)s etc, and when the self-directed aspect is added, it only gets worse.

It would be great to see a member-driven guide, a complete run down on the rules, and discussion of the comparison between the SDIRA and SD401(k). Till that happens, I'll keep reading the forum and learning.

The ROI looks very different based on leverage. Say you have a $100K total cost house. $2000/mo rent (2%rule) and $1000 is clear after expenses (50% rule). $12000/yr on $100K is 12%. Nothing to sneeze at. But, finance 80%, even at a 6% rate, ($600/mo mort) and now you have $4800/yr on your $20k out of pocket. 24%, plus principal pay down, and a leveraged return.

In my opinion, there's risk in being over leveraged of course, but paid in full properties are the opposite of liquidity, and if you are in expansion mode, I'd choose a leverage that let you sleep at night, whether it's 80%, 50%, or if paid off makes you happy, go for it. For multiple properties, you'll know how your occupancy rate is doing, and whether higher leverage becomes too risky.

"Each approximately 2,100 square-foot building costs less than $5,000 to construct."

You are looking at a $120,000 home, have only $5000 to put down, and looking at 30 years of $900/mo mortgage. And another $200 in property tax. That might make this house pretty appealing.

The big 'but' is where one would find land to build on. In parts of the world (US included) where there are homeless people and cheap land, this can help provide a solution. I just spent more than twice this amount to put a new roof on my re-hab. I wish I could have knocked it down and printed a new one in its place.

Funny, my old rental, a condo I lived in years ago, that I kept -

Rent is $1450. $17,400/year. 50% of that is $8700. Condo fee $285/mo, or $3420/yr. And tax is $4000/yr. Water is in condo fee, but sewer is $250. Total $7670. That leaves $1030/yr to be at 50%. And $1000 is what I'd been setting aside each year for 'other'. It builds up, and then something goes. $2500 for an AC condenser. $750 for the fridge. But as others have said, log term, it doesn't accumulate, nor go much below zero, so 50% is as good a long term estimate as one is going to get.

Rules of thumb come into being for a reason, if it was wildly off, it would fade away. This one looks right to me. My latest purchase in my new life, is a 3 family, that should rent for $24,000/yr total. I'm going to plan for the 50% rule, and figure that I'll have the other half to comfortably service the mortgage, which is another story.

If you look at the numbers on a finance calculator, this is close to a 20% APR. The simple way to look at it is 6 months worth of payments average 3 months in time (same as a year's worth average 6 months.) So a 5% discount for a payment due in 3 months represents an annual 20% or so. A year in advance? I'd consider a 2% discount, but no more, as that's costing me 4%.

Just under 4700 sq feet in my town. Listed for $1.025M (It started a year ago at $1.3M, we'll see what price it sells for). It's on 5 acres, but the area typically has 1-1.5 acre lots.