All Forum Posts by: Jeff Nash

I haven't been to college in some time now but I know a lot has changed in and outside of any formal educational setting.  I think it is important not to waste time and money on pursuing something that will not provide you with a definitive skillset as an education is an investment as already stated.  Obviously certain professions like attorneys, physicians, accountants, engineers, etc. require college bachelors degrees and beyond.  So if you know you don't fall into this camp, then what direction are you heading?  If you want to pursue a career in real estate it is helpful to have a finance background and possibly even something more specialized and multi-disciplinary like construction management.  From an intangible aspect, college gives you an opportunity to build relationships and network which is huge.  It should help improve your communication skills and hopefully help you focus on improving weaknesses to whatever extent yours are.  I can see the benefit of having a delayed start and trying to do some on the job learning or get a license or two under your belt (realtor, MLO, insurance, etc), but I would say the potential benefits of college should outweigh the costs.  You always have other variations to consider like working full-time in the summer or even going part-time for starters instead of breaking altogether.  If I had to do it all over again, I probably would use the period from ages 18-28 to essentially take on many different jobs and explore what each has to offer and tactically combine them.  This strategy for example is ideal in financial services and can definitely work in real estate as you can get creative.

@Marc Howard provided some good commentary.  Interest paid on the vacant lot or unproductive land is either deductible as investment interest (limited to investment income) or capitalized and added to your cost basis.  If you itemize then you might get the best tax benefit from interest expense.  For real estate taxes, it's the same but in your case for deductibility purposes you will want to capitalize.  There is an annual election (Section 266) to capitalize otherwise deductible expenditures and you can alternate and pick and choose.  Also, insurance and lawn mowing used to be deductible as miscellaneous itemized deductions but this changed for tax years 2018-2025 with the TCJA.  Hope this helps.

@Randy Rodenhouse offered good advice.  The only tack on would be to consider papering up the loan in a formal note to make it official (unfortunately things can happen between family members) and charge an arms length rate of interest or use AFR (just search for this term and there is a good article on Investopedia).

@Tyrone Carter there are all sorts of online and in person meet up groups you can locate pretty easily depending on where you are located.  @Denver McClure can you offer any suggestions?

Are you a real estate professional and if you accelerated depreciation what would be the impact be relative to your entire portfolio and income from other sources? @Julio Gonzalez is a professional in this space and addressed some great considerations so you might strongly consider reaching out to him.

Welcome!  The best advice I can give is to plan properly and write things down.  Identify the professionals you need to surround yourself with and get systems and processes in place.  Try to work on your business (that won't happen immediately) rather than in it and leverage solid people.  The best business owners are ones that probably know there are others smarter or more experienced than them and they make them part of the team.

@Michael Cooprider your explanation makes things more clear, but I just question the billing arrangement. I would think they could put in writing the strategy and rationale for implementing it and break-down how they came up with the amount of tax savings. I generally like the 401K but it does not appear that it would be that effective based on the income you noted ($4,080 based on a 10% fee assumption). Sometimes certain things can be done (setting up an LLC in some outside state, new entity, etc.) but it does not mean you should do it or that it is entirely necessary from a cost/benefit standpoint. If you are uneasy about it you might be honest and explain to the practitioner why, which it appears that they just have not either explained it well enough or you just need more time to comprehend and grasp what they might have already told you. I'm not sure what applies but it really doesn't matter, as how you think and feel matters.

I just have a few comments and questions:

I guess I am not sure why you are asking some of these questions here since your new CPA should be obligated to explain as you have already paid good money for his or-her services.   

I do not know what your tax bracket is and if another pass thru entity is appropriate, but if you are converting otherwise passive income to active I assume maybe a retirement plan like a self-directed solo 401k is in the mix?  Any discussion around that topic?

I would think a CPA/attorney combination would be very helpful and address most of your needs, assuming the expertise is in the area of real estate, estate planning, and entity selection.  

I’ve skimmed the previous posts and know this is a polarizing subject for many reasons.  I am a CPA and also a licensed insurance agent.  I like life insurance, namely for the tax advantages and flexibility of its use for cash value types (whole life, IUL, VUL). The main problem is that it is sold to people that it is not suitable for and/or is misused by consumers. Just because you can do something with a policy doesn’t mean you should.  Life insurance is often not well explained by agents to consumers. The pros and cons, which applies to any financial product or service, are not properly addressed. Cash value insurance can be a great tool and fit for certain people in the right situations but not necessarily everyone.  

This subject is top of mind since me and another CPA worked together yesterday with a high net worth commercial real estate broker to come up with a creative solution involving cash value life insurance. He has almost all of his wealth tied to real estate, is about to get married, and already has 2 young children. The topic of protection and estate planning were on the agenda, along with tax free income in retirement, borrowing from the policy for any purpose, and the importance of legacy planning attributable to the death benefit.  It was a lengthy conversation and not one that would involve someone younger with less income and wealth.  This particular client is looking at funding $100k per year for 7-10 years and that is not an excessive amount for him (10% or less of income). Even with those dollars he would not be expected to borrow from the policy early on or until after the primary term, and ideally it would happen closer to retirement. So long story short, this makes a lot of sense for this particular client with this profile, and cash value life insurance can be a great solution or part of someone’s financial plan to some degree, but is not for everyone.  Life insurance is used for protection first.  

When people ask how or why the rich don’t pay as much in taxes (relative question) the answer usually is because they invest in and know how to use real estate and are able to capitalize on tax advantaged solutions using life insurance (and have great attorneys!). Not triggering or limiting ordinary income and using leverage tactically is key.

Yes, Sense Financial is very reputable and has been involved in this niche market for years.  @Dmitriy Fomichenko is the owner and very knowledgeable about self-directed 401k and IRAs and is active sharing and explaining how they work on BP.