All Forum Posts by: Jim Goebel

@Matt Pavelko

I don't see a crack.  Looks like a really nice basement/foundation, to be honest.  Where's the crack?  Are the walls straight?  

@Nick Scapellati

Well , it depends on your market.  But, it's not abnormal for us to put out 5 offers and have one get to the finish line (after counters, etc).  When starting out, we knew what we wanted so were coming in close to asking on a house that was a good fit, so that was taken right away, just about.

@Michael Cai

I'd definitely recommend bidding out as small parts of the project as you can, initially.  Try to get it down to where you have it where you're even setting goals on a day by day basis.  I know many would consider this micro managing, but at least you know what you're getting for an honest day's work.  Labor rates for a decent contractor for a day might range from $100 - 400 depending on what's going on, skilled/unskilled, where you are, etc.

@Scott Jensen

Thanks for the contributions, again.  I was kind of sad to see the limits on who the funds can be given to, but thanks for the info.  I'll be honest, so far, I don't really understand the Roth conversion ladder after looking at a couple sites.  My brain just seems to get lost in these taxation concepts.  It's actually quite weird to me as I'm very analytical but I just find myself having a hard time focusing.  I think people have explained the difference in pre tax vs post tax treatment of a Roth/traditional at least 25 times now in my life, but I still have to ask every time.

Do you think you could take a crack at explaining the concepts of a Roth Conversion ladder?

I feel like you're perhaps familiar enough with my goals to help. Again, we have ~$30k available in cash or liquid accounts in the Self Directed Traditional IRA, in addition to that asset that produces ~$1,100 / mo in income. We contribute to the 529 on a standard schedule, for both kids. Those funds would be available to move over to a contribution to a Roth IRA on a regular schedule, if it'd help.

@Account Closed

Hey Michael what you just did is nearly the definition of trolling.  I'll give you the benefit of the doubt, and allow you to critically explain your stance (which, you didn't do the first time).  However, you've got an upward hill to climb, and you didn't start by doing so.  While we all don't have to agree, at least putting in the reasons/details why you are writing things that are incendiary might be more persuasive.  There's plenty of examples of cases where it's just about a no brainer to get a 401k going, including one of which is if you get free money in a company match.  I don't think you're doing yourself justice by taking such a rigid stance.  In this case if you're so confident as you're expressing, some humility in expressing who you are, and how/why this has worked for you, would again be more persuasive.

@Damaso Bautista

I'm honestly biased towards a 4 year degree, and I accept that.  So at least you know where I'm at :)  I'd love to hear more of your perspective of why you feel it was a mistake for your kids to go to a 4 year college.  Where are they at in life, and what do you feel that they gave up by going to the 4 year college, and not taking the $$$?

@Dennis M.

Thanks for the thoughts here Dennis.  One of the other things my grandfather recommended was for me to read a book called 'The Millionaire next Door' when I graduated.  It's got conclusions of what leads to wealth, and what does the opposite, backed up with verifiable data/statistics.  I'm very grateful to have read that book at the impressionable age I did.  With that being my main source, I find two things 'wrong' with the prospect of gifting a house / rental property that potentially produces income for a child, vs. investing that money in education.  The first is, from that book, that gifts or economic support seems to do the exact opposite of its intended purpose - they do not improve the economic situation overall of the child, and perpetuate the dependency relationship/expectation.  The other, is the overwhelming correlation between those with lots of wealth, and their stress in the importance of education for themselves and their children.  I think by shifting what you're giving, you're sacrificing on both of these fronts, and I'd suggest you read that book as in my opinion, you're making a mistake.

@Steven Ko

Thanks Steven! I think I understand where you're coming from. In some ways, I think having the money separate is simpler. Certainly working through a custodian comes with its own compliance hoops to jump through. That said, we've got the self-directed IRA already going, which for me was because of 401k monies I contributed to when I was in the W-2 world. I don't know what I would have done with that money had I not socked it away in the company plan at the time, but although in some ways I was ahead of my time in terms of money, I also got by butt kicked around professionally a bit, and ended up (looking back) owning a lot of liabilities (furniture, etc). I may have spent that money elsewhere on things that wouldn't have helped me. Meanwhile, we're in a strong position with the self directed IRA at the moment, and we have tax advantages (that I hardly understand). I do agree there are tax (and other) advantages to having that money outside of the IRA (for instance, our ability to use leverage, and all the depreciation and interest deductions, etc) - but these advantages are kind of hard for me to compare apples to apples to the tax advantages within the IRA.

@Scott Jensen

@Ann Lamm

Thanks for the questions/thoughts Ann!

This is a little off original topic, but just got me to thinking - and we might be in the same boat on this, later, as well - if Ann has 'too much' money in her 529 - let's say all her kids finish college but she has $50k left over, then she's left with this extra money that can 'only' be used for 529 purposes.  Yet, what just crossed my mind is that there's plenty of other parents and kids out there that could just as easily make use of those funds for college, and those funds are worth just as much to them as they would be to Ann.  So, can't a law firm just draft up a simple contract and legal mechanism to allow Ann to 'sell' her 529 funds, essentially be compensated for designating the funds to another beneficiary.  Especially if there's no kin requirements, I guess I don't see why / how this might be prohibited.  Just thinking creatively, I guess, but asking the question - as I don't know if there's any legal issues with this.  As I said though if our kids choose a state school, or don't go to college at all (gulp) then we may be in the same boat.  I suppose passing along those funds to grand-kids might be another option.

Since Ann asked about borrowing against a 529, if there was a financial/legal instrument that would guarantee that the funds would be designated somewhere else, I could see a market for these types of securities developing.  For someone talented in the financial services industry, unless I'm missing something, why not.  There may be a need to cross collatoralize in certain situations, for instance if Ann spent all of her funds in the 529 on college, and then defaulted, a lender would have no recourse.  Whereas, if Ann would give up a second position collateral position perhaps that would be enough to satisfy a lender from a risk perspective.  Or, perhaps Scott you know the law is explicit enough to disallow these practices?

Scott, as an aside thanks for your contributions here and sharing your knowledge!!!

I haven't found time to dig into that Roth conversion ladder, and will soon.

My mind right now is simply on downwardly adjusting our 529 contributions, perhaps forgoing the CESA (Coverdale) contributions entirely, and starting/continuing to contribute to a Roth IRA independent of the Traditional Self Directed IRA that's already going. If needed, we might want to get with a custodian that allows 'partnering' of different IRA / custodial accounts, IE: so that we could buy new real estate assets with combination of funds from the Roth, traditional, etc accounts. Please weigh in on this intent, all.

@Steven Ko

I understand Steven. I'd typically be in the same boat. However, my grandfather that I loved dearly to his credit sat me down soon after I finished college, and recommended a few things, one of which was starting up a brokerage/investment account (Roth IRA) ASAP. I did, and am very happy I did. As I understand it, the ability for investments to grow tax free in either a 401k or IRA can be substantial. Granted my understanding of taxes is very limited. Also, having a forced saving scheme is something I highly value.

@Damaso Bautista

That's an interesting idea, Damaso: thanks.  I suppose we could get the rental income up to that point, but then wouldn't we get absolutely hammered from a taxation perspective there in selling the asset(s) at that point?  My understanding is that selling an asset can hit 30-40% taxes even before the early withdrawal penalty, which I think is 10%.  Sounds kind of brutal.

@Scott Jensen

Thanks for the input.  I do understand the taxation side better, from the deferred taxes in the traditional.

I'd like to explore more a way to perhaps get both a Roth and Traditional going at the same time, if I can. If that's an option, perhaps I just let the traditional stuff ride (and on that side, by the way, I'm learning more about 72t distributions) - but if we can contribute to a Roth IRA as well, then I see benefits to going that route vs a 529 or Coverdale account. Main benefits being - we can do self directed (ie: do real estate), and the contribution limits are better.

@Mike Freske

Thanks for the thoughts Mike. Yes, I was kind of wondering about the refinancing picture but another consideration there potentially is that when we looked into the non recourse lending environment under an IRA account, the terms are not favorable, at all.

@Anthony Rosa

Hey Anthony - I'm 36, so no not at retirement age.  For clarification, that $1,100 / mo is just going right back into the custodial account, currently into cash.  So it's not a distribution.

@Scott Jensen

Hi Scott, thanks.  Do you mind expanding upon your last statement?  I'll be honest, the intuition is not really there on taxes for me.  I'm wondering what you mean by 'deferring to much tax' inside traditional retirement accounts.  As in, if we build a nice base there why would we pay taxes on it later?  You may have to start small with my tax understanding.

@Jason Walker

Where are you starting from Jason.  I think most of the time people want to find an overall GC to handle a project Turnkey, this really gets a lot of people into trouble.  If you're not knowledgeable enough to know when to bring in your framer, your electrician, your finishing crew, and negotiate what you need to with them and hold them to account, then be prepared to be taken for a ride.

Other than that to answer your original question, the key is to get references that can speak to their abilities and integrity.  

@Malcolm Jarrell

I admire the perseverance.

This type of arrangement would NOT work for me.  I'm an active investor.  If you're ready to work, what I might propose is something more akin to: equity earned tied to a per hour worked basis.  Your investor (ie me) would need the option to fire you for certain non deliverables, and I'd want less equity going to you based on how many hours I had into the project.  I would track my time, and you'd be expected to track everything else (scope, schedule, budget)  Earned equity under those circumstances would be based on a vesting schedule, again tied to how many hours you make it into the project.  My assumption going in would be that you would not make it all the way through.  Your hours would be tied to a delivery schedule, tied to scope.  You'd be asked to work for free on your hours.  We have credit, the ability to do the work, and if you had any reservations / trust issues with us re: our ability/seriousness on following through on stuff spelled out in an operating agreement, we'd do what we could to build trust, but be OK if that doesn't work for you.

50% is not reasonable from what you've shared, or anywhere close.  If you had a track record of projects, where I knew I'd have virtually zero time invested and could get 50% equity, MAYBE if it was a slam dunk project.  

We'd want to run the books, ie: have full authority to manage/operate the asset once it's been 'converted' into its full income earning potential.

But, alas, this project you're suggesting is not me/us.  Just trying to suggest something to help you set your expectations.

I don't know if something like I threw out there is something you'd find a taker on, but you shouldn't assume that when someone reads your post that they don't take a critical eye to it, maybe even cynical.  I'm not trying to be a debbie downer, but the reality is that if we were to tie up a bunch of capital, with the outlook to buy an asset that may or may not hit the numbers that you're throwing out (in terms of income) and we'd want to manage it ourselves when it's at top form, giving you 50% is just ...  silly.  If it would take a couple months of work why wouldn't we just integrate this into our operations, do it, and not have reporting obligations and give up half the income?

Part of the thing that I feel like it's important for you to understand Malcolm is that once people get established, the Debt Service Coverage Ratio becomes important for their access to capital.  So you're asking for someone to put up 100% of the capital requirements to get into the deal, take on (I guess) the responsibility of managing it, and yet only get 50% of the income?

Perhaps HML would be an avenue. I don't see the partnering kind of arrangement under anything remotely close to what you're proposing. Good luck

@Jacob Murry

Hey Jacob I wouldn't assume the only solution here is to approach it from outside.

If your tenants a little crazy and your trust them, you might investigate letting them crawl around in the attic (if accessible) to locate the leak.  I don't have a great product recommendation, however there's an expanding foam product that's made for gaps to make a coy pond, so it's got to be water proof.

The next time we need a stop gap, we will mark where the water is coming from, and then when it's stopped raining, we may try sealing it up from the inside.

Of course, this is a band aid as usually when water is coming through, over time you will still have slow rot of your roof sheeting.  I don't have any contractor recommendations though, sorry.