All Forum Posts by: Jim M.

I mean, I don't want to sound like to voice of gloom & doom, but by considering the money lost, I can only be happily surprised if/when I get it back. :)

I predict they will file bankruptcy and close within 3 months, and all investors will be screwed.  Keep in mind that when they made this announcement, they didn't want to start a panic.  So they made it in the nicest possible euphemisms.  The reality is probably far worse.  I'm considering the $25k or so I have invested there as lost.  If I ever do get it back, I'll consider myself lucky.

I have a small exposure to them...2 or 3 deals, about $25k total.  Interestingly, a fourth one that I had just signed up for a week or two before this announcement had just been debited from my bank account.  They said I should have that money back in my bank within 2 weeks.  We'll see.  For the time being, I'm considering every penny I have with them to be gone forever.

@Chris Jensen 

Well, here is the proposal he has come up with.  I put up 100% of the purchase money.  We're talking anywhere from $100k-350k although most likely toward the lower end to start.  He does the rehab and does not bother me for any more money to pay subcontractors, if any.  Then we split the profits 50/50.

This wasn't exactly what I had in mind at first (see OP).  I mean, if I were to buy a deal and then hire him to do the rehab, I'd get 100% of the profits.  So I'm not sure I agree that he's entitled to 50% of the profits when he's putting up no money (just sweat equity unless subs are involved).  

I think I will go along with it for a while, as a learning experience.  Once we've done a few deals together and I feel like I've learned all I can from him, I might ask for a 60/40 split next time unless he is putting some money into the purchase too.

So I know this contractor who has done a few jobs for me at my own home.  He does high-quality work and is trustworthy.  During the most recent time he was at my house, I asked him if he ever does any flipping.  He said yes, he does and in fact has a few prospective deals coming his way.  I mentioned that I have some capital that I'd like to put to use and we should talk about partnering.  He agreed but since he was busy on the job we didn't really have time to discuss it further.

So of course, one option would be for me to just be his private money guy and structure it as a debt deal, but I'd really rather get a little more skin in the game and partner with him.  My question is, how would we divide the profits?  My first thought is that we'd split them after his expenses, proportional to the amount we each had in the deal.  For example, say we bought a property for $200k, $150k of it mine and $50k of it his.  Then he rehabs the property at a cost of $50k, and we sell it for $400k.  He takes his $50k rehab cost, then the $150k profit is split $112.5k to me and $37.5k to him.

I realize that this requires me to have a certain degree of trust in him to not inflate his costs but I am willing to take that chance.  He is really a nice guy and I don't think he would rip me off, and if he did, well, that would just be the last deal we did together.

Does this sound fair and reasonable?  Am I missing anything?  What about closing costs (e.g. realtor commissions)?  Should they be paid equally or proportionally?

Thanks for any input.

Hi Justin,

I'm aware of the mega 401k; in fact I even tried to get my employer's provider to implement it.  Unfortunately my employer is are far too conservative and doesn't want to make any changes to the plan.

The pro-rata rule I was referring to states that, when converting a TIRA to a Roth IRA, all monies in all TIRAs, SEP-IRAs, and SIMPLE IRAs must be considered in the calculation of how much tax is due on the conversion. 401k's, 403b's, 457b's, and the like, are excluded from these calculations. Thus, many people roll IRAs into those other entities before converting a TIRA to a Roth IRA, to avoid paying extra on the conversions. This is especially true when converting a TIRA which comprises only nondeductible contributions (and minimal if any earnings). When converting such an IRA, no tax is due UNLESS you have no-basis money in another TIRA, SEP, or SIMPLE IRA. Again, 4xx entities are excluded from those calculations. Hope that clarifies.

@George Blower

The pro-rata rule does not apply to 401k's, Solo or otherwise, only to IRA's. I actually mis-spoke in my original post. The backdoor Roth is achieved by making nondeductible contributions to a TIRA, then immediately (or soon thereafter) converting to a Roth IRA.

Here is my situation: I currently have a decent chunk of money in a few accounts from a former employer's retirement program.  They are 401a and 403b's.  The current custodian is TIAA.  I have not worked for this employer for one year, and could roll these accounts out to other custodian(s) if I wanted to. 

Here's the kicker: I am thinking about going back to work for that employer.  If I do, that money will be locked up at TIAA again.  So, I want to roll it out *before* I return to work for them.  Obviously, any money that I contribute in the future to the employer's plans will have to stay at TIAA, but I want to liberate the existing accounts before they get locked there again.

I want to transfer to a custodian that allows self-directed IRA or Solo-K. Solo-K would be my preference since this will allow me to avoid tripping the pro-rata rule when I make my backdoor Roth contribution/conversion every year.

My question is, which self-directed provider to use??  BP has a nice article at https://www.biggerpockets.com/rei/self-directed-ir... which lists 58 (!) providers.  I don't have time to investigate that many companies and would like to pare down the list to no more than a dozen before I start doing my due diligence on each one.  I would like a custodian that allows checkbook control which would make real estate investing from the account much easier.  Other than that, lower fees are better than higher ones, of course, and....what else should I look for in making comparisons??

Thanks in advance! :)