All Forum Posts by: Jonathon Weber

You charge a processing fee. Mine is $15. Never had any issue. 

@Aaron Hunt my tax stuff is even more complicated than that since I have 1099s (consulting agreements in my profession as S and LLC), stocks, interest payments, as well as W2s and my rental income. I can't even legally do a regular Roth IRA. I have to do a backdoor.

You will want to consult with those that know the laws to your specific situation. My situation gives my accountant headaches..ha!

Obviously my reference point for income and tax discussions is at a much higher level than most on here. For starters, since 2018, taxpayers with qualified business income (including rental income) are eligible to take a tax deduction up to 20% of their QBI. Determining whether or not you will be eligible to capture the full 20% deduction on your rental income will be based on your total taxable income for year. The taxable income thresholds are as follows:

Single filers: $157,500

Married filing joint: $315,000

"Total taxable income" is not your AGI (adjusted gross income) and it's not just income from your real estate business or self-employment activities. It's your total taxable income less some deductions. For example, let's assume you have three rental properties owned by an LLC and you net $50,000 in income from the LLC each year. But your wife is a lawyer that makes $350,000 per year. Your total taxable income for the year would be $400,000 landing you above the $315,000 threshold.

Below The Income Threshold

If your total taxable income is below the income thresholds listed above, the calculation is very easy. Take your total QBI and multiply it by 20% and that’s your tax deduction.

Above The Income Threshold

If your total taxable income is above the thresholds, the calculation gets more complex. If you exceed the income thresholds, your deduction is the LESSER of:

1. 20% of QBI

1. The GREATER OF:

• 50% of W-2 wages paid to employees
• 25% of W-2 wages paid to employees PLUS 2.5% of the unadjusted asset basis

The best way to explain the calculation is by using an example. Assume the following:

• I bought a commercial building 3 years ago for $1,000,000
• I have already captured $100,000 in depreciation on the building
• After expenses, I net $150,000 in income each year
• The LLC that owns the property has no employees
• I’m married
• I own a separate small business that makes $400,000 in income

Since I’m over the $315,000 total taxable income threshold for a married couple filing joint, I will calculate my deduction as follows:

The LESSER of:

1. 20% of QBI = $30,000 ($150,000 x 20%)

1. The GREATER of:

• 50% of W-2 wage paid to employees = $0 (no employees)
• 25% of W-2 wages page to employees plus 2.5% of unadjusted basis

(25% of wages = $0) + (2.5% of unadjusted basis = $25,000) = $25K

In this example, my deduction would be limited to $25,000. Here are a few special notes about the calculation listed above. the W-2 income of the property management company would not be included in the calculation for the QBI deduction.

Another special note, the 2.5% is based on unadjusted basis and it’s not reduced by depreciation. However, the tangible property has to be subject to depreciation on the last day of the year to be eligible for the deduction. Meaning, even though the 2.5% is not reduced for the amount of depreciation already taken on the property, the property must still be in the “depreciation period” on the last day of the year to be eligible for the QBI deduction.

And as noted above, the objective is not to get your hands on the property when you buy a non performing note, it's about trying to help the person (or family) stay in their home or apartment. As a reward you get the monthly payments.

There is a ton of risk involved in note investing.

@Linda D. Note investing is not real estate investing. One can start by buying a partial too.

From my chats there aren't that many people who invest in notes. The major players are your large banks and funds that buy a million dollars or more in bulk.

When you run your real estate business through an LLC it allows you to pay yourself a reasonable salary and the remainder of the money you were paid (or technically your LLC was paid) you can distribute to yourself as an owner draw (also known as a distribution) (which is separate and distinct from your salary). The salary versus the owner draw distinction is the critical part of all of this.

Why you say? Because you ONLY pay self-employment tax on your net income (or net salary), and you do not pay self-employment tax on the money that you distribute to yourself as an owner draw. I know it sounds crazy, but that is what I am told. So effectively, by not paying self-employment tax on the owner draw component (versus the salary), you may end up saving significantly on your taxes.

It can be done but not easy to do. The smartest thing to do is have the money going to an LLC and paying yourself as an employee. That step alone decreases your tax liabilities.

@Toral Patel

Where to buy? Banks, other investors, brookers, hedge funds and the like. Don't expect to win deals with companies like Bank of America and other large banks without the ability to throw down a million dollars on the table.

I am just getting started.

I also buy real estate.

My note investing is dealing with student loans, mortgages (multi family, commercial, businesses, and homes), vehicles and receivables.

Mobile home parks have what is called sticky tenants. They pay your to rent space on top of the soil while owning their home. They don't tend to move as often as people who live in regular homes. 

Mobile home park investing is the most underrated and underappreciated investment in real estate, IMO. They tend to perform well and not expensive to manage. 

A park with 80 lots is going to cost around $800,000 and will require about $160,000 down. That is cheaper than what you will find with multi family deals. 

I would buy a couple of mobile home parks, some homes to rent out, future contracts in agriculture, buy notes, and put the rest into a syndication. 

Sell everything and put it all in a 1031 and keep repeating. Losses will happen but that is how you grow your wealth.