All Forum Posts by: Mark Davidson

My CPA does not want to assist me in any aspect of my Solo 401-K.  So I just have her do everything but the solo 401K specific items such as annual compliance.  

The thing I like about my solo 401K financial is that they will file the 5500-EZ and I believe the 1099s and 945s if you make a withdrawal.  Both of these forms have timelines that need to be adhered to and it's a nightmare trying to get assistance and information.  Understand what forms are needed and when, don't be late filing them, and you can avoid the need for a specifically trained solo 401K expert CPA.  It boils down to communicating with the custodian so they understand what you're doing.

I also really like IRAFinancial because, like My Solo 401k Financial, they give lots of great information on youtube.  Of course, folks who post on bigger pockets deserve to be considered as well.  

I'm trying today to figure out which one of the two is best for me.

It was not that long ago when we were allowed to remove it in NW Florida.  

We were advised to line the perimeter of the house with plastic and hose the siding down while carefully pulling off mostly whole pieces.  Wrap the plastic up and tape it and take it to the landfill. 

An alternative is non asbestos replacement siding to fill in bad pieces. 

Do your due diligence before commencing.

I purchased the furniture with funds from the 401k. If I don't rent it furnished, I'd have to liquidate the furniture for a big discount.  The benefit of the arbitrage is that the condition of the property is likely to be better than with leasing it long term.  

I'm struggling a bit with the type of investing allowed within my solo 401k plan.  My concern is triggering UBTI or having the IRS frown on the nature of my investment.

About a year ago, I purchased an investment single family home using plan proceeds.  

I had planned to rent it out as a short term rental and even fully furnished it.  I then found out that this type of use within a solo 401k may or may not be allowed by the IRS so I did a typical one year residential annual lease.  

The tenants have moved out, and suprise, they actually took great care of it.  However, I know I'm pushing my luck and would rather rent it to someone who will arbitrage it and has an interest in keeping the place in top condition. 

I would like to sign a one year lease with a property manager (no family relation to me) who plans to rent it out short or long term on Airbnb, VRBO, or whatever he chooses. It is possible that the average stay may average less than 7 days, I don’t know, nor would I have control over that.  

The arbitrage investor would be the tenant and I would still be the property manager, which just means I would hire out any repair work and pay the property tax and insurance on the structure.

The way I would set up the lease is that I have nothing to do with his rental use other than entering into the annual lease with him.  There would be an addendum to the lease to specify the inventory of furniture included.

Although it is furnished, down to the utensils, I would not pay utilities, approve guests, provide coffee, snacks, or any other goods or services to him or his guests. The tenant would also be responsible for basic maintenance, all cleaning, advertising, scheduling, and lawn maintenance. I would not be responsible for any management fees with him or with airbnb, nor would I be responsible for local lodging taxes. In other words, it's just a plain old residential annual lease with his LLC.

I understand a triple net lease is probably fine with the IRS.  This is not a triple net lease since I’m responsible, for instance, for the property taxes, insurance, and substantial repairs.  It seems the IRS would not have a problem with this arrangement. The rent is even the same amount I received from the prior tenants.

I'd appreciate any thoughts.

You're in Charleston - one of the nicest cities in the country and full of historical charm.  I'd buy the quintessential Charleston townhome, in the city near the water, complete with courtyard and gas lights and do the Airbnb thing.

Did the buyer obtain a professional inspection of the house before purchasing?  Also, was the roof permitted?  If so, did it pass inspection? 

Yes, you can do it yourself, but I've seen so many poorly drafted deeds.  Do you understand tenants by the entireties, the habendum clause, consideration, legal descriptions, the formalities of deed execution, for instance?  

Remember, your estate is going to have to straighten out any issues with the deed in court and that gets expensive and time consuming.  I think you can have an attorney do it for a whole lot less than a $1,000, like maybe $250.  Your own time is worth something. 

To save costs, the drafter may place a statement on the deed that she or he has not reviewed title to the property.

Research the Statute of Frauds.  It's my understanding that a verbal statement that I'm going to sell my property to you could be made in front of the sheriff and the minister of the First Baptist Church and be completely unenforceable.  The contract has to be in writing and signed by the seller.  

What I don't like is that you are apt to lose your $10K if you don't perform, yet there's no penalty on their part.  I'm wondering who regulates auctioneers?

Verify everything with your attorney if you want to pursue this further.  Personally, I'd chalk it up to experience and move on.  There's always another deal.

I used Brian Eastman at Safeguard Advisors.  Couldn't be happier.

The investment turned out great and it's comforting to me to have a real estate investment that I control and understand.

We've never allowed them, but think about it sometime and wonder if it's worth it.  We maybe have 100 guests a year.  Wondering how many of those dogs will have fleas or ticks and or urinate or worse on the floor?  Cats spray.  Then there's the shedding and hair balls.  

So far we've been very successful not allowing pets and the place is still immaculate after a year with no smells.