All Forum Posts by: Mark Edler

Hello Bigger Pockets,

I am looking at buying two duplexes as a package deal from a single seller. The seller is motivated, and the cash flow prospects are good. However, I am not interested in putting a significant sum down for the down payment.

I am looking for some verification on the dynamics of a seller's assist for a commercial transaction. I know personal home buyers are limited to a 6% assist. Does the same go for commercial?

I would be buying the properties in an LLC and obtaining a commercial mortgage.

Great insight @Dave Foster. Here's the link to the Rev Proc you mentioned:

https://www.irs.gov/pub/irs-dr...

The IRS definition of Replacement property for 1031 purposes:

"(2) Replacement property. A dwelling unit that a taxpayer intends to be
replacement property in a § 1031 exchange qualifies as property held for productive use
in a trade or business or for investment if:
(a) The dwelling unit is owned by the taxpayer for at least 24 months immediately
after the exchange (the “qualifying use period”); and
(b) Within the qualifying use period, in each of the two 12-month periods
immediately after the exchange,
(i) The taxpayer rents the dwelling unit to another person or persons at a fair
rental for 14 days or more, and
- 5 -
(ii) The period of the taxpayer’s personal use of the dwelling unit does not exceed
the greater of 14 days or 10 percent of the number of days during the 12-month period
that the dwelling unit is rented at a fair rental.
For this purpose, the first 12-month period immediately after the exchange begins on
the day after the exchange takes place and the second 12-month period begins on the
day after the first 12-month period ends.

Great points @Michael Plaks! Thanks for your input.

@Joel Balderas good question. A 1031 exchange requires that both properties be held as trade/ business or investment property. If you have any intent on renting a portion of your residence that you're moving into, part of your new home could be considered 1031 but only the portion that is rented.

Depending on the amount of equity you hold in your current two properties, it may be more tax efficient to do some sort of HELOC or cash out refinance to acquire the new property you will move into.

You should also note that there is no capital gain exclusion for selling the investment property (except a 1031 which is temporary) but selling your personal residence using section 121 automatically excludes $250k (500k if married) of capital gain.

If those avenues are not possible, you may be stuck with the capital gain tax. Let me know if you want to discuss your options in further detail.

Hi Bigger Pockets members,

I've been on Bigger Pockets for a couple years educating myself on Real Estate investing. I am just recently joining the platform as a CPA and looking to answer any questions you might have regarding tax accounting for your real estate ventures, or just general accounting questions!

I run my own tax practice outside of Philadelphia and also invest in Real Estate in and outside of Philly. No questions off limits!

@Catherine C. Agree with there is no tax impact because the Roth IRA contribution is after-tax. If it were a traditional IRA, There would be no impact on the accounting for the Business Account but your 1040 would show a $6,000 adjustment to income. Feel free to reach out with any other questions!

Jake,

Glad to hear you have saved up enough to start your journey in Real Estate. I love investing in Philly, I have found a few connections to Wholesalers on Craigslist (remember to do your due diligence on anything they send), realtors @Dan Powers will obviously be helpful as well. Sherriff Sale is also full of opportunities, although it is still closed due to COVID.

As you begin to invest, keep in mind that taxation of real estate investments can be complicated, but ultimately very rewarding. If you need help with tax prep services or year-round tax planning advice to reduce your tax liability as you grow, I would be happy to help.

- Mark

@Greg Dickerson thank you for that advice, much appreciated!

@Najah Yasin would be more than happy to discuss your needs.

Anthony,

This is my opinion, but I do not generally advise people to use a self directed IRA for Real Estate investments. People use them, but Real Estate is already tax-efficient as-is if you're not wholesaleing and the IRA will prevent you from using those funds until age 59 1/2, plus they can be expensive to administer since they are not common.

As for the 401(k), I typically advise to contribute up to what your company will match. The real question is, will your investments provide better returns than your company's match amount? Additionally consider the timing of your goals. "Hardship withdrawl" is not an easy election to make, so consider your retirement contributions as being stuck in the account until age 59 1/2.

A more realistic approach to reaching your goal may be to use the BRRRR method to incrementally build monthly cashflow and use equity from each home's renovations to refinance on an additional property, and repeat until you get up to your monthly cash flow goal.

Feel free to message with additional questions. I work with individuals on tax strategy and financial goal planning to come up with a plan that works for their situation.