All Forum Posts by: Mike S.

@Todd Goedeke

Yes and you can find other YouTube videos showing why Ramsey is wrong in his statements…

Educate yourself.

@Todd Goedeke

Yes Dave Ramsey is a financial expert and believe you shall not use leverage ever…

So all of us here in BiggerPockets are stupid using mortgage to buy real estate…

Again, educate yourself and do the maths. But it appears here that even simple maths is too difficult for some to understand here as they are blinded by their absolute convictions and refused to challenge themself

Quote from @Todd Goedeke:

No insurance policy comes close to averaging better than 6-7% long term. You will never see returns posted as investment returns for life insurance. 

Insurance policies by themselves are getting a 3 to 7%long term IRR tax free. It is not phenomenal by itself. However during retirement you can safely get 8% of cash per year out of it forever you live, while in a 401k you don't want to take more than 3% out per year if you want it to last just 30 years.

Also, during the growing phase, while 3 to 7% IRR is way less than some good real estate syndication, when you use a cash value life insurance in your investment system in the same syndications, you increase your syndication investment return by a few percents. No one here is advocating using only a cash value life insurance policy as an investment. But by using them with your other investments, the few percent increase of return will in the long term (over 10 years) bring more wealth, despite the initial loss of investment capital due to the front loaded fee.

If you have your own side business that create some minimum income (like selling on eBay, managing some properties, etc...) and can create a Corporation for it, you can sponsor a solo 401k and roll over your fund from your prior employer 401k.
You can then invest your solo 401k in real estate very easily.

The second option would be to roll over to a self directed IRA. This option is less desirable than a solo 401k as you have more restrictions in an IRA than a solo 401k (including UDFI taxes).

I also would encourage you to look at your taxes. If you are in between jobs and your income for the tax year will be lower than usual, it may be a good time to do a conversion from traditional to Roth (preferably again in a 401k before an IRA if possible as you can roll over a Roth 401k to a Roth IRA but not the opposite).

Quote from @Mike S.:

Tax avoidance is illegal. Tax optimization is not.

I tried to update my post.
I was wrong, tax avoidance is legal. Tax evasion is not.

Quote from @Richard F.:

Tax avoidance is illegal. Tax optimization is not.

Quote from @Richard F.:

I am not an expert with regard to tax avoidance or isolating liability, but all of the above, while certainly creative, I must ask... has your management arrangement ever been tested in court, or approved in writing by the RE licensing authority?

The statutes explicitly exempt licensing when self managing your own properties. I didn't research case law on that matter but I am not worried as eventually I am still the 100% beneficiary of the property.

But you are perfectly correct that when using entities, you need to make sure that the flow of money is respecting each entity. You should not get money to yourself directly as it will be used to weaken the veil of your entities. If you don't respect your entities, why should a judge do?

I don't know what is your exact situation, but for me a management corporation is so much more than just collecting rent.

It is the corporation I can take a salary from and fund a solo 401k. It is the corporation that reimburse all my ancillary expenses and purchases that I am using for my investments. It is also reimbursing my vehicle mileage and medical expenses.

Also you may need to have the entity registered in the state where the properties are as you need to have a local situs if you need to start an eviction or other legal action.

For CA, look at Clint Coons Youtube videos.

https://www.youtube.com/watch?...

https://www.youtube.com/watch?...

I am not aware of all the CA specificities.

In my case, my management corp is a 1% member of the holding LLC so, as a co-owner of the properties, it was exempt from real estate manager license requirement.