All Forum Posts by: Michael Swan

Hi again Brian,

We will agree to disagree on this point.  For me, I want the cash flow now and I wish to take it on a tax deferred basis now.  I would never take a tax deferred instrument like real estate and put it in a tax deferred retirement plan.  I have totally changed my paradigm and am putting all my eggs in one basket and guarding it with my life.  Financial planners etc... Have been nothing but bad for me and my family.

I learned my lesson well.

Swanny

Michael Swan Investor from San Diego, California

replied 6 minutes ago

Hi Brian,

Maybe I wasn't clear. You do not take all that money you speak of out of your IRA or 401k at one time. You only take it out when you need a downpayment. Still, I believe it is not smart to invest in a tax deferred vehicle like real estate inside a tax deferred instrument like a self directed IRA or Solo 401k.

I am able to use $10,000.00 tax deferred cash flow now. My son just started college this year at San Diego State and his college is covered. If my wife or me lost our $80,000 gross W2 jobs tomorrow, how long would we be able to last, without returning to a W2 job. How much of that tax deferred retirement plan goes into your pocket every month? I am 50 years old and am financially free.

How many 1031 exchanges have you completed? It costs me $500.00 total to do a 1031 exchange. You need to educate yourself. I have not paid a dime in taxes on my tax deferred cash flow over the past 5 years. If you do real estate right, you defer, defer, defer, defer, and die. Then your kids inherit at a stepped up basis and depreciation starts all over again and they decide to continue on this same financial freedom plan and NEVER do a straight sale and keeps 1031 exchanging or refinancing, they can defer, defer, defer and die too.

You need to start by reading Multifamily millions by David Lindahl, Loopholes of real estate by Garrett Sutton advisor to Robert Kiyosaki and listen religiously to Del Walmsley's at Lifestyles Unlimited. I have listened to their podcasts for the last 3 years. When you said 1031 exchanges are expensive, I knew your financial ladder is leaning against the wrong wall.

Last, in a self-directed IRA, you will have tremendous tax consequences at the end of those 20 years etc... Who knows what the tax structure will be 20 years from now. The financial planners say, you will be in a lower tax bracket then. Remember, you will be taxed at they other rate on this real estate later held in this tax deferred self directed IRA. I like everything in my control and utilize this cash flow now. Who knows what our government wil do 20 years from now. I will take advantage of all the loopholes the government gives us now with real estate.

The peace of mind I have now is amazing!!! I just don't spend my cash flow on liabilities. I save a significant portion for more real estate acquisitions that throw off tax deferred cash flow now, not som imaginary date in the future.

When you change the way you look at things, the things you look at change right before your eyes!!!

If a lowly paid school teacher can do this, anyone can!!! 2 years from now I will have $200,000-$300,000 passive leveraged tax deferred cash flow that I can use and not wait until 65 or 70 years old, which some financial planners and pundits say people will have to wait to retire, due to taking 3-4% of this imaginary nest egg and not oulive their money by the age of 85-90.  By the way Brian, I noticed you are working in the industry you speak of.  

As you can tell by my post, I had a 10 year period that I was contributing $6,000.00 a year with a financial planner and he had me in a DEWORSIFIED mutual fund portfolio that consisted of small cap, mid cap, large cap, international and fixed.  At the end of the 10year period it was the same value I started at 10 years before.  Who made money here.  Not me.  financial planners, fund managers, expense ratios, plan administrators etc...  Don't get me started Brian.  My parents had a financial planner that sold my parents some risky Hawaiian real estate and it ended up being a ponzy scheme.  We have total control of our money now!!!

What a joke!!  Be careful out their people!!!

Swanny

Hi Brian,

Maybe I wasn't clear. You do not take all that money you speak of out of your IRA or 401k at one time. You only take it out when you need a downpayment. Still, I believe it is not smart to invest in a tax deferred vehicle like real estate inside a tax deferred instrument like a self directed IRA or Solo 401k.

I am able to use $10,000.00 tax deferred cash flow now.  My son just started college this year at San Diego State and his college is covered.  If my wife or me lost our $80,000 gross W2 jobs tomorrow, how long would we be able to last, without returning to a W2 job.  How much of that tax deferred retirement  plan goes  into your pocket every month?  I am 50 years old and am financially free. 

How many 1031 exchanges have you completed?  It costs me $500.00 total to do a 1031 exchange.  You need to educate yourself. I have not paid a dime in taxes on my tax deferred cash flow over the past 5 years.  If you do real estate right, you defer, defer, defer, defer, and die.  Then your kids inherit at a stepped up basis and depreciation starts all over again and they decide to continue on this same financial freedom plan and NEVER do a straight sale and keeps 1031 exchanging or refinancing, they can defer, defer, defer and die too.

You need to start by reading Multifamily millions  by David Lindahl, Loopholes of real estate by Garrett Sutton advisor to Robert Kiyosaki and listen religiously to Del Walmsley's at Lifestyles Unlimited.  I have listened to their podcasts for the last 3 years.  When you said 1031 exchanges are expensive, I knew your financial ladder is leaning against the wrong wall.

Last, in a self-directed IRA, you will have tremendous tax consequences at the end of those 20 years etc... Who knows what the tax structure will be 20 years from now. The financial planners say, you will be in a lower tax bracket then. Remember, you will be taxed at they other rate on this real estate later held in this tax deferred self directed IRA. I like everything in my control and utilize this cash flow now. Who knows what our government wil do 20 years from now. I will take advantage of all the loopholes the government gives us now with real estate.

The peace of mind I have now is amazing!!!  I just don't spend my cash flow on liabilities.  I save a significant portion for more real estate acquisitions that throw off tax deferred cash flow now, not som imaginary date in the future.  

When you change the way you look at things, the things you look at change right before your eyes!!!

If a lowly paind school teacher can do this, anyone can!!!  2 years from now I will have $200,000-$300,000 passive leveraged tax deferred cash flow that I can use and not wait until 65 or 70 years old, which some financial planners and pundits say people will have to wait to retire, due to taking 3-4% of this imaginary nest egg and not oulive their money by the age of 85-90.

What a joke!!

Swanny

I am really worried about continued postings regarding investing in a tax deferred self directed IRA in a tax deferred instrument like passive tax deferred real estate. The stupid tax (10% penalty) should not prevent you from cashing out your IRA or 401k money for each downpayment on properly leveraged tax deferred real estate. Read below.

Here is an example. I am closing this Monday or Tues on a 12 unit Apartment complex that, based on current leases and rent role will cash flow approximately $18,000-$22,000 right out of the gate each year. The downpayment came from a Condo that I only put down $34,000 four years ago. We purchased this property for $125,000.00. All I did was take out $50,000.00 from my tax deferred IRA to pay the stupid tax (10%) penalty and the taxes to make that down payment. It cash flowed $6,000 a year and had no vacancies since 2011 when we purchased it. Soooooo, we earned $24,000 on let's say $50,000 because of the taxes etc.... We had to pay on that original amount. That was a 50% return right. Much more if we just count the $34,000 down payment. That would be about a 70% return for those 4 years. That is about a 15-20% return on investment per year.

Now for the amazing part. We 1031 are exchanging this one little condo for the 12 unit apartment complex. We sold this little condo for $275,000.00. Remember, the purchase price was $125,000 four years ago. When you do a 1031 exchange, the taxes are deferred. That 50%-70% return (in my pocket by the way and not put in some IRA and taxed later) now gets added to that $150,000 in appreciation and all that money is tax deferred do into the 12 unit apartments complex.

Sooooooooooo, $24,000 in tax deferred cash flow plus $150,000 appreciation = $164,000 on a $34,000 or $50,000 if we are worried about the stupid tax and the reg taxes, which are much lowere than W2 earnings or sale of stocks is approximately approximately a 400-500% return.

It is a no brainer guys!! Now I just increase the NOI on these apartment complexes by raising rents and increasing efficiencies and the bank says in 2-3 years that this apartment complex will be worth about $150,000 more than I paid for it and we either refinance or 1031 exchange into a much larger complex with even more tax deferred cash flow for another 2-3 years and do it again.

You may be saying, What is the catch? It sounds too good to be true. The only way to screw this up is to hire the wrong property manager. You know who that is? That is yourself!!! I don't deal with tenants and I don't have a key to my 57 front doors (4 apartment complexes and 12 single family). I manage my property manager and make sure he keeps my properties at 95% occupancy or higher. Right now we are at 100% occupancy on those 57 front doors. We currently have $100,000 tax deferred cash flow and that is rising. We are currently negotiating to buy a 1.2 mil 21 unit in Shaker Heights, OH. This is the first time I have used private OPM and friends are going in on an equity partnership. If we get this property, we will be cash flowing $40-45,000.00 a year on that one too. I still have four more pricey San Diego Condos to 1031 for more Apartment complexes. I should be a principal in over 150 front doors easy by this time in 2017. $200,000-$300,000 tax deferred cash flow by 2018. What a country!! Our combined W2 jobs only gross $80,000.00 right now working for 30 years.

Finally, the best part ever, after you keep deferring and you die, your kids inherit at a stepped up basis and they can defer, defer, defer, and die too. That is how you get multigenerational wealth.

I love this stuff!!! Anyone can do what I did!!!

Swanny

Wow!! Do not use a self directed tax deferred IRA to invest in a tax deferred instrument like tax deferred cash flowing real estate!!! I am sooooooooooooo frustrated by people that say to do so. All your tax deferred cash flow has to go right back into your IRA. You don't get to take it out tax free to save up to buy more tax deferred real estate. Why does a 10% penalty dissuade anyone from making 10% cash on cash return that you can pocket now, not to mention loan pay down, appreciation etc... You will have to pay taxes on any appreciation when you sell at some imaginary date down the line. Personally, I took all my money and invested in tax deferred real estate.

Here is an example. I am closing this Monday or Tues on a 12 unit Apartment complex that, based on current leases and rent role will cash flow approximately $18,000-$22,000 right out of the gate each year. The downpayment came from a Condo that I only put down $34,000 four years ago. We purchased this property for $125,000.00. All I did was take out $50,000.00 from my tax deferred IRA to pay the stupid tax (10%) penalty and the taxes to make that down payment. It cash flowed $6,000 a year and had no vacancies since 2011 when we purchased it. Soooooo, we earned $24,000 on let's say $50,000 because of the taxes etc.... We had to pay on that original amount. That was a 50% return right. Much more if we just count the $34,000 down payment. That would be about a 70% return for those 4 years. That is about a 15-20% return on investment per year.

Now for the amazing part. We 1031 are exchanging this one little condo for the 12 unit apartment complex. We sold this little condo for $275,000.00. Remember, the purchase price was $125,000 four years ago. When you do a 1031 exchange, the taxes are deferred. That 50%-70% return (in my pocket by the way and not put in some IRA and taxed later) now gets added to that $150,000 in appreciation and all that money is tax deferred do into the 12 unit apartments complex.

Sooooooooooo, $24,000 in tax deferred cash flow plus $150,000 appreciation = $164,000 on a $34,000 or $50,000 if we are worried about the stupid tax and the reg taxes, which are much lowere than W2 earnings or sale of stocks is approximately approximately a 400-500% return.

It is a no brainer guys!! Now I just increase the NOI on these apartment complexes by raising rents and increasing efficiencies and the bank says in 2-3 years that this apartment complex will be worth about $150,000 more than I paid for it and we either refinance or 1031 exchange into a much larger complex with even more tax deferred cash flow for another 2-3 years and do it again.

You may be saying, What is the catch? It sounds too good to be true.  The only way to screw this up is to hire the wrong property manager.  You know who that is? That is yourself!!!  I don't deal with tenants and I don't have a key to my 57 front doors (4 apartment complexes and 12 single family).  I manage my property manager and make sure he keeps my properties at 95% occupancy or higher.  Right now we are at 100% occupancy on those 57 front doors.  We currently have $100,000 tax deferred cash flow and that is rising.  We are currently negotiating to buy a 1.2 mil 21 unit in Shaker Heights, OH.  This is the first time I have used private OPM and friends are going in on an equity partnership.  If we get this property, we will be cash flowing $40-45,000.00 a year on that one too.  I still have four more pricey San Diego Condos to 1031 for more Apartment complexes.  I should be a principal in over 150 front doors easy by this time in 2017.  $200,000-$300,000 tax deferred cash flow by 2018.  What a country!! Our combined W2 jobs only gross $80,000.00 right now working for 30 years.  

Finally, the best part ever, after you keep deferring and you die, your kids inherit at a stepped up basis and they can defer, defer, defer, and die too.  That is how you get multigenerational wealth.

I love this stuff!!!  Anyone can do what I did!!!

Swanny

Hi Prasad,

It took me a lot of reaching out to property managers, lenders, and brokers. Building contacts and connections takes some time. The rent lowering thing is not a worry to me. I buy the complexes based on increasing NOI. When you buy at the right price and focus on providing the best product and the best service, it is a no brainer. Besides, I traded in $5,000.00 cash flow for $15,000-$20,000, every time I purchase an apartment complex. Even if my cash flow goes down 50%, I still have more cash flow than the property I traded it in for.

Swanny

Sorry, at the end of that last post should have said (5 million in total real estate and 2.5 net worth and $120,000 cash flow per year and growing)

Have a great day!!

Swanny

Hi Lisa,

I am also from San Diego and in October of 2014, I began investing in the Northeast Ohio area.  Right now I have 8 single family in Euclid, with no vacancies (knock on wood) since purchasing them.  They cash flow after all expenses $3200.00 per month.  That is after keeping $100.00 a month in reserves per property, 10% property management, $35.00 insurance per month per property, $100.00 RE taxes per month.  The only issue with single family so far is that I paid cash and all in, after rehab. Is about. $250,000.  I would have rather used leverage.

Also, I have been 1031 exchanging my pricey San Diego Real estate to buy Apartment complexes in Northeast Ohio.  Right now I have 4 apartment complexes and 45 front doors in these apartment complexes.  I have 2 vacancies total.  That is approximately 95-96% occupancy.  Plain and simple, If your provide the best product and excellent service at a fair price, occupancy issues will be limited.  If you follow these two rules, it is tough to go wrong.  1. Don't lose Money!!  2.  It must cash flow!!!  Don't follow the heard and be seduced by late night gurus and there garbage of something for nothing, instant gratification, diseased way of thinking.  Get all your money out of the financial planners hands and into something YOU control the outcome.  Pay your STUPID tax of 10% and the regular taxes and only do this for downpayment on tax deferred cash flowing rental properties, not losing money and replace all your W2 earned income in 5-10 years.  I did it in 5 years, due to my low W2 earnings due to being go a teacher and my wife a low paid Special Ed Assistant.  We gross at under $80,000.00 a year, living in a very pricey area of the country.  If we can be financially free after 5 short years, anyone can!!

If you change the way you look at things, the things you look at change right before your eyes.  I learned at 45 years old that my financial ladder was leaning against the wrong building.  I educated myself and changed my existing paradigm and replaced it with a financial freedom plan that anyone can follow.  Right now $120,000 in tax deferred cash flow!! That is after 5 short years.  5-10 years from now $1,000,000.00 in tax deferred cash flow.

I have said it here before and I will say it again,

If you reach for the stars, you may grab a handful of clouds. But most certainly you won't grab a handful of mud. What holds people back is FEAR (False Evidence Appearing Real). What really scares me is the Herds of masses investing their hard earned money in 401K and IRA. What a joke!! Who makes the money? Financial Planners? Plan administrators? Mutual Fund Managers? Expense Ratios? I know it is not the investors. I got all my families' money out of that speculation and gambling game. When that stock market goes up or down, I just sit back and collect my mailbox money. Also, if I lost my W2 teaching job, how long could I make it before I had to go back to work?

FOREVER (million in RE and 2.5 mil net worth and $120,000 cash flow and growing)!!!!!

Swanny

When you transitioned to multi (greater than 4 units per property), out of state, did you find a partner in Ohio?

Unless you have boots on the ground, I find it to be much more difficult to do multiunit apartments effectively or needing to spend inordinate amount of time flying out to the site and being more involved hands on.

If I had a partner who could do more of the hands on work, I do financing that could work.

Hi Joe,

I am a teacher.  I teach at the daytime and at night time at the local community college.  I have made connections and have acquired the 8 single family in Ohio and the 3 soon to be 4 apartment complexes in the last 14 months.  Napolean Hill once said, whatever the mind can conceive and believe, it can achieve.  I work about 60 hours a week during the school year at my 2 teaching jobs.  I believe that if I live like no one else now, in a few short years I will be able to live like know one else.  

We are only limited by the limitations we put on ourselves.  I have 45 front doors right now and one vacancy.  Soon to be zero vacancies and 57 front doors with our new acquisition in February.  When anyone tells me they find it difficult to do something, I tell them to do it anyway.  Get er done!! That's what I tell my property manager when he told me it would be difficult to rent out our 10 vacancies during the dead of winter and we are down to one vacancy now!  I click on new Craigslist ad every three hours on my phone to flood it with rental ads.  If someone tells me something is virtually impossible, I tell them there just has not been found a solution yet.  

Would Henry ford have been as great as he is if he would have listened when his people told him it was impossible to build an 8 cylinder engine?  How about Steve Jobs?  Did someone tell him that this iPhone thing would not be the new wave and nobody would pay these data fees for their little phone?

If you reach for th stars, you may grab a handful of clouds, but you most certainly won't grab a handful of mud.

Swanny

I had 10 too and found out about economies of scale.  Wow!!  1031 exchange those single family in for Multifamily.  I still have 4 single family in San Diego, 8 single family in Ohio and now 3 Apartment complexes, soon to be 4 apartment complexes in Ohio.  Started with 10 single family with loans and now have 45 front doors, a great $8,000.00 cash flow per month and soon to be $10,000-$11,000.00 cash flow per month and 57 front doors  after only almost 5 years of buying our first little 1br/1ba in San Diego.

Now I have $4,500,000 in total real estate and $2,000,00 in net worth.  That is the power of the 1031 exchange and the Multifamily business model.

Swanny