All Forum Posts by: Paul Vail

@Dmitriy Fomichenko -- thank you!  Unfortunately, I don't have income at the moment (that would qualify to open/contribute to a Solo401k.   My best first option is to explore rolling an existing Roth into a SD-Roth, but I'm trying to outline what else needs to happen first:

Do I need to create the LLC or S-corp entity? It would seem so.

It's part of a larger collection of questions I'm just starting to consider.   This is incomplete, but might be useful for others who are trying to get the nuts/bolts in place.

What is better for a self-directed (SD) account, LLC or S-corp? Why?

Do I need an atty skilled in setting up LLC or S-corp?

Do I need a CPA for paperwork, taxes, filings?

Two common types of SD-accts: SD-Roth IRA and SD-Solo401k. As I'll be using it as a holding vehicle and I don't expect income to contribute to a 401k, and I prefer the tax advantages of a Roth over a 401k, I'm leaning toward Roth. Is this a bad idea?


Determine what is necessary to open, then maintain, a SD-acct.

What kind of paperwork is involved, what needs to be filed with the feds or state, how often?

What are the fees to open a SD-acct?

How is a self-directed Roth set up with the SD-acct?

What are the fees associated maintaining periodically with a SD-acct?

How to initially roll over the funds to a SD-acct?

How to make withdrawals (is there a checkbook, online site or app for transfers)?

How to make payments into the SD-acct?

What name do I use for contracts, promissory notes and agreements (presumably the legal name of the LLC or S-corp that holds the SD-acct)?

Build a list of partner resources --
Potential financial custodians:

Potential attys:

Potential CPAs:

Quote from @Justin Windham:

@Rita Medeiros

The IRS does restrict Roth IRAs to allow transfers only to another Roth IRA. Other Roth funds (such as a Roth 401k) can be transferred to Roth IRAs or a Solo 401k with a Roth component.

If you have a significant amount of Roth IRA funds that you want to self-direct, then the self-directed Roth IRA is your best best. Checkbook control is preferred by most real estate investors, so an LLC created for the Roth IRA may be a good option for you.

If you do not have a large amount of Roth IRA funds or have the ability to make significant contributions to a Solo 401k, that may be an option for you to consider as well. Compared to an IRA, Solo 401k contributions limits are roughly 10x higher and there is no custodial requirement for the 401k. You can take participant loans from the plan, you don't need the additional expense and administration of an LLC to have checkbook control, and there is a built in-Roth component. The plans are often quicker to setup and cost less money over time especially compared to most IRA LLCs.

Justin, what are the mechanics of having a Roth within a Solo401k?  Does this tool satisfy the 'no self-dealing' requirements of the IRS?

This thread is nearly 2 yrs old, but for future readers, I didn't see anyone mention that when you roll from another form of IRA that was funded with pre-tax dollars into a Roth, you will pay taxes on that rollover.   Maybe your bracket or circumstances have you zeroed out for the year or in a low bracket, but these are two separate accounts.   Roths are funded with AFTER tax dollars.  All others are funded with BEFORE tax dollars.  Get an accountant to lay out the math for what is best for your circumstances.  

There's also nothing wrong with having more than one account.   Have a Solo401k if you want.  And a Roth.  And a SEPIRA -- go any direction you want, but understand what these different families of tax-advantaged accounts are and 'how' they are tax-advantaged.

There is an additional element that the above advisors neglected to point out:  while you can withdraw any principle you have contributed to the Roth IRA, there is an important rule involved to avoid fees for early withdrawal: the account needs to be 5 years old or you need to be more than 59-1/2.  You cannot put back that money later (unless you are doing a back-door contribution), so you'll lose out on the compounding effect of long-term investments.  You are capped at a maximum contribution every year.  And this is not a joint acct -- it is an individual account.  If you make too much money, you may not contribute.  You also have to have taxable income to contribute.  So study up.

I agree with the above -- Roths are excellent and everyone should have one if allowed.  Your kid earns an income?  They should open one, too.  Way too powerful of a tool, even with its modest contribution rules.

Quote from @Brian H.:

@Blair Tarter

Curious what your numbers ended up looking like on this deal??  I am from Watauga County, born and raised. I really feel this area is a much better fit for either fix-and-flips or AirBNBs.  I can't begin to figure out how people really make money long term on standard long term rentals up here. The property prices are absurdly high compared to what you can get for rent from people for those properties.  How did this flip end up going?

I have myself have 11 rental units, but all outside of the county. MUCH better return for the money, as far as long-term rentals go.

Funny you wrote that 2 yrs ago.   Asking prices in Blowing Rock for many properties have doubled or more in just two years.  It's no longer about investing, but sky-high speculation that someone will bite on a $300k home being offered at $750k.

Kyle, your post is 2 yrs old, with no response :(      I'm also interested in learning who to consider/not consider for a local Blowing Rock property mgr.   Did you find your solutions?

Quote from @Jeyo Punnakottil:

I am going through my 1st eviction ever.Tenant owes me 8600$ in total including 2 months rent+ Pet fees+ late fees+ court fee .Writ of possession has been obtained and eviction day is tomorrow.Will you accept 1/2 of the payment as the tenant says not to put the stuff outside but will move out on Sunday as their moving truck is scheduled on thursday.Or will you just kiss good bye to $8600 and move them out.

Fool me once...      So, no.   They'll play you again and again.  They made a tacit promise to pay on time for the use of your property.  Through their behavior, they lied.  Humans are creatures of habit - adults rarely change.  How often do you want to go through this exercise with this tenent?   One, and done.

Quote from @Jeyo Punnakottil:

I am trying to move my rental ppty to an LLc.It was my primary home and the title has my name on it.I created an LLc and a bank account for the LLc. I did a quit claim deed ,deeded all my rights to llc and had it notorized and filed it with my county clerks office.All these been done like 2 months ago .I was looking into the tax records today and it still shows my name on the tax records.I looked into the deed history on county appraisal district website and the last recorded transaction was 2 yrs ago and that is when i purchased the ppty.How do i verify that the property has been moved to an LLc?? NB: ppty is in texas.

Curious if the LLC is in a tax-advantaged account, such as a 401k or Roth.

Hey folks -- I've searched the forums, but have only found ideas on developing lists of out-of-state owners.   I have my eyes on some property that is derelict, and the best my googling can find is the owner may be in an adjoining state.   However, finding his actual contact information is eluding me.   Searching the public records thus far has me stymied.  Should I use a private investigator?  Are there resources that a RE agency may have/use that isn't something we the general public are clueless about?   I appreciate any thoughts, even the simple ones I'll face-palm when I read them.   Thank you.

@Joshua Hughes -- Thank you for confirming you do have funds to cover your backside.   I really misinterpreted the first post.  I worked with (many) folks in a retail gig that had nothing in reserve, like $0.  Scary.

I'm sure you listen to the podcasts and read the usual book collections. My ideas are digested from a bunch of theirs and my own business philosophy. Some say it's vital to keep any tenant deposits in a dedicated account (savings/CD ladder/FDIC-insured accessible thing) so commercial landlord accounting books reflect that this is a definitively separate non-fungible account from other spending accounts. If you have a financial advisor/accountant, maybe ask them if this practice is common (or required) for your area. It's on my checklist for my first BRRRR adventure.

And you mention your 'normal' checking account. In all of my businesses, I've found it very helpful to have completely separate banking accounts from my personal accounts. Easier bookkeeping, easier doing taxes, easier if there's an audit. I imagine that is what you meant. In a perfect world, we maximize efficiency and profit from every corner: rent checks go into business checking account for that house or that LLC (not one's personal acct). From there, whatever money is not needed for the next 2 or 3 months' worth of immediate bills funnels into better yielding free insured accounts. As you said, every dollar has a job. Your goal here is to fund the next investment, so that's your eye-on-the-prize. Optimizing that growing dowry/downpayment can be shifting all excess funds to a high-yield money market account, or a CD. Just not something that is harder to get at (I-bond) or can lose value unexpectedly such as stocks/bonds/crypto/gold. Every budget is different.

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And you don't have to take any out as owner draws for your personal budget? Presumably there is a W-2 job for ones own income to personal bank accounts. Paying for the roof over head, feeding and clothing family, buying healthcare insurance (I like HSA plans for the investment opportunity), put gas in the non-work car, etc. all comes from somewhere. As would contributions to a Roth or SEP-IRA as a tool for your wealth building. Presumably a fraction from a W-2 gig goes into a 401k/403/TSA plan. But that is all on the personal ledger, not the real estate empire ledgers.