All Forum Posts by: Kenneth Estes

Also, I think going off the gold standard was a terrible idea. I've not independently verified this, but I've heard no currency has survived for more than 200 years once they go fractional reserve. The fraction always gets lower and lower until they remove the standard entirely and hyperinflation wipes it out.

Those are trends that were in play long before WWII and accelerating thanks to one of the worst thing that's ever happened to this country: John Maynard Keynes.

Hey Ben. Don't get me wrong, I think there's a small chance that the government doesn't pull its head out of its arse and the system as we know it collapses. If we don't listen when the "wake up" call happens, we've got some serious problems.

On your point about the have's vs the have not's. One way to quantify income inequality is with the gini coefficient. That too is not as high as it has been historically http://goo.gl/nzyMhh. On the world gini rankings, the US is middle of the pack. At least to me that implies we're not at a tipping point just yet.

I just don't feel that we should start panicking just yet. We still have the opportunity to change course.

That said, my gut tells me the likelihood of a collapse of the US government within the next 20 years is between 5 and 10%. I read enough history books to know it only takes one spark when there's kindling everywhere.

That said, back in 2008 I actually got my pilot's license and a farm in the middle of nowhere in case things get really bad...Hope for the best and plan for the worst right?

Interesting topic. I'm going to go high level to start. Let's ask the question: how bad off are we, really? I cringe when folks talk about "spiraling debt" and grandstand with "debt clocks." We need some context and I usually go with debt as a percentage of GDP. http://goo.gl/agupBG

Is it bad? Yes. Is it the worst it's ever been? No.

After WWII we had proportionally more debt. Interestingly enough I'd argue we're in a similar position today for the same reason: out of control military spending. 1/6 of our spending is on "national defense." Strange so much of it isn't even on our nation's soil. The defense spending is even higher when we note a lot of the misc spending in the budget is towards overseas subsidies which support more military activity. http://goo.gl/023rE7

How did we get out of the hole after WWII? We taxed the hell out of the nation. http://goo.gl/z8AeYT In 1945 the the highest marginal tax bracket was 94%!

Today it's 40%.

If we're going to dig ourselves out, we'll have to cut military spending and increase taxes. A lot. The issues is that this isn't politically appealing.

We're going to need a wake up call. My money is on China losing faith and selling its dollar reserves and creating a huge dollar devaluation, but that's just speculation.

OK, so we were talking about municipalities, why did I go high level? Cause municipalities ARE high level. You know how you were always taught the government was built on a system of checks and balances? Have you ever wondered what the check was on the federal government is? Originally, we were the United STATES. The check was the states had the right to secede. That went out the window with the Civil War.

Now the Federal government runs the show and things trickle down to the states and municipalities.

What's going to happen if we have a slew of municipalities declare bankruptcy? Uncle Sam is going to increase taxes and give them more support. They might even get around the political quagmire of increasing taxes by warning about a "neighbor vs neighbor" society.

Hey Levar,

In general, you don't want to be taxed as a corporation. If you do, you will have to pay tax at the corporate level and also at a personal level (called double taxation). I've a couple of article on my bigger pockets and personal blog on this topic.

If you opt to not be taxed as a corporation, taxes pass through, meaning you're on the hook for 100% of the profits. How much you pay is determined by your personal tax bracket.

I think the easiest thing is to not take a salary (I can't think of a tax benefit from taking a salary).

If you meet all of the requirements to be a real estate professional, you should be able to apply all of your LLC tax losses to your personal income. If you're not a real estate professional, you are only able to apply passive losses to your regular income if you make less than $150,000. If you make less than $100,000, you can claim $25,000.

Never comingle your personal funds and an LLC's. As a sole proprietor, this is very tempting to do, but it might cost you the protection an LLC provides.

Cheers,

Kenny

The other option no one has brought up is you can get into an area that has high rental returns by investing with someone else with a strong track record. You get all the upside, let you capital go to work, appreciation, passive cash flow, etc, without the downside of actually having to do the heavy lifting.

Actually, we've an investor group (they receive an ownership percentage) and these are entirely cash purchases.

Couldn't agree more Tom. That's why we're not going to be doing it ourselves. If we can just hand off the account and have someone else do it for us, it's totally worth it.

Cheers,

Kenny

Thanks for your replies folks!

Hey folks,

We've a couple of hundred homes that we rent for cash flow. As one might imagine, we also have a fair amount of former tenant balances we need to collect on.

We've given a couple collection agencies a try in the past but have not yet found any that really delivered. Does anyone know of an agency that might be a good fit?

Most of our debt is from South Bend, IN and less than three years old. We don't really care where they're based out of, just as long as they're licensed in Indiana.

Cheers,

Kenny

Hey folks,

I have an investment group and have a lot of investors with self directed 401ks asking to use it to invest with us.

The easiest thing to do would be to have them take out a 401 k loan and have them pay the 10% penalty (albiet back to themselves). That is not ideal.

Rather, I want to set things up so we are a "legitimate" 401 k investment. I can't seem to find any good web sites on this.

The individuals in question have self directed 401ks. What hoops do I have to jump through?