All Forum Posts by: Peter K.

Hi Christine,

I'll start off with the disclaimer that I am not tax professional and don't play one on HULU...however, I have a self-directed IRA and have done several different RE investments with it.

First, as you probably already know there are two types of SD IRAs:

1. SD IRA. Pre-Tax deposits into this account are Tax-Deferred. Once you reach a certain age...59 1/2 I believe, you can begin withdrawing money from this account without penalty, while paying taxes on the money at that time based on your tax bracket at that time. In your examples, any profits would continue to grow this account without tax consequences....until you begin withdrawing the money.

2. SD Roth IRA - After-Tax deposits into this account grow tax-free. The idea is that you've already paid the taxes on the seed money, you shouldn't pay it again on the growth. This is a great choice if you A) expect to be in a high tax bracket in retirement (great problem to have) or B) expect huge growth/returns on your investments (another great scenario). Basically, it's the optimists IRA. :-)

An SD IRA can be converted to a Roth. The downside is that a big chunk goes to Uncle Sam and Aunt Samantha now. Some things to consider before converting:

1. What will the expected investment amount be per transaction?...meaning, if you are going to be fixing flipping 500K homes, you'll need at least that amount and some reserves in your account. So if you have 600K now, you may want to wait before converting to a Roth, as you may end up with insufficient funds to do a transaction.

2. If the amount is not an issue, you may want to consider having a smaller Roth account for the $1K to $10K example that you gave above.

There are many more things to consider, but these are some of the basics. Hopefully, it helped. Many of the SD IRA administrators, like Pensco have free trainings that cover more details. And by all means make sure that your accountant chimes in and gives you their blessing before making a decision.

Last thing is that it sounds like your main goal is to avoid paying high taxes on Flips....join the Club! :-) Flipping can be flipping expensive when it comes to taxes. Make sure to keep good records so that you are writing off all of the allowable business related expenses. Even meals and entertainment with business partners and clients are potentially a tax write-off if you discuss business...see disclaimer above. Some investors do flips to build the war chest then use some of that money to buy and hold for income that is not so flipping expensive.

Do a web search for Sandy Botkin. He is a CPA, tax lawyer and ex-trainer to the IRS lawyers. I got a lot out of his training program. It gives amazing ideas on how to legally maximize business expenses while easily documenting them to audit-proof your return.

Good luck! Happy investing!

Peter

@Johnson H. Thanks for the invite. I hope to be there. It's a bit of a haul from the South Bay, but I will be there if I can.

I haven't purchased anything over a couple hundred dollars from the gurus in many years and I haven't purchased Josh's program either, but it also caught my eye (or ear?). I have listened to a couple of his podcasts. Mostly, they are very informative. He does share his "proprietary" sale formula on one of his podcasts. It is worth a listen. I used a couple of his ideas on our last flip and got 5 offers....sold in about 2 weeks.

There is a lot in the podcast but in a nutshell he recommends pricing right at the top of the market for a buyers mkt so they feel like they have gotten a deal when they get it for under asking price. In a sellers mkt, price lower than competition. In both, market the heck out of the first open house to create a frenzy and get those one or two real buyers feeling like they may lose out if they don't make a high offer now. None of the above is new or earth shattering, but his marketing blitz approach and auction style open house along with gift cards for signing in, free stuff if offer is made within 48 hours etc. May not be for everyone but it can work. I don't like being too gimmicky which is why I only used a couple of his ideas that fit my style.

One of his exit strategies is lease options (rent to own). Is it possible that in these transactions DOM would show as 200-300 days?

I agree that in general, expensive guru junk is mostly that...junk. I know this from experience. However I also know that every rule has exceptions. Can't say for certain that Josh is the exception but he and a few others like Sean Terry do seem to legitimately want to share quality info.

Nothing beats Biggerpockets though!

Happy Investing

Peter

Bret, congratulations on having a Quality Problem!

Assuming that you are mostly flipping, one thing you could consider is offering two options to your investors.

A) 12% fixed interest rate

B) 6% fixed interest rate OR 20% of the net profit on a deal, whichever is higher.

Option A gives the more security focused investors the ability to sleep at night knowing that they'll earn a solid 12%.

Option B may satisfy the investors that are willing to take a little more risk for a bigger potential reward, while reducing your risk should things go south on a deal. Option B would be only for those investors that are funding all/most of the project.

The above could be adjusted slightly to work with buy/hold projects as well.

If the projects are small to medium and under $1M, a simple Joint Venture Agreement could suffice (see legal advice). For larger projects, then a more formal Syndication / LLC is probably a better option.

Good luck and congrats on your success!

Peter

Welcome Dustin! I'm in the North San Jose / Milpitas area. Let's chat and or meet up for coffee sometime. I'm getting back into Real Estate Investing, mostly Flipping and wholesaling to build up the war chest. Got a couple of flips we're working on right now. The Sjrei real estate club is pretty active and informative. If you're not a member, you may want to consider it. Good luck! Peter

@Ralph E.

@Bill Bockwoldt @Sarah Lam @J Martin @Amit M. @Johnson H.

Hi guys. Sorry I missed it. Sounds like a lot of good discussion was going on. Beers and Real Estate, it doesn't get much better than that!

I went to a couple of SJ Rei meetings recently. They were pretty good. Market update last night shows local market cooling off sharply from spring and summer. Be careful if buying to flip quickly.

Hope to see you all at the next one.

Hi Michael,

I'm in the South Bay. Open to doing deals all over the Bay Area within a 90-min drive from the South Bay. I'm part of a team that is doing a small number of deals now (mostly SFR) and looking to ramp up.

I'd love to connect some time and see where we can help each other.

Peter

@Ray Gonzales . Try typing "Inheritance" and "Inherited" into the search engine here at BP. You'll find some in depth past threads that have some really good ideas. That's how I came upon this thread.

Good luck!

@Brad Keller Welcome Brad!

@Eric Kennedy @Sam Lee @Sarah Lam @Amit M.

I recently joined SJREI. Looking forward to seeing Chris Clothier next month. Hope to see you all there.

@Silvio L. Congrats for taking some bold action. I'm sure it will pay off. I've also heard good things about the list. Unfortunately it's not available my investing area.

My understanding is that they folks at US Leads List have a whole program laid out that has a proven track record that is included with the list. I would call them.

Good luck and keep us posted of the results!