All Forum Posts by: Account Closed

Clinton was indeed responsible for the repeal of the Glass-Steagall Act in November of 1999 which was indeed a big step toward the mess today. It was a Republican bill, but he signed it!

But along with his many failings, sexual and otherwise, he actually managed to have 3 straight years of budget surpluses before turning it over, even got rid of the 30 year bond, Bush never had a surplus. When the big 'O' took office it was already forecast to be 1.2 trillion deficit with an 800 million stimulus package included.

But Bush repealed the up-tick rule, allowed the banks to expand leverage and never attempted to reign then in, he also never came close to a balanced budget and left the world at the brink of collapse, in two wars, and within the worst recession since the depression.

Watching the mis-management of Tarp and the Car companies, both Bush and Obama, brings no joy either. Ayn Rand must be saying. "I called it!"

But again, blame does not set a path forward, and you are right, he asked for the job so stop complaining about the past. How would you all go forward from here?

Me. I would re-institute the Glass-Steagall Act, up-tick rule, and raise the balance sheet capitalization requirements for any institution allowed into the FDIC program or use the Fed window, and clean-up the GAAP, they are broken.

I would bring all derivatives and Hedge funds under regulation and stop the financial madness that is at the root of the credit crisis. The financial institutions have become completely corrupted by greed and we need to stop this from ever occurring again by reigning them in.

Disband the Sec, as well, it has failed to protect our system in any way and seems to be more a financial institution lobbyist group these days then anything else.

Hi Mike,

Well saying that the Bush admin was a miserable failure is like saying the Challenger disaster was a minor technical problem.

Spent 6 Trillion Dollars more then he took in and left the world near financial collapse, it was his watch, the dollar was burnt there, and nothing to show for it. Just gone! The first person to say we are safer gets thrown up on!

Reminds one of Pogo, "I have seen the enemy and it is us!".

Hopefully, congress will pass a law requiring sterilization of the whole family,
OK, thats getting nasty but ..

I agree Obama definitely has socialistic tendencies and some of them, quite upsetting. I am watching in sadness at the car companies and the mis-handling of the bankruptcies.

My husband and I own some unsecured GM bond paper and it is pretty clear now that we willed be wiped off in favor of supporting the UAW which burns us quite a bit.

It is true, we will recover from the bite, but for the UAW ?, Smacks of "Atlas Shrugged" doesn't it? Completely undeserving of any support, but so many jobs in supporting industries.
Not sure which way is right.

But hopefully, there will be some some good to come out of the other infrastructure, health care, education initiatives.

I do not feel it is correct though to say his spending is the cause of our collapse, likely to happen as you mention or at least a lot of dollars to be printed to pay off foreign debt, , but he inherited 11 trillion in debt and basically a depression economy with no chance of achieving anything without massive spending.

Saw his picture in a paper this morning and noticed, he has aged a lot in this job already, don't know how many people would like to have it at the moment or would know how to do it better.

Cheers

Trying to determine a cause for this crisis by looking at policies put into place during the Clinton/AG years completely misses the point, the Banks lent money to those who couldn't possible afford it, sold unregulated securities to people who didn't understand them rated triple A by the corrupt rating agencies, the SEC lifted the limits on leverage the financial institutions could use on the balance sheets and slept through their roles a system guardians, ALL of this occurring in the last 8 years under Republican leadership and allowing the financial community to almost destroy our economy, while
being touted by the past administration as years of positive growth, unbelievable!

Listening to Republicans and republican policy supporters moan just reinforces my belief that they have learned nothing and deserve no support whatsoever until they acknowledge their part and apologize for this mess and their destructive policies.

Hyper-inflation is definitely one of many possible outcomes of trying to save people from collapse in their lives, but what you do differently besides the hands-off, let the financial system work things out themselves attitudes the got us here.

Complete clear now,

No. This would be considered a prohibited transaction (see IRC 4975).

IRS rules:

An entity at least 50% of which is owned (or at least 50% of the beneficial interests are held) by a combination of the above (e.g., if you and your spouse own 50% of an LLC, that LLC is a disqualified person with respect to your IRA)

It appears that you may not sell a property to an IRA if you, or any direct lineage, already own the property, not so clear if you can sell it from an LLC or S-Chapter.

Although it appears be to against the spirit of the law.

We are approaching allowable IRA distribution age and have multiple rental properties all with taxable cap gains and no mortgages

We have taken a second rental as primary residence now but why sell at this point in time at such depressed prices, so we will wait.

Our question involves transferring some of our rentals to our self-managed IRAs and then using the tax-deferred nature of it to lower the tax implications.

The mechanism would be, sell the property to our IRA's at the adjusted base, so no tax bill, unwind the property from the IRA, again no immediate tax bill, and then take our distributions form the IRA's and pay tax on that, which would be almost nothing due to our lower incomes at that point.

Again, doing this at this point in the real estate valuation may not be the best, but once values begin to climb again

Was just wondering if anyone has used this mechanism for unwinds, I believe it is perfectly legal, but will check with tax people.

Cheers

Unfortunately, I believe the answer is no, unless the rental is listed as your primary residence for at least two years.

Otherwise, when you sell the rental, you will have to pay cap gains taxes on the profit vs your adjusted base price , although some of the gains could be offset against any other passive losses ( in investment accounts for example, if you have any unrealized losses, could be a good time to realize them and offset the gains, or versus losses generated in some other real estate)

A good accountant will help you calc your adjusted base, ( depreciation recapture comes into play), so that you can calculate your tax implications and decide the best way forward.

If it was the other way around, the rental was converted into your primary residence for a period of two years, then you could unwind it and use the money with no tax implications.

We have used this method before, transfer the rental at the adjusted base to ourselves, so no tax implications for the rental company, use it as primary residence for two years and then unwind it, no tax for ourselves due to its status as primary residence.

If you can wait the two years, this might also be an option,
especially given the current deflated values.

Again, you should check all of this with your accountant, there are restrictions involved, believe it is based upon the number of times you can do this, amount of money involved, etc. but haven't checked the rules of late

About the biggest downside is the loss of the write-off of passive losses, usually caused by depreciation and one of the main advantages of rentals when not primary job, reduce your taxable income.

If a rental has a loss for the year including depreciation, which is very common in rentals, you can write off that loss versus other passive income ( investment gains, interest income) and lower your taxes, up to a limit.

This paper loss vs real income will be lost as you don't pay taxes on gains in IRA or 401k and cannot write-off the IRA loss versus non-IRA income.

With prices the way they are, low, and expected capital gains due to the unusually low prices of houses at the moment, not a killer point, but one to be aware of.

Speak to your tax guy about the rules for a full view of the affects.

Cheers.

Hi,
Ok where to start.

I have been running rentals in Florida since the late 70's and will try to answer a few
questions and venture a few opinions about what you are considering.

First about Florida in general.

Negative:
=========

a- Insurance
The insurance costs in Florida are higher as a percentage of rent then in most parts of the US,
so return on investment is impacted negatively.

1- You will be signing paper, lack of cash, so you are required to have insurance which is hard to get and expensive.

2- Insurance companies that will insure you limit the age of an insurable house
(15 years or less is common)

3- Roof age is limited to 10-15 years, regardless of roofer guarantee, so buying a house
with a 10 year old roof means you are looking at an almost immediate new roof. Cash is
usually required and an average roof cost of 5,000 for a small house.

b- Property taxes
The wondeful legislature passed two laws affecting landlords:

1- The property tax, homestead exemption was raised for homesteaders, those who live in the
home, but limited to a 10% increase per year for landlords.
This means that given that Florida like most states is broke, the landlord will
be getting a disproportionate level of property tax increases for the coming years,
I budget for the full 10%, although last year my increase was only about 2%, homesteaders
had a decrease in their taxes of up to 25%. Don't think about lying, an acquaintance of mine
was severly punished for that, financially.

2- The three month clause. The costs for getting a tenant are rising with along other costs,
but at least you could sign a one or more years lease to help with teh amortization of the
costs. But now, they have passed the three-month clause which means that a tenant can give
three-months notice the day after he signs a one-year lease and you can do nothing about it
but re-run your advertising and alert the wife.

b- Transient
Florida is a transient state which means you can expect a higher turnover then you would like,
or hope for, especially around an airbase.

c- Huimidity is a killer of carpets/flooring. Should always change all floors to
tile as soon as is possible to minimize the most annoying costs for a FLorida landlord.
Average carpet life is only about 5 years and that is with no pets, with pets shorter.
And the cleaning costs eat into your re-leasing costs eevry turnover which can be expected to
be higher, see above.

Good Parts of FLorida
=====================

a- Legal Deposits

1st, last, and security are allowed along with pets fees, pet deposits, key deposits, separate
garage arrangements and the lease language is specific and legally enforceable.

b- The property prices as an entry point are close to the lowest I have seen in thirty
years, so it is a good time to be looking at entering the game.

Now your situation in particular:
=================================

You do not have a lot of cash and so will be entering a dangerous area.

If you spend 43,000 for a house needing say 8,000 in updating, replace floors with tile, appliances
baths etc., with a closing cost of sat 8000. Well you are left with available credit of 9,000. This
will have to cover you mortgage payments durinng renovation, which you must do yourself, and finding a tenant, which you must also do yourself. No contractor, no manager, you cannot afford it and you need
an ojt education of the finer, read that as expensive points, of the rental business.

Numbers

Mortgage 15 years @7.00% on 35,000 $314.59 a month
Insurance (Landlor policy) 150.00 a month
Property Tax 80.00 a month
================

Monthly cost: 544.59 a month

Rent: 650.00 a month

Running numbers like this: Plus cash per month: 105.00

This is with no management costs of 10-12% per month.

As you can see there is no room for even a month's vacancy, and you must budget for this,
I budget 11 months a year. No maintenace numbers, I budget for two months a year.

Put it all together
==================

Even with the minimal numbers I quickly put together, you must assume a negative cash flow for
the first year or two, both for the inital repairs and the learning mistakes you will make, we all
do. And you do not have a lot of cash to hold you over, even a minor problem could cause devastation to
your budget and foreclosure.

Why would anyone do this? The reason is long term. I have 10+ houses and all are now worth 4-10
times what I initially paye dfor them, even with the late crash in prices. But during the 30 or
so years I have been in this, at least 20% were negative cash flow years until all mortgages
were paid off.

If you take a long-term view of rentals and expect pain and negative cash flow for a while,
then this is the best time I have seen to get in the game, the expected appreciation curve in the
coming years has a steep grade and capital gains are there in the future, but pain is ahead in the short
term and you must expect that, and do a lot of work, as much as possible, yourself.

You need to study Florida Landlord lawsas well, the prospective tenants will,
they can be found easily online

Hope this helped and gl..