All Forum Posts by: Timothy Metra

Opinions on Grant Cardone aside (I personally have mixed feelings), he had a podcast titled "How to Rip off the IRS" that I listened to today. I'll list what he said to always do below and my concerns.

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1.)

Claim: Every person should be taking 9 exemptions. He said that it doesn't matter whether you have 9 kids or not. Doesn't matter if you're 18 or 88 years old... 9 exemptions. He says, "Everyone should do it. It's legal, it's alright."

Concern: I'm fairly sure if you have to provide a SSN for each child when filing. I'm single with no kids, so this isn't something I'm familiar with.

2.)

Claim: Create a business entity and operate from your home. Have one of your rooms set up as an office, and claim half your office as a business expense. He used a co-worker as an example. She pays $1,550 in rent. He said to make an office out of one room, pay a membership for network marketing and say that's your business, then claim about $400 a month towards that office space. He also did say to make some attempt to sell items and whatnot, but that it's good to pay $1,000 towards the "business" and be able to claim $8,000 on taxes).

Concern: I honestly hate the IRS myself, but this seems borderline fraud. I honestly don't care about the ethics of it though, as long as it's legal. I'm okay with not paying more in taxes than I have to.

3.)

Claim: Lease a car. He says this over and over throughout the show, claiming that if you lease a car, you can claim 100% of the payments on your taxes at the end of the year. If you pay $400 a month for the car, write off $4,800 at the end of the year for it.

Concern: Not using the car for 100% business purposes. Since he's in real estate and doing deals literally everywhere, he claims all of his vehicle payments. Even said to go out and get a Lexus if you want.

4.)

Claim: No refunds. He doesn't elaborate on this too heavily, just kind of talks in circles about "the federal government gets it before you" and "don't overpay the IRS".

Concern: Owing a lot more than expected at the end of the year.

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There were some other points I'm sure I missed. Listened to it today at work, but you can find the podcast on iTunes. It's episode 240.

Like I said, I'm completely fine with approaching these strategies if legal. And yes, I will contact a CPA before actually doing so. But I'd like to know your opinion.

ALSO, I'm planning on starting an LLC within the next month, so all my operating expenses would be claimed through this and kept a record of through a business checking account. I'm not only operating the LLC for tax advantages, though. I'm looking to actually do my investments through it.

Does anyone care to comment? Please do.

@Chris Martin

Thanks, bud. I'm just not sure how to financially structure the deal. I should have about $40k to play with. Not sure if I should buy some land in cash and finance the construction, or finance everything with a small down payment.

Plus I'm unsure of which type of floor plan to go with. I'm right outside of a college campus on one side of me, and a huge city of professionals on the other side. Just a little more out in the secluded country. Unsure if I should place it towards the college town and market towards investors, or closer to the professional side and market towards professionals buying a home and settling down.

Big decision that'll ultimately decide which floor plan to go with!

@Chris Martin

I'm working with my dad, he's done it for many years. Was always the superintendent for the general contractors and really knows the business, but he did them in a different city. He built the house he's in now for about $70k under current market value.

He just knows how to build from the ground up. It's more or less up to me to take the financial risk, planning, floor plans, and whatnot, so I'm the one giving him everything for us to do.

When doing a spec build, is it best to just find out what's selling the best in my market area and order a floor plan online?

Not sure if I should go with a basic one from a website, or just use it as a rough draft and edit it on my own.

Any suggestions?

Annyyyone?

I had a rather long conversation with my father last night. He used to build houses from the ground up and sell them with his partner who was a general contractor. My dad was the superintendent over these jobs. Really smart guy in terms of these things, he's been doing it his whole life. He even built his own home from the ground up (of course with the help of others).

The project took him almost 8 months. He spent $110k to build it. 2,100 sq ft. 3 bed, 3.5 bath. $56,000 for the land (7.5 acres). He also said that he spent an additional $25,000 than originally planned (that's already included in the $110k mentioned above), because he could afford to hire out coworkers to get the job done faster and decided the money was worth spending. The property was appraised for $205,000.

Obviously, there's a lot of potential, right? I'm considering doing this for a first deal. Both my parents backed my idea. I'm pretty much going to be providing the capital, if this is the route I end up going with.

My question is this:

How do construction loans work?

I'm assuming it's like... $100,000 job. I need 25% down. Interest rate, no idea. Do that and then convert it into a mortgage while waiting for it to sell? I'm very confused about the part after the house is built. I doubt I'm going to live in it. I'd like to sell it quickly and know it's possible. Then do it again with a house I'm living in. In my state, after I'm there for 2 years, I can sell it and not pay a capital gains tax. So that's a plan. Then be an agent on the side while using the BRRR strategy for some rentals.

I always seem to ramble, I apologize. But does anyone know what's best to do in these situations? Should I leave it as a construction loan after it's built, how does that work?

@Chinmay J.

Thanks, bud. I planned on leaving on a good note. Not even putting in a 2 weeks notice. I was going to put in like a 2 month notice, really. And then type a goodbye letter to give to my bosses on the way out the door, saying how happy I was for the experience and whatnot and that it was a personal decision and nothing negative towards the company.

My only concern is I work about 60 hours a week and it's hard to build a reasonable portfolio on the side of that, plus my job is labor intensive. Not compared to construction, but it's definitely not a desk job.

I appreciate your concern. I still have a year left to decide on what to do. Whatever I do, I'll have at *least 6 months worth of finances in cash sitting in the bank.

@Anton Watt

That's a great story, my friend. How'd you handle the stress of not having a promised paycheck and all? Does it have more good moments than bad, to finally go through and REI full time? I feel like it would be stressful at times but ultimately worth going through that stress versus living an unhappy life for a day job.

@Michael Wagner

I've had my share of dumb purchases. Getting it for the status of things and whatnot, especially vehicles. I'm past that, though. Well... I'm still a materialistic person, I'm not gonna lie. But it's in the sense of being able to afford it. Yes, I might wear a nice watch and name brand clothes... But I can afford them. No, I'm not about to go and drive a $45,000 truck when I only make $30,000 a year or something. Haha.

And I'm a big believer that the best thing you can do for yourself is to be successful before trying to find something serious in terms of a relationship. So I'm not really worried about the whole marriage and kids trap anytime soon either!

But it's awesome that you still ended up in REI after getting in that much student debt. That's insane. It's definitely a good fallback for you, though. I'm think college is nothing but a business for 9/10 degrees, but something in your field is when it's necessary. I was considering obtaining my Business Management degree, although it's completely pointless in terms of me being an entrepreneur. But sometimes you gotta play the system. It could help me land a better job if I were to have to result to plan B, and it could also possibly help me obtain a loan when I have that educational experience as well.

I'm just focused on saving up for now. I really think I'm gonna go for it. Get financial freedom or die tryin'. Hahaha.

You're a bank manager for a large bank, your wife is a real estate agent, your friend has 100+ rentals with you, your father is an attorney, and your mother is a real estate agent...

Wow.

You know how some families have the military thing going? Mom, dad, brother, uncle were all in the military. Guess what Tommy is gonna probably do?

You're like that, but with real estate. Hahaha, that's awesome. You're literally surrounded by everything pointing towards you should being an investor. I just thought that was funny (not in a bad way), glad you're using your knowledge to help beginners. You're doing a great thing, man. Just had to drop my praise for it!