All Forum Posts by: David Morgan

@Account Closed Investing here is TERRIBLE! Don't come to Knoxville. ;)

2% rule is tougher here than elsewhere, but there are plenty of great opportunities nonetheless.

37934, 37932, 37922, 37923, 37919 are probably the most in-demand zip codes in Knox County for higher end residences. In that sense, the path of progress is in a southwesterly direction, but we'd refer to these areas as West Knoxville or Far West Knoxville.

There is certainly growth in other directions as well, as well as pockets around downtown.

The U.S. Department of Energy is the biggest employer, followed by healthcare systems and state jobs (including the public university).

Compared to other cities I've lived in, there are no real danger zones worth talking about.

I was talking to my portfolio lender yesterday when I was at the bank. I asked him if he'd be interested in coming to one of these meetups sometime to speak, and he said he could. Something to keep in mind.

@John Woodrich --

Self-employment income of $60K or thereabouts is what I had read was the sweet spot for after-tax contributions. Do you agree?

Originally posted by @Paul Papamarkos:

Thank you both for your great insight!

Ok now can you tell me what my first course of actions is? Do we go out and have an appraisal done for the property? Lets say the price of the property is a total of $400k would it be best for my mother to take out a an equity loan on the property and pay my aunt her half of $200k?

There are likely several avenues for you to get the desired results. And a lot of this depends on your relationships with your mom and aunt.

Your aunt might give you a better deal than an appraisal would, so how you decide on price is up to you. Appraisal, comps, broker's opinion letter... or just a number you agree on factoring in any repairs, speed of closing, terms, ease, favorite nephew status, etc.

One way to do it fast and loose would be to tell your aunt you'll pay her tomorrow if she'll quitclaim it to you today, then refinance tomorrow with your mom when you're on title, and pay off your aunt. Pretty sure my aunt wouldn't go for it, but yours might.

Another way would be what you suggested -- your mom buys out your aunt and refinances in the process, then you set up an arrangement with your mom to buy half the property from her either right away or at some point in the future.

But here's what I'd actually recommend: Buy out your aunt with a promissory note, refinance with your mom, and use the bank loan to pay off your aunt. I just found a local portfolio lender who would likely let you do this kind of thing all in one day, but I don't know about lenders who resell their loans on the secondary market.

And with my mom, I'd only get financing for 50% of the property value and I'd just tell her I'd be responsible for paying it off. She's still on the hook as far as the bank is concerned, but I'd let her know I'd take care of it.

But maybe your mom wants more income, so maybe she'd be down for pulling out more equity in the refinance, and then use it to buy more rental property.

@Dmitriy Fomichenko Figured as much. 

Thank you for your help.

I have a house under contract. The contract is assignable. Would assigning the contract to the 401k be a disqualified transaction? If not, how long does it take to set up a plan? Closing is Dec 21.

@Daniel Dietz, yeah, the Roth IRA is a dead end as far as rolling it elsewhere. Great way to pass wealth to heirs, however, especially if you don't need to take distributions before your own dead end ;)

I'm guessing I can find a local portfolio lender or private money for non-recourse loans with good terms if I look hard enough. Or just keep the seller's financing in place during a flip. I am extremely hands off, so I don't expect an issue with active involvement.

Thanks again for your insight.

@Daniel Dietz -- thank you, that's very helpful.

From the reading I've done, my income level likely puts me in the sweet spot for after-tax 401k contributions as well as Roth 401k contributions. Does your plan with @Dmitriy Fomichenko provide for after-tax 401k contributions?

@Dmitriy Fomichenko - yes, you answered most of my questions. Thank you.

So if I have a house in a Roth 401K that I want to start using personally, and I am at an eligible age for an in-kind distribution, the property would be appraised at the time of distribution. I would not pay any tax because it was held in a Roth account. But as far as future capital gains, the appraisal value would be my basis?

It sounds like there would be nothing stopping me from maxing my 401k contribution, maxing my traditional IRA contribution, then rolling the IRA contribution directly into the 401k. Did I get that right?

And if I go from sole proprietor to LLC taxed as sole proprietor to LLC taxed as S-Corp and swap out my SSN for a new FEIN along the way, no problem. Just fill out some paperwork.

Instead of having two 401k accounts, one for equities trading and one for real estate, notes, etc., it sounds like to do what I want to do, I would move my  solo Roth 401k from my online brokerage to a truly self-directed Solo Roth 401K, and then have the new plan turn around and open an account at an online brokerage, possibly the same one I just left... but the new plan could also open another account for cryptocurrency... another for crowdfunding... it could buy and sell paper... flip houses or wholesale without UBIT or self-employment taxes... and I could buy when it's good to buy, and sell when it's good to sell, and not have to worry about capital gains, depreciation, 1031 exchanges, tax on interest, and so on... did I get that right?

And if I live to the point that I don't want to deal with real estate anymore, I can liquidate everything and buy index funds. And if I don't need the income and don't want to take RMDs, I can roll my Roth 401k into a Roth IRA. And my heirs could spread their RMDs out over many years... and pay no tax.

So... unless you need the income now, or you don't have the money built up yet in the Roth 401K to do deals... is there any reason at all why you wouldn't do every real estate deal in your Roth 401K?

If a refinance, no downpayment necessary. You won't likely be able to refinance just your interest in the property. You'd be putting a mortgage on the whole thing, including your mom's interest. So she'd need to be on board with that.