All Forum Posts by: Tom Degroodt

I am ignorant to all of the benefits of Cost Segregation, but it was my understanding that one of the benefits to me would be when I spend capitol expense money to get a property in the condition I want it.  If I buy a property that has a tenant in place and 20 years on the roof.  when the tenant moves out and I replace the roof so I don't need to wait for the call that the roof has failed in the future.  The old roof still had some depreciation left on it.  I was told that I could bring that depreciation forward, and start the depreciation of the new roof at 27.5 years.  The only holdings we have that were bought after the qualifying date for cost segregation have been under 100K, so I have not looked very hard at using it.

Depending on your situation, whether you have children and such.  I loved the book,  Tax Free Wealth,  by Tom Wheelwright.  Again,  doing or starting a business just for tax savings may not be the best idea.  Knowing how to have it structured to best benefit you though is.

I will let the experts answer your question. I just wanted to give you my experience. The first year I was investing in RE I thought I was super smart. I wrote off everything I could legally and was able to reduce my W2 income by 25K, thus saving a boatload of taxes. I thought I was a genius until trying to get more financing. The bank saw my $25,000 loss and added $2083/Month to my Debt to Income Ratio. This effectively stopped us in our tracks until the next tax year. We were in great financial shape, but on paper the $2083 in my DTI would require an extra $55,000 a year of W2 to offset. $2083 / 43% x 12 I had one of my mentors ask me if my accountant asked me if I was going to look to finance anything in the next 12 month. When I said no he shook his head and said "Well he should have, that is his job."

TD

Yes,  I have added dependants on my W-4 at my employer to make sure I do not get a huge refund.  I am of the camp if you owe or get a refund under $1,000 you have done great projecting your year.  I never want them to use more than $1,000 of my money.  I also don't want to write a check bigger than $1,000 at the end of the year.  Here is a good tool  https://www.irs.gov/individual...

My wife and I are planning to set up a SD-401(k).  With all of the changes in both the CARES act and with Covid I have some questions about getting a loan from the plan for primary residence.

We are planning on purchasing another home for our personal residence and putting our current home into rental inventory.  We would like to keep our liquid money that is not in the retirement funds, so if I could loan myself money for a down payment for 15 years or longer that would work great for us.

Is the loan based on how you set-up or amend the paperwork when setting up the SD-401(k).

Also on a separate question, it sounds like the CARES act allows you take a distribution and pay it back in 3 years.   If payed back no taxes are due.  If you take a distribution would you pay 1/3 of the taxes every year and then amend you taxes if you paid the distribution back?  Would the 1st tax payment be due on 2020 taxes (April 2021)?

Thanks,

Tom DeGroodt

Evans, Ga

Sometimes walking away and losing the earnest money is better that getting into a bad deal and losing more.

Following

@Brian Eastman I have my rental properties in an LLC and use another LLC for property management. I pay myself thru the property management business, does this qualify as self employment for the purpose of a SD-401k?

We would not take a year rent upfront. We would however take a year rent and put it in escrow and take monthly draws. That way if things go sideways you have a chance to evict. If 1 year was paid for what options do you have if she becomes the problem tenant that you can not get rid of.

@William McGregor

We were in a similar position. If you redo closing costs will be higher than getting a HELOC. With a HELOC you could likely get 95% LTV out of your home. You will pay a higher interest rate than a mortgage. The beauty part for us was that we could pay the HELOC down when we didn't need it. Then when a deal comes along we can go get the money again.