All Forum Posts by: Loren Whitney

Hello BP Community, I haven't posted in years so it's awesome to log back in again and participate. 

I'm looking for help on two questions: 

1. What are the steps and/or roadblocks associated with creating an HOA that was intended for a development (stated in CC&Rs) but then never formally created.

2. What rights/options might lot owners have in enforcing road maintenance when an HOA doesn't formally exist yet?

Here are the facts: 

We own in a small development (8 lots on plat). The development is on a private road and there are CC&Rs in place. The CC&Rs specify the following,  "An Association shall be a non-profit association setup for the purpose of maintaining the roads within the development."

HOA bylaws were never formally created and one member of the community has basically self-appointed themselves as the leader in organizing repairs and raising funds for the road. Collecting funds for the road has been a struggle and some believe that they're not legally obligated to participate in this informal arrangement.

Anyone have insights? Thanks for advance for any helpful information,. 

Hi All, 

How would you handle the following scenario? 

Tenants write you stating that the dishwasher "smells badly" and request that you send someone to fix the dishwasher. What do you say? They have already used Affresh to clean the dishwasher but apparently there is something cause an odor. The dishwasher runs and drains still. 

TIA for your time.

@Justin Windham Yes,  we are geared towards residential and commercial brokerages as well as developers.  Regardless, anyone in real estate that wants salesforce should start with propertybase. Since it such a robust system, we offer the best starting point. Take care!

What a great discussion - enough to write a short ebook! Nice work gentleman. I was a sales director and educator in the SDIRA business for five years before moving on to something new (thank you Jesus) and I can confirm that Ian's suggestion to lend funds between non-disqualified persons is infact prohibited. That is deemed an "arrangement" in the eyes of the IRS.  The fact that he tried to disagree displays his ignorance.

Regardless of which vehicle you use to invest, please take the time to study IRC 4975. Any SDIRA/401k shop will be happy to chat you up about the rules. Just find someone you can rely on for accurate answers and don't make new investments without reviewing the scenario with a professional. 

Good luck! 

• You didn’t claim any exclusion for the sale of a home that occurred during a 2-year period ending on the date of the sale of the home, the gain from which you now want to exclude.

To me, this reads: you must wait a full two years between excluding capital gains when selling one home after another. For example, if you sell today (5.4.17), you would have needed to sell your last excluded home on 5.4.15 or earlier. Is this accurate?

@Dave Foster thanks for the info. Regarding the dates of sale, do I have to wait a full 24 months from the last sale in order to qualify? 

Hey all,

I'm looking for a little help on what doesn't seem crystal clear to me at the moment. I'm trying to determine if I qualify for the 2 of 5 year rule and avoid cap gains on my current primary residence. Mind helping me out? 

Here's the story. I purchased a home in May, 2012, lived there for six months then turned it into a rental. It was a rental for approximately 2.5 years. During that 2.5 year period we purchased and resold another residence, avoiding capital gains (2015 tax year). After selling that home, we moved back into the original home purchased back in 2012. We have lived in the home now for 2 of the last 5 years total. 

It has not been a full 24 months since the sale of our last home. Does that matter or is 2015-2017 tax years considered two years? 

TIA!

You'll find that the free and cheap services offer some value but often leave you wanting more. Sugar CRM is an inexpensive CRM to get started on. What I've learned over time is that many agents/teams make the mistake of taking on several systems for different pieces of the business instead of employing a centralized CRM. Good luck!

@Daniel Dietz

• Say I buy property A for 200K using 50% (100K) leverage, and it appreciates to 300K and loan balance is at 50K by then. There would be a gain of 150K.

The gain would actually be only $100,000 plus any depreciation used by the property.

• I sell that property for 300K, and reinvest it into an 4 plex (or whatever type of property) using that 250K of equity from the sale plus an additional 150K loan for a total of 400K using a 1031 Exchange.

OK,

• This the tax on the profit at the time of sale of the first propriety is deferred until further down the road at some point.

Yes,

• New property appreciates to 500K and I pay off the loan from operating income. So 500K 'free and clear'. I wait 1 year plus after paying off to avoid UDIF taxes on the gains.

OK

• Haven't I just avoided paying UDIF taxes on 400K of gain by using a 1031 Exchange and waiting the required 12 months after the loans are paid off before selling the final property?

Yes

UBIT and UDFI are taxes on that year’s gain or loss due to the purchase debt financing on property held that with with debt still in place. Individuals are used to accumulating gains inside 1031 Exchanges based on the “I’m eventually going to have to pay the piper when I ultimately sell the property and don’t replace it. IRAs have the exclusive benefit of being able to calculate the gain, but then determine the portion of it that is taxable based ONLY on the debt in place in that particular year. So, like magic, assuming the pay off the debt a full 12 months prior to the sale, the taxable portion of the gain on that sale is zero, zip, not a, the piper goes hungry.

Don’t forget too, that the pay off of the debt can come from any assets the IRA owns. We have seen investors direct cash flow from other property to pay off the debt on one property in anticipation of the sale. Also clients have transferred in funds from other IRAs specifically to pay down debt early, wait 12 months, sell the property with no UBIT, then transfer the extra funds back to where they came from.

• Of course the YEARLY UDIF taxes on operating profit are a whole different conversation.

Yes, and that is where depreciation benefits can help, we often see taxable losses accumulating in IRAs from newly purchased property even though the property is cash flow positive.

@Johny Kuppama

Glad you had a chance to watch the video. I hope you took away some good information. 

The IRS (IRC Sec. 4975) states that you cannot provide goods or services to your retirement plan. This can mean different things in different investment classes. This has not been clearly defined in the case of checkbook IRAs. 

Any attorney can help you with drafting an operating agreement for an IRA LLC. On the topic of Forex, be sure to do your due diligence. Forex accounts commonly require personal guarantees and are not non-recourse. Also be aware that using an IRA and an IRA LLC will be subject to the same rules. An IRA LLC does not help you gain exemptions from UDFI or UBTI.

I'm currently working on a new blog post for BiggerPockets about the pros/cons of holding real estate in and out of an IRA. Look for it in the coming weeks.