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Long Term – Short Term – Real Life Term

by Jeff Brown on September 28, 2010 · 4 comments

  

This morning I got my daily fix out of the way quickly, talking with a very bright investor who’s been doing well in turn ‘n burn mode. Not 40 yet, he’s married with three young children. They’ve been pretty successful in buying REOs, rehabbing them, and doin’ it over again. They’re now liking the whole lease/option approach in selling these homes. ‘Bob’ and his wife ‘Marie’ have very good heads on their shoulders — smart folks.

However, they’re realizing that even though they’re making five figures a month between them, their job related retirement plans are ticketed to be a colossal failure. Also, they can now see the emerging script with their rehab success. They’ll make a lotta money, but since by definition, the strategy in place  must keep their capital churning, getting a reliable retirement income established will be problematic at best.

What to do?

Time doesn’t allow for a detailed exploration of all their options and the execution thereof, but here’s a quick outline of their main menu.

1. Separate literal turn ‘n burn deals from the buy/rehab then lease/option deals.

2. Make use of either/or long term cap gains rate — tax deferred exchanges — for the closed sales of lease/optioned properties.

3. Move the equity to long term purchases — tax deferred if indicated — the agenda being the development of retirement income.

4. Stop — as in ‘by around 4:30 yesterday afternoon’ — making contributions to both 401(k)s and the IRA they now own.

5. Divert those contributions to separate EIULs  — one for them to develop a second basket of tax free retirement income — the rest for their kids’ education costs.

6. The rest will be in a separate post showing exactly how their particular Purposeful Plan will be structured.

As is true with so many people with whom I talk, they have the potential for a retirement far beyond what they may have envisioned as possible.

Next week I’ll show what they might consider doing — the primary goal being retirement in 20 years or less — with retirement income well in excess of $100,000 a year.

I strongly suspect they’ll be able to retire before 20 years pass. I also believe they’ll end up with an annual income above what they ever made while employed.

This is gonna be WAY fun.

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{ 4 comments… read them below or add one }

Bilgefisher September 29, 2010 at 6:43 am

Jeff,

Your posts help us all keep our eye on the prize. Every time I read one it reminds me why I am doing all of this.

Jason

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Joshua Dorkin September 29, 2010 at 7:08 am

Absolutely, Jason . . . there’s always an inclination to go for the short-term, but Jeff always reminds us to think about the long term.

Reply

Jeff Brown September 29, 2010 at 7:33 am

Thanks Bilgefisher, it is easy to get lost in the daily minutia, isn’t it?

Hey Joshua — how’s your sleep lately?

Reply

Katee July 6, 2011 at 1:44 pm

Again Jeff Thank You.

These step by steps help keep things clear and keep us all moving forward and preparing effectively for the long-term.

Keeping ourselves and our clients continually reminded of the future and rightly using tax deferment and trades is a great tool and invariably essential in these processes.

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