Coronavirus Updates

The Investor Mindset in the Age of Coronavirus: Tactics to Drive ROI

Expertise: Business Management, Personal Finance
83 Articles Written
blond woman sitting on ledge looking out of city skyline

Investors in the time of coronavirus are in completely uncharted territory. Navigating this landscape can be fraught with new and unexpected obstacles.

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In the third and final article of this series, we’re examining the mindsets investors can take in approaching these challenges, discussing strategies to determine the best course of action, and sharing tactics for achieving success. Check out the rest of the series here:

We’ve navigated the murky waters of how to approach investing and planned out how to thrive in spite of everything working against us. So, now it’s time to put those plans into action with four tactics for success.

4 Tactics for Real Estate Investing Success Amid COVID-19

Tactic #1: Tax-Free Funding

Did you know that you can set up a solo 401(k) as an additional cash reserve? Not only that, but you can use it without tax penalties if handled correctly?

A solo 401(k) gives you complete control over the buying and selling of assets without an intermediary, which in turn offers more flexibility and less administrative costs than a standard 401(k).

Related: I’ve Put More Deals Than Ever Under Contract During the Pandemic—Here’s How (and Why)

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There are four primary ways to access these funds, each with different tax penalties:

  1. Withdrawal. As of 2020, you can take up to $100,000 as a withdrawal. Though no penalties are assessed, you will likely face a larger tax bill with this method.
  2. Personal Loan. You can loan yourself up to $50,000 directly out of this retirement account. There will be no taxes or penalties for this, but you are required to pay this loan back with 5% interest within five years.
  3. Loan a Friend. This is a much more aggressive strategy on a tax and legal basis, but you and your “financial friends” can loan each other money from your network of retirement accounts under this model. The IRS tests this by determining if the other party to the transaction were removed, would it have the same effect as you were doing business with yourself in a disqualified manner? If so, you can be subject to penalties for early withdrawal or disqualified transactions.
  4. ROBS Plan. You can use a ROBS plan to move your retirement funds into a C-corp, through which you can draw a salary. This was originally designed to use your retirement funds to start a business, though you may be using it to run a business.

Withdrawing funds from your retirement should be an absolute last resort. It’s crucial that you are proactive to keep from needing to do this, but the option is there if it’s needed.

Tactic #2: Write Off Expenses

Did you know that if you spend more than $5,000 out of pocket for medical expenses, you can write them off? If you didn’t, I’ll bet you want to kiss me for telling you that.

To do this, you need to establish a C-corporation with a health reimbursement account (HRA). This will let you transfer funds from your non-W-2 income into the C-corp by charging fees, at which point you can pay for medical expenses through the HRA.

A clean and simple way to do this is to limit the fees your C-corp charges to the amount you already know is required by the HRA, thus avoiding taxes at the level of the C-corp. In doing this, you’re now paying all your medical expenses with pre-tax dollars!

Related: Is It Safe to Invest in Real Estate Right Now? 7 Ways to Mitigate Your Risk

Tactic #3: Take Back Properties

Have you ever sold someone a property using seller financing only to find the buyer can’t pay?

If you end up in this situation and want to avoid a foreclosure procedure, the key is in getting the occupant to leave the property under their own free will. Similar to the communication with tenants in the second part of this series, you'll need to discuss options with the buyer in a way that shows what's on the line for both of you.

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Perhaps they don’t realize that if they leave voluntarily, they can protect their credit score by avoiding foreclosure. Sweeten the deal for them so they’re even more willing to leave by offering assistance where available.

If you can get them to execute a "Deed In Lieu of the Foreclosure," this will move the property back into your name and leave both of you in a situation where you come out ahead. (Or ideally, move the property back into the name of your Anonymous Asset Holding Company.)

Related: 5 Ways Coronavirus Changed My Investing Plans

Tactic #4: Make 1,000% ROI

This may sound like a joke, but it all comes down to understanding how the Coronavirus Aid, Relief, and Economic Security (CARES) Act (signed into law March 27) can work in your benefit.

The CARES Act will allow taxpayers to apply credits you get now against the last three years of your tax returns. If you can find a way to acquire a bunch of tax credits now, your tax professional can amend those previous tax returns and receive a significant refund from the IRS.

With a skilled CPA and investment business partnership, you can attach tax credits to your investments. This will give you an immediate return on your amended tax filings, along with the return on the investment itself.

Questions? Comments?

Let’s talk below!

Scott Royal Smith is an asset protection attorney and long-time real estate investor. His law firm, Royal Legal Solutions, helps thousands of real est...
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    Kalavati Patel from Detroit Michigan
    Replied 3 months ago
    What kind of tax credits can you amend?