New Investor in Fort Collins, Colorado!

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New Investor in Fort Collins, Colorado!

Todd Richmond
Investor · Fort Collins, CO · Member since 2016 · 10 posts · 2 votes

Thought I would introduce myself to the great members of BP!  

I have been investing off and on for about 8 years now, buying and selling, doing rentals, lease options, fix-n-flips and whatever comes along.  With the housing market being so hot in Fort Collins and NoCo, I am looking more at the buy and hold strategy.

I love the passive income from rentals, and have done well with appreciation. In March, I completed a 1031 exchange out of a mountain property into two SFH rentals in Loveland (new construction). I am hoping to purchase at least that many more before the end of the year through a self-directed IRA and other means. My long term goal is a minimum of 20 rentals, which should enable me to fully replace my income as an electrical engineer.

I have a large and busy family with 8 children that are ultimately my greatest success in life, irregardless of how well I do or do not do in real estate.

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  • Brandon TurnerPro Member
    Investor · Maui, HI · Member since 2009 · 13k+ posts · 3k+ votes
    10y

    Hey @Todd Richmond thanks for jumping in and introducing yourself! Looks like you have some good experience with real estate! Don't be afraid to jump in and help answer questions or ask some of your own.

    Have you setup your "Keyword Alerts" yet? If not - definitely add some. I'd recommend adding "Fort Collins" so you'll be notified when people talk about your local area.

    Welcome Todd!

    Podcast Guest on Show #92
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  • Dave VisayaPro Member
    Moderator
    Audio Engineer and Investor · Cebu City, Cebu · Member since 2013 · 7k+ posts · 881 votes
    10y

    Hey @Todd Richmond, welcome to the site! It's great to have you here. Feel free to ask any questions in the forums. Seeya around!

    BiggerPockets
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  • Robert Herrera
    Investor · Denver, CO · Member since 2015 · 492 posts · 267 votes
    10y

    @Todd Richmond Welcome to BP. You seem to be doing very well on you path so far, and buy and hold is the way I like to Invest. GREAT JOB on the 1031 exchange. I would love to talk about that sometime. 

    One thing I would like to point out about Self-Directed IRA, Lack of LEGAL PROTECTION.

    I am NOT A LAWYER or PAID ADVISOR, please reference your own in your area for accuracy.

    If you own 5 separate properties in your IRA, and someone at property 4 gets hurt or something, and sues you, they can get at everything in your IRA. EVERYTHING (properties and money). That's because TITLE to property is held in the SAME NAME and ENTITY. As well as your money.

    ALSO you cannot take the same TAX BENEFITS of Depreciation. As well, you will pay INCOME TAX- the highest tax available- on the money you start withdrawing if it TAX DIFFERED. TAX DIFFERED is a great way for the government to let you build up a big account and the more you build, you more you pay yourself, the more you will pay in taxes because of your tax bracket. 

    I recommend opening Separate LLC's owned by you. All tax benefits flow down to you you as the owner. Bills are paid by the LLC as a business expense and are written off. Cashflow comes to you as INVESTOR INCOME-Passive. It's taxed at a lower rate, that's before you take your depreciation. Then you can 1031 exchange that up to avoid the recapture of depreciation.

    I'm sure you know some if not most of this, but it's I felt it worth mentioning since I run into investors who use Self Directed IRA's.

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  • Brian EastmanPro Member
    Self Directed IRA & 401k Advisor · Wenatchee, WA · Member since 2014 · 2k+ posts · 2k+ votes
    10y

    @Robert Herrera

    Asset protection and asset segregation can be designed into a checkbook IRA LLC.

    While you are correct that tax-deferred funds perform different than after-tax funds in your pocket, you miss 2 key points:

    1) If one already has built up some tax-deferred retirement savings, they need somewhere to invest those funds.  If real estate can produce better results than other investments such as mutual funds, then that is the right place to put that money.

    2) Paying taxes when you take distributions from a retirement plan is not a bad thing.  The fact that you have not paid taxes on the income producing activities of that capital for many years has allowed you to snowball the plan into a much larger overall value.

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  • Todd Richmond
    OP
    Investor · Fort Collins, CO · Member since 2016 · 10 posts · 2 votes
    10y

    Hey @Brandon Turner, thanks for the warm welcome and great advice.  I've got my Keyword Alerts all set up.  I see that you are quite a prolific poster here at BP, and I will be taking the time to read your book. 

    Just curious, but you mentioned as one of your goals to own 100 units cash flowing $100/month each.  Is your market difficult to cash flow?  I only have 3 properties at the moment, but I try to target $500/month cash flow.  In that respect our goals are similar in that I am trying to get to 20 properties, i.e., $10,000/month cash flow.  Obviously, I have a long way to go,  but I am excited about the journey!

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  • Todd Richmond
    OP
    Investor · Fort Collins, CO · Member since 2016 · 10 posts · 2 votes
    10y

    Howdy @Dave Visaya, thanks for the moral support.  Glad to be here!

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  • Jack Butala
    Los Angeles, CA · Member since 2014 · 2k+ posts · 515 votes
    10y

    Hello @Todd Richmond and welcome to BP. Not only does BP have a great real estate investment community, it also has great resources on real estate investing starting with it's free online courses and videos. You most certainly came to the right place and I wish you nothing but the best. 

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  • Todd Richmond
    OP
    Investor · Fort Collins, CO · Member since 2016 · 10 posts · 2 votes
    10y

    @Robert Herrera, @Brian Eastman

    Ah yes, the self-directed IRA thing. I have read an entire book on that topic, and I still feel the need for more enlightenment. I have decided that it is just one of those things that you need to experience firsthand before coming to grips with it.

    The way I understand it, it is advantageous to set up an LLC as the controlling entity for each property you purchase through your IRA. Does that not protect you from someone getting at the rest of your IRA?

    Also, do you recommend an LLC for each property regardless of whether it is in an IRA or not? I have been considering doing that, but am a little unclear about how to move money between the different LLCs I would have. For example, I might want to use cash flow from a number of LLC properties to pile on and pay off one particular property. Just wondering what the consequences of doing that might be with LLCs might be, if any. Thanks for any insights you might have!

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  • Brian EastmanPro Member
    Self Directed IRA & 401k Advisor · Wenatchee, WA · Member since 2014 · 2k+ posts · 2k+ votes
    10y

    @Todd Richmond

    Whether in an IRA or with personal funds, there can be advantages to using LLC entities to create segregation. Such structuring needs to be both established and used properly in order to provide the desired asset protection, however, and it is best to consult with an asset protection or corporate entity attorney.

    As to whether this is a recommended strategy... it depends.  What values are we talking about?  What is your risk tolerance?  What types of properties/markets are you investing in?  Will you be managing properties your self or hiring a property manager?

    In an IRA, it is pretty easy to setup a structure where you can control the IRA funds via a master IRA-owned LLC, then have that LLC hold the membership interest of a sub-layer of LLC entities that hold properties. Income from property LLC A could then be distributed back up the chain to the master LLC, and redeployed into another investment, whether that be property LLC B or a brokerage asset or whatever.

    Outside of an IRA, proper asset protection with LLC's can be more challenging if you are using leverage. Most conventional lenders will not let you vest title and borrow in a LLC.

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