All Forum Posts by: Alan Johnson

@Andrew Yu I personally believe that there are many potential advantages to the use of option contracts as an alternative to assigning purchase contracts.  The primary reason is that an option contract is designed to be a unilateral agreement (only one party has an obligation; namely, the seller) but a purchase contract is designed to be bilateral (both parties have an obligation to complete the purchase and sale transaction).

Double-closing fulfills the bilateral agreement, but assignment may not.  Since the intent of 'wholesaling' is not to actually take possession, the unilateral nature of an option agreement seems to fit the wholesaling business model and should, presumably, mitigate some of the concerns a wholesaler might have if they are unable to complete the purchase.

I am currently researching the use of options as an alternative to assignment and have started a member blog on this topic.  If you are interested in my progress (admittedly a bit slow as I only have weekends to devote to this), I invite you to go to my profile and scroll down to the 'Member Blog' link.

Hope this helps to address your question.  

@Nathan Oster  Yes, I agree that it's time to get an attorney involved!

@Nathan Oster  If it truly is an option contract then you will receive "valuable consideration" from him up front.... This means no strings attached (refundable, paid at closing, applied to purchase price, etc).

How much is the consideration he is willing to pay you?

The consideration should at a minimum cover your carry costs over the option period (mortgage payment, property tax, utilities).  On a $575k property this is quite likely to be more than a few hundred dollars.

I've started a member blog on the subject of options contracts.  Feel free to send me a private message if you want to discuss further.

...And good luck!

@Kathy Henley This is definitely something that should be discussed with the IRA custodian and the account holder's CPA. Some of the answers in this thread seem to be addressing the K-1 aspect, and some seem to be addressing the potential UBIT aspect.

While convenient in terms of getting quick responses, the pitfall in seeking answers to regulatory issues (such as taxes) in a social networking platform such as BP is that the respondents tend to answer the question as worded.  So if there is a misunderstanding of the wording, you could receive a response that is inappropriate to your situation.

Inappropriate advice could cost you time and money later in order to straighten things out.

@Jay Hinrichs Thanks for your input!

@Chris Sukala  Have you already paid the taxes on your botched 401(k) rollover? You may be able to qualify for a hardship waiver offered by the IRS.  For starters, check this article: 

https://www.kitces.com/blog/rev-proc-2016-47-self-...

(This is not advice; just information).

@Joe Arida It's not clear whether you need to be able to partner the two accounts together in order to make the investment(s). To the extent that you could separate your investments into each account (e.g., "Investment A" made from the Traditional IRA account, and "Investment B" made from the Roth IRA account), having separate LLCs might prevent one of the accounts from being distributed in the event that the other account engaged in a prohibited transaction.

@James Wise Exactly what I was looking for!  Thanks! (Only 49 states to go.....)

One risk of wholesaling that is often mentioned is that it could be considered brokering real estate without a license.  Is anyone aware of what the fines and penalties for brokering without a license might actually be by state, and/or provide me with links that could address this question?

Note:

1. Please do not respond with opinions about the legality of wholesaling; there are many other threads that seem to endlessly discuss this.
2. Also, please do not attach a link to a particular state's 5,000+ page website that contains all of the real estate statutes.  I've already been there.... but I would appreciate a direct link that is targeted to this question that you may have picked up during, for example, your real estate license education and training.

Thanks for any assistance you can provide!

@Matthew Charron Hi Matthew.  I was wondering if you started wholesaling and have any experiences to share regarding what you learned about expenses?