All Forum Posts by: Bob Dole

Quote from @Aaron Zimmerman:

Quote from @Bob Dole:

@Daniel Kazakos I think we're all in agreement on cost segregation.  The thing I'm trying to figure out is how to properly qualify as a RE Prof.

 I would agree that RE prof status is hard to achieve with a limited number of properties. There’d need to be a lot of rehab work/managing that would require you to put in that many hours.

From a financial perspective, it seems like the highest leverage way to keep buying more properties is leveraging your W-2’s and then being work optional.
Have you enjoyed leaving your W-2? Is there a way to perhaps work part time? I think overall life satisfaction is very important so ultimately have to do what’s best for you. Biggest thing is not letting the tax tail wag the dog. 

We're both tired of the W2 grind.  Ready to call it quits.  Trying to pay the least amount of taxes legally possible.  Really tired of paying taxes while the govt gives away money (let's not get political here please).

Quote from@Ronald Rohde:

 It represents more risk than they need to take. unless its a gross operating business like multifamily or SS, single tenant has a lot of risk already.

 Ugh, more thing to deal with when I need to refi the property.  I'm pretty sure my current bank won't do it either since they're only doing $10m+ deals now.  I'm small potatoes.  And by the time I refi, I may be sub $1m or right around there.  

Dealing with commercial financing is such a PIA compared to a single family home.

I think RE prof is out of the question for us now. It would be hard to fulfill the 750-hour requirement (can I go to community college as part of the 750-hours?!)  I don't want to deal with the stress of potential audits if we look suspicious to the IRS.

I will do the cost segregation for the property.  We actually have 2 properties, one purchase in '24, and one purchased '19.  It sounds like we should do the recent purchase first and then figure out the earlier purchase later.

Now the $1m question, any recommendations for cost segregation firms? I know a lot of you offer this service (and no offense), but I'm looking for customers that have done this and gone thru it all.

I don't have anything of value to add to this thread, but I was reading thru it as I will have a property to refi in about 5 years due to the loan maturing.

If I'm reading this correctly, the bank won't refi for longer than the lease length?  Why is that?  

I got a 10 year loan with I think 2-3 years left on the lease.  The tenant renewed, and we have another 5 years.  If we assume the tenant renews again, they'll have 2-3 years left when the mortgage ends.  I can't just refi for another 10 years?  Or is this simply the appetite for commercial loans currently?  

BTW, my 10 year loan.  Originally the bank offered 5, I asked for 10.  They offered 7, I asked for 10.  I got 10 as I just wanted to know what my payments would be for the next 10 years.  I wish it could have been longer, but 10 was the longest anyone offered!  My rate is like 3.75%!!!!

@Daniel Kazakos I think we're all in agreement on cost segregation.  The thing I'm trying to figure out is how to properly qualify as a RE Prof.

Funny, my CPA called me yesterday to discuss the cost segregation and RE professional.

His thoughts from our conversation:
-Cost segregation makes sense to maximize deductions now.  But I'm front loading everything so there will be less deductions later on.  The cost to the study vs. what I would "make" with the increased deductions makes sense.  He says to go for it!

-RE prof is a bit trickier.  The guidelines require the 750 hours to be spent managing and working on real estate. So researching properties to buy doesn't count unless you actually buy something -- and this isn't Amazon where I'm randomly buying things on a weekly basis.  Paying bills, invoicing, etc count, but it will be hard to say it took 750 hours!  He said even driving to pick up the rent check doesn't count (the driving part doesn't count), but picking up the check does (how long does that take? 1-2mins?).  Also, our properties are commercial so it's not like I'd need to go to a duplex and sweep and clean the place.

IMHO my CPA is not conservative at all.  So I don't think he's chicken or anything.  Any thoughts on the RE prof piece?  Anyone know of people that got audited for being a RE prof and what happened?

@Daniel Kazakos At this point, it's less about gaining wealth and more about income streams.  Now of course a side effect of real estate is wealth, so not going to cry about that.  But yes, the plan is for long term holds.  Maybe at some point some cash out refi to buy additional properties.  

The thing for us is that we're both relatively high W2 earners.  This calendar year, we'll do $1m+ in W2 alone.  I left my job earlier this month with the intent of retiring -- not so sure how that's working out as now I'm interviewing as I feel like I'm not being productive (this is an entirely different beast).  

In theory if I stay "retired" from W2, for CY25, my spouse will likely work half the year and call it.  The W2 income however could be over $750k -- whole reason to stay right now is the potential for a large bonus.  I can be the RE prof for 2025.  

@Daniel Kazakos Correct, I don't think I could qualify as a RE Prof in the next couple of months given that 750 hours is required and nov and dec are "short" months.  Granted I did work on the RE items throughout the calendar year, but I didn't track the time.  (Could actually be substantial since we bought another property in 2024 so that sucked up a bunch of time).

For 2025, it looks like one of us can take on being a RE prof full time.  In my reading, the advantage seems to be taking losses as a RE Pro.  What if there are no RE related losses?  We're flowing positive on our 2 investment properties.  Is there still a reason to be a RE Pro?

@Gregory Schwartz Yes I do have a CPA.  THings have just been busy and I haven't had a chance to engage on the cost segregation conversation.  I shot him an email right after I started this thread.  

@Marcus Auerbach Not sure we have it in us to buy more real estate.  For our purposes it's all for an income stream.  At some point, the juice isn't worth the squeeze for us and we just want to enjoy life.  It'll be up to the next generation to figure out if they want to build an empire or not.  Having said that, I do believe we have 1 more property in us.  There's a lot of timing to consider, and honestly, this potential first cost segregation will be a learning experience for us.  I need to defer or lower our income as much as possible for my age 64.

@Francisco Centeno Thanks for the summary! I read it a couple of times to make sure I understood it, and i"ll probably read what you wrote a couple of times to make sure I understand it.

All, I really appreciate the responses for this thread.  I'm frankly surprised by the responses!  Great community!

@Sean Graham Thanks for the information!  So it sounds like a no brainer to do a cost segregation.

I'm not worried about the cost to do the cost segregation as it seems pretty reasonable.  Just trying to legal pay less taxes or at least defer them.  

@Sean Graham What happens if I have more depreciation than I can offset from the rental income?  I get a carryover to the next year?  Thanks

There are no plan to sell any real estate in the near term.  The plan is to buy and hold.  This is for the income stream.  The next generation can figure out if they want to sell when we're gone.  But they'll also get the stop up costs basis too.