All Forum Posts by: Charles LeMaire

@Paul Moore - Hey Paul, Great Question!  But to be clear, I am not a RE Pro, just a serial passive investor.  And certainly not a CPA!  My understanding, not that it matters, of current law is that if you own it at death the basis is reset. This method of tax avoidance does have the side effect of you being DEAD!  

And one would owe estate tax on any end value above the exemption (I believe this reverts back to a lower number in a few years), so not terribly unlikely. Estate planning good!

As I am not a RE Pro, I depend on the disposition of an asset rule to help.  This also kicks the taxes down the road, but later is thought to be better than now.  And I hope to be able to move to a point that apparent income is minimal and some of the cap-gains will be taxed at 0.  As those pent-up taxes come due, I hope to be at lower rates.  

Charles

With the high likelihood of being reprimanded by the Moderator, I mention that the Sumrok organization (Yes, I am student, but NO, I do not work for Brad!) does have a lower priced passive only training/networking option called Foundations.  As this is information and NOT a SALES PITCH, I leave it at that!

Regards,

Charles LeMaire

Yes, and no!  And this is just my opinion!  One can use the passive loss to push taxes into the future.  This is clearly what the RE Pro wants, but it is also possible for a serial passive to take advantage of this.  Talk to your CPA about using "passive losses at the disposition of an asset".  For instance, this year, my passive losses will allow me to do larger Roth conversions and stay in the lower tax brackets; note the rates are a bit better now than after 2025. 

I suggest that using a retirement account has some disadvantages: consider taxes, depreciation (passive loss), tax rates.

If you use an IRA and invest in a property that has a loan on it, you are subject to UDFI (sometimes confused with UBIT). Many syndications don't pay off the loan, so the tax will apply (yes, the IRA is subject to tax! Even if it is a Roth!). A Solo 401K avoid this tax.

In non-Roth retirement accounts, you will move what would have been Cap Gain to regular income in the future when you distribute (RMDs!).  Yes, a Roth will avoid this.

In all retirement accounts, you will forgo the depreciation (passive losses).  These can be used to offset income.*  Roth may win here, but that income offset is sort of nice.

* Before everyone piles on about RE Pro (yes, that is one way to do the offsets), realize that at the disposition of an asset, Cap Gain unlock passive losses to be used against all income. 

Regards,

Charles LeMaire

I suggest that if this is an SD IRA that you not put it into a RE syndication that does not intend to do a long-term hold. There are three issues:

1. IRAs are subject to UDFI (often confused with UBIT). This tax is applied to a percentage of the profits equal to the loan. Say you have an 80% loan, 80% of the gain, less some offsets, will be taxed (YES, there is a tax in your IRA!) at a high rate. DDT := Don't Do That! A Solo-401K is not subject to that tax.

2. By using a deferred plan, you will turn income that would have been taxed at Cap Gain rates, into income taxed at earnings rates. 

3. You will loose any benefit that the depreciation and passive loss might have given you.

It is legal, but less beneficial!

Regards,

Charles LeMaire

This is a hard one to wrap your mind around.  I suggest you go to YouTube and search for "Passive Activity Loss & At-Risk Limits".

I'm sure you have heard all the benefits of being a R.E. Pro.  Well it turns out that in the year one disposes of an asset (sale of the property), all of the previous depreciation on that property and all of the depreciation on other properties for that year are "released" to be used to offset the gain on the property and can be used on earned income.  I am not a CPA, just an investor that has also been trying to understand this.

Regards,

Charles LeMaire

First stop - SEC lawyer.

It is more MF, but much would apply to 3Net, read The Best Ever Multifamily Syndication Book by Fairless & Hicks.

Regards,

Charles LeMaire

Infinite Banking (IB): I rather think this is a "religious" question.  If you believe, then it is real to you and you like the results.  If you don't believe, ...   

I found and watched 3 very detail, albeit quite similar, IB videos.  It was clear their source was the same and all mentioned Nash.  I took their examples showing the benefits and how to use insurance and checked their math.  It look like it would work.  Then I reran the examples simply using a real bank.  The bank results beat the insurance.  

Perhaps there is some "long-game" that would differentiate IB, but it seems to me that the proponents of IB need to use an example that makes the advantage clear.  Perhaps the tax benefits way off in the future might make it worthwhile, but they did not show that.

One of the videos used a car purchase to lead into his main example.  It this one, he alleged his banker showed that borrowing for the car was better.  He was very convincing, but the math was way off. 

The tax treatment if started early enough, might be advantageous, but as I mentioned, that was not in the examples.

Regards,

Charles LeMaire

I want to second the comment on Brian Burks comment and his book.  The first, above, is very comprehensive, as all of his comments are.  And his book is a good read and very thorough.  

Charles LeMaire

@John Stanczak - I have met Jillian Soditi a few times, she had a great reputation wrt RE Syndications.  Her advice is rock solid.

I was going to suggest (humorously) the phone book, but I don't think those exist anymore.  

In my opinion, you need to try IRL (in real life). To my knowledge, there is no "Amazon for Investors".   Go to meet-ups (Yes, the virus makes that harder) and network. Find some like-minded person and get coffee.   

To do a 506(b), you must have a pre-existing, substantive relationship. You should have been building a database of prospect for quite some time.  If you are too far along on the deal you mention to be "rep-existing", you may need to try for an active partner or start over.

I've gotten into 50+ MF deals as a passive (LP), it is the relationship with the lead (GP), along with the business plan, that makes the deal interesting.  Personally, I would avoid a GP that does not follow the rules.

Regards,

Charles ("Grumpy") LeMaire