All Forum Posts by: Christie Gahan

 Caroline: FYI... Bozeman, MT was -30 this weekend plus a wind chill that would give you frost bite on oncovered skin in 5 minutes.  Wyoming was colder.  Maybe, not be in Wyoming in the winter ???  

This is a GREAT question.  I hope someone chimes in cuz I don't know.  Whe I think of the 1980s I think interest rates.  18%.  Uh huh.  I'm sure a lot of folks sat on the side lines then.  That's like financing a house on a credit card.  Expensive mistakes.

 65% is on the high side.  But, if you don't pay attention to these things you can pay that. To get to that number you would be paying state and federal income tax and both sides of your SSI. This is you taking everything as ordinary income.  There is also some sort of surcharge / tax for higher income  Might point is, emphasize how much you keep.  You need an accountant that likes strategy.  You might as well start with a good strategy.  

The S Corp numbers you have look correct. But, I dont mess with that too much. The tax rules change on a yearly basis, so if I don't personally have an S Corp or a Self Directed Roth IRA, I don't keep the precise numbers in my head. Plus, it will change if you are married or have kids or whatever. Cuz your gonna hire your kids as a business owner and then as a Dad you're gonna say. You need an IRA. Don't let them spend the money. Ha Ha.

In a sucessful story, it sounds so easy.  I know it's not.  What kind of improvements did you have to do to "create" lots.  

How was the PML experience for you?

 Jay: what part of Oregon was this in?

Start asking around for a good accountant. This is not someone who prepares your tax returns. You will need someone who will strategize with you. They will probably work with other small business owners. There is a strategy to run short term rentals to off set income but there are a lot of rules. Congress will probably change up the rules between now and then so I wouldn't worry about a deep dive in that now. There are lots of tax advantaged accounts for retirement and health savings accounts. Read up on "The Back Door IRA" "The Back Door Roth". The basic idea is that you put as much in to retirement accounts as possible. ( You can then convert to a Roth) You change the retirement account to a self directed account. This will allow you to invest in real estate with your retirement funds. Important: Once it is in a retirement account it needs to stay there. You will pay taxes and fees and crap if you take it out. The retirement accounts do nothing to help you pay your day to day bills. Nothing. The retirement funds build wealth. This year if you did all the retirement funds allowed and switched them to self directed to buy real estate... you could put away about $65k. ( Sorry, I don't remember the exact amount.) Do this for 3 years and you have about $200k. You can really do a lot with that. You are now running a small business inside a tax free account. There are a lot of rules. The government isn't gonna make it easy for you. The bummer with flipping is that you are self employed and are gonna pay state, federal, social security.... Almost 65% of what you make goes away. You need the money to stick to you. At some point, if you have enough cash to pay your daily bills... partner with an investor. The two of you form an LLC. The LLC buys the property. The investor is dealing with the loan and down payment. You bring to the table that you are doing the work and don't have to be paid an income because you are part owner. Sell a year and a day later. You are now taking profit from an investment. This is long term capital gains. Fed tax rate starts at 10%. No social security. With the tax advantages, you will keep twice the money that you would if you got paid immediately. Sorry this is so long.

How many people are motivated by the tax savings though?  They sure do talk about it a lot.

Ouch.

Okay, I'll learn from you. What is the story? 

No. It's like comparing a Tesla vs a kids big wheel.

I do get things confused.  I understand there are principal theories behind real estate that should apply to all sizes of deals.  I think I understand the Mom and Pop side of things but when you scale up I start getting confused. Definitely get confused by syndication.

Are they selling tax write offs for year one with accelerated depreciation?  Or are they selling a slice of future income from a rental stream?  Or are they selling an actual building?