All Forum Posts by: Daniel Johnson

There are a handful of banks that specifically focus on the Profit First model and have their accounts built for it.

The first is technically not a bank, it is a fintech company that partners with a bank to hold the assets. I'm thinking about using this one for some of my own businesses: https://www.relayfi.com/

Another fintech bank is https://www.northone.com/produ... - they have partnered with Profit First for their product.

The last fintech bank that specializes in this is https://www.novo.co/

Hope this helps!

I would be inclined to look at ultra short term bond funds. Current yields are attractive at > 4.5% as of yesterday. You have the ability to gain liquidity within 24 hours. 

I would recommend taking a look at Stessa. Operates similar to QB, but not quite as detailed. You can link the bank account and categorize expenses, then provide a year end report to your CPA. 

Personal view on it is that if you are renovating/adding value, there is a high likelihood of refinancing down the line at an equivalent or better interest rate. I would save the cash to improve the home and keep a close eye on interest rates for refinance opportunities. I’ve never been a big fan of buying rates down unless you are 100% sure you will be in the home with the same mortgage in 15 years. 

As you have been searching, you have probably found there aren’t a lot of financial planners that understand, advocate for and even invest in real estate themselves. As an additional layer, many times the advice provided can have a goal of selling a product, like insurance or asset management. It is important to seek out a fee-only financial planner, and most times you will probably have to hire someone that isn’t local to you to find someone with expertise in Real Estate.

I’ve been a real estate investor for 15 years and decided 2 years ago to start a financial planning company that would focus on working with real estate investors utilizing a flat-fee/fee-only structure. There are some great places to look for an advisor, one of which is XY Planning Network and the other is NAPFA. Both of these organizations have Find An Advisor tools. I know of a few planners working hard on developing great resources for finding financial planners that specialize in working with real estate investors. Hope this helps.

Looking forward to the meetup tonight! I recently lost my IH hat, so I won’t have that on! Just look for me based on my profile picture. 

Hey @Christine Krevalin - as you have found, there aren’t a lot of financial planners that understand, advocate for and even invest in real estate themselves. As an additional layer, many times the advice provided can have a goal of selling a product, like insurance or asset management. It is important to seek out a fee-only financial planner, and most times you will probably have to hire someone that isn’t local to you to find someone with expertise in Real Estate. 

I’ve been a real estate investor for 15 years and decided 2 years ago to start a financial planning company that would focus on working with real estate investors utilizing a flat-fee/fee-only structure. There are some other great places to look for an advisor, one of which is XY Planning Network and the other is NAPFA. Both of these organizations have Find An Advisor tools. 

Hope this helps!

Quote from @Mark S.:

Quote from @Daniel Johnson:

Just a few caveats on this information.

1) with the Backdoor Roth, you can't have any other traditional IRA accounts to make this work as described and intended.
2) there are different rules for Roth IRA contributions vs. conversions(described in the Backdoor Roth). If you do a contribution, you can access your “basis” contribution anytime. If you do a Backdoor Roth Conversion, you have a 5 year rule. Meaning you can’t withdraw the converted amount within 5 years. If you do, it will be subject to taxes. 

A final note on REITs, they qualify for Qualified Business Income deductions when held in a taxable account, which makes them a little more tax-efficient to be held outside of IRAs. 

Always happy to talk with people about these things. 

 The 5-year rule related to Roth conversions (different than the 5-year rule that applies to earnings) determines whether or not the conversion PRINCIPAL will be PENALTY free (the converted amount is NOT taxed “again”).

Check this out for more detail than you ever wanted: https://www.kitces.com/blog/un...

Thanks for clarifying, with the 5 year rule, withdrawing principal within the 5 years will result in penalty (not tax as I said in my post). I’ve read the Kitces post and the IRS regs too many times to count!

Just a few caveats on this information.

1) with the Backdoor Roth, you can't have any other traditional IRA accounts to make this work as described and intended.
2) there are different rules for Roth IRA contributions vs. conversions(described in the Backdoor Roth). If you do a contribution, you can access your “basis” contribution anytime. If you do a Backdoor Roth Conversion, you have a 5 year rule. Meaning you can’t withdraw the converted amount within 5 years. If you do, it will be subject to taxes. 

A final note on REITs, they qualify for Qualified Business Income deductions when held in a taxable account, which makes them a little more tax-efficient to be held outside of IRAs. 

Always happy to talk with people about these things. 

So, you will have your contribution “basis” in the Roth IRAs that you could withdraw and use towards property purchases. 

The positive of the Roth IRA is that all of the gains/income produced are tax free. This is really powerful over time, but the investment options can be limited. If you are able to grow that capital faster through real estate, that is awesome. However, I would probably rather look at the Roth IRA basis as an emergency fund that you probably won't touch, but could if you needed to.

My general thoughts are leave the $ invested aggressively in the Roth and if you had a really awesome investment opportunity come by, take the basis out at that point in time.