All Forum Posts by: Daniel Dietz

I have heard good things about all of those on here over the years. I personally choose Sense Financial @Dmitriy Fomichenko after talking to several of those that are active on here and have been very happy with the service.

This is NOT something you want to try to do yourself and screw something up. Both I and 4 of the 5 partners I invest with have some form of Self Directed accounts (either SOLO401K or SDIRA, or both) and would not dream of trying to do it ourselves.

Dan Dietz

I have not done this yet, but probably will in 2021 in my SOLO401K. 

One thing to keep in mind is that to the best of my understanding it is the "Net Value" IF a person has a loan on it. An example would be if you had a 50K loan on that 100K house, leaving you 50K in equity, if is just the EQUITY that you would pay tax on, not the whole value.

Maybe so of the Pros on here could confirm or deny that?

Dan Dietz

Doing deals like this can be complex. I was in one at one time but we (disqualified partner and I) but we sold that one off.

I would suggest anyone doing this google videos by Matt Sorenson from KKOS Lawyers (he has the #1 selling book on self directed accounts) or Equity Trust also covers things well.

Essentially, to VERY liberally paraphrase the concept "you can 'co-invest' with a disqualified party (yourself or another one) ONLY on an original purchase or transaction. Meaning you could not start with say your IRA and THEN add some of your own funds. You can also never add more funds to that partnership in the future to my understanding.

After learning all of the complexities of doing these types of dealing by doing one when under-educated about it, I have since chosen to find partners that are NOT disqualified to me.

Dan Dietz

If you want to 'self educate' before talking to your professional, I have found Youtube videos from Mark Kohler /KKOS Lawyers to be supper helpful in getting a basic eduction of pros and cons.

Dan Dietz

I wondered if you Pros could comment on something I have heard in 3 podcasts and a couple of articles lately regrading the Real Estate Professional statues and "Housing Contractors"?

I am a full time remodeling contractor doing kitchens and baths primarily. It is where 90%+ of my income comes from (the rest is from Design Only work for house blue prints.

If it matters I DO also materially participate in the maintenance and management of my rentals.

These various sources said that, to paraphrase, "Housing contractors (since they work ON real estate) count as Real Estate Professionals. It seemed VERY clear what they are saying, but having not ever read that in the many excellent blogs and forum posts on here has got me a little cautious ;-).

So, are Housing Contractors really able to qualify as RE Pros?

Thanks, Dan Dietz

I think you are definitely on the right track to not have property in the S-Corp.

If you have not already retained a lawyer accountant to help you out, I would highly recommend you contact Mark Kohler's office at KKOS Lawyers/Accountants.

He/they have a ton of good youtube content to help understand entity structuring and the tax ramifications also. We (3 partners and I) used them to set up our LLCs that are made up of our SDIRAs and SOLO401Ks and were VERY happy with the service and knowledge. They expertise is legal and accounting primarily for RE investors of all kinds.

Dan Dietz

Hello All, 
IN regards to tracking time, we use the app Toggl. My partners and I owe 30 units in 7 different entities, and track our time working on them religiously. NOT to claim the RE Pro status (We all fall under 100K of income and have losses less than 25K each right now).

We do it because we each get compensated for the work we do (one of us does 'tenant stuff, one 'maintenance stuff' and one 'business stuff'. So we each get 'paid out' for those hours, and THEN split the profit three ways.

Toggl lets us do reports by entity, property, person, or task - such as loan paperwork, tenant turn over etc....

If I remember right, I was probably figuring 10% down, which can be a good starting point IF a property is owned free and clear and they don't need the equity right away.

IF there is still a loan on it, most astute sellers would want enough to pay off that current loan, and also to cover whatever their first years taxes to them would be.

Dan Dietz

@Nick S.,

The middle figure is what he threw out there as a starting point. I simply played with a mortgage calculator to keep the monthly payment consistent. 

The general idea is to 'offer what they want'. #1 would give ME a lower price and the risk of interest rate increase when I refinance in 10 years. If would give HIM the higher interest income compared to capital gain income IF that is desirable to beneficial to him. #3 Give ME a lower interest rate while also giving me a higher Basis in the property. If give HIM lower interest income (taxed at ordinary income rates usually) and higher capital gains income which MIGHT be better for him if his Capital Gains rate is lower than his Ordinary Income Tax rate.

Excellent explanation @Michael Plaks, thank you very much. I think this will help a TON of people wrap their heads around the topic.

It would be nice if the moderators would put it as a 'sticky tread' in the tax forum :-)

Thanks, Dan Dietz