All Forum Posts by: Daniel Dietz

I have NOT done a distribution yet personally but HAVE read up on it a lot for future planning purposes. 

@Brian Eastman REALLY covered it as perfectly as can be done in a short post. Run your numbers every which way (the calculators here on BP are GREAT for that) and see what makes sense. I particularly like the idea of 'partnering up' with others and how it can help your tax situation. 

We have borrowed in both our SDIRAs and SOLO401Ks. The UDFI tax did really not seem like that big of a deal when all was said and done.

Dan Dietz

In all seriousness do a little more reading up on things, and then give a few of the people like the three guys above who participate her on BP a call and see who is a good fit and get a few references. The best day of my life in regards to this is when I quit trying to find a 'local' provider and found BP :-) !

There are LOTS of rules involved, but with guidance and self education it is not too hard to figure out. 

We have both SDIRAs and SOLO401Ks. 

Dan Dietz

@Mike Williams,

I have both a SDIRA and a SOLO401K, as do my three main partners that I invest with. Why both? Because we didn't know about SOLO401Ks when we did the SDIRAs ;-) 

For the SDIRAs we chose a company that we heard about on here and things went pretty good. We  were in somewhat of a hurry to set things up to purchase a particular property which has been a good investment for us.

When I learned more about SOLO401K (through the BP Podcasts!) , we chose one of the several Plan Providers, who often chime in with their expertise here in this forum. I would recommend calling a few of them (you can tell who providers are through their 'tag lines' in the posts) and see who seems to be a good fit with you. It would probably be hard to find a 'local' person who has as much knowledge as they do. 

A couple of the main things to remember is that there are LOTS of rules about 'prohibited transactions' and IF you are going to borrow to leverage you funds it MUST be non-recourse and typically you will need at least 40% down (unless you find a private lender who is more flexible). 

Dan Dietz

I will let more qualified people explain the details, but paying down the loan does NOT change your tax situation at all. The 'profit' is the same, you would just be choosing where to put the dollars which is not an 'expense'.

I save save it up for future down payments and it could also be there in the mean time for emergencies if needed.

Dan Dietz

@Harry Metzinger,

You are getting some great advice. All of the guys above have great reputations of knowing their business in this area. 

I have BOTH SDIRA and SOLO401Ks, as do my 3 business partners. The only reason we have the SDIRA, which we have had for about 5 years, is that I did not know about the SOLO401K at that time or it never would have happened. We are all self employed and eligible for the SOLOs.

We hold 3 of our 25 units in the SDIRAs which we paid cash for (no financing) and 6 of the remaining units in an LLC that all of the 'members' are each of our SOLOs, or I think more correctly the 'trusts' that hold them. I was a bit confusing between the SOLOs and forming a 3 way LLC that is held by them, but with good guidance we made it through :-) Now that it is set up, smooth sailing!

As to your questions about your 'transfer' being much bigger than your yearly 'contributions' we are all in the same situation to a point. We all had fairly substantial balances to transfer, but our yearly contributions will be fairly modest, similar to what we could put into a regular IRA.

One of the other benefits of a SOLO401K  is that the contribution limits are MUCH higher which can be huge for those higher income earners. One of the partners got an inheritance about equal to his 30K earning for the year - that allowed him to max out his contribution by using it. 

A side note is that you can NOT make a yearly contribution larger than you 'self employment income' - meaning if you earn 100K at your Day Job, and 2K by self employment, you can only contribute approximately 2K (there is a formula for this) even though you might have plenty of 'cash on hand' to do more. 

If you have any questions for the 'consumer side' of using a SOLO, or SDIRA, fire away. 

Dan Dietz

@Account Closed, 

We are in negotiations on two properties right now, a 4 unit and a 6 unit. Both of them are older long term landlords that I approached about properties not on the market right now.

One is very willing to do owner financing, but that one we are thinking of doing with our SOLO401K funds and are thinking it would be better to go the bank route and look things in. A loan to a retirement plan held asset has to be 'non-recourse' and those lenders, that I know of, do NOT allow Owner Carried Seconds. (If anyone know of a non-recourse lender that does PLEASE let me know!) 

The other one we would be doing conventional portfolio loan for mixed with some owner financing. The bank will go up to 80% LTV if needed which means we would need 50K down. I would rather but 20K down, since part of our plan is to get as much bought while rates are low as we can to lock in lower cost for the long haul. The owner owns it free-n-clear, but is concerned with capital gains and recapture taxes, which will be roughly 60K on a 240K purchase.

The idea that we have come up with is that we would do 10% down, 24K, the owner would carry a 56K second @ about 4-5% interest only with a 5-7 year balloon and the bank would do 160K first mortgage @ 5% with a 25 year amortization and 10 year rate lock. 

This would give the seller plenty of funds to pay taxes and 100K left over to do with as he chooses right away, within that 5-7 year range between appreciation and loan paydown we could do an equity loan or refinance if rates are still low and pay him off the 56K we owe him. 

The point being you need to talk to him and see what his 'needs' are. If we all want something from the sellers like a lower down payment, they need something in return, whether it is a partial bank loan like my case to help with taxes etc... or maybe a higher interest rate so they feel compensated for their increased risk of a lower down payment. It has to be a 'win-win' situation to work. 

Dan Dietz

Hello,

I am wondering if there is a way to output the data that is created and shown in the BP Rental Calculator's 'spread sheet' at the bottom of the report to Excel somehow?

What I am hoping to do is be able to take the 'raw date' (CSV format maybe?) and fill in the 'missing years' such as 5-9, 11-19, etc.... In essence it is the same info that shows up in the 'live charts' at the bottom (how you can hover and get yearly equity, cash flow, etc....).

Is this a feature that the powers that be have ever thought about or would be willing to look into? 

Thanks, Dan Dietz

@Jackson Long, 

This,

https://www.biggerpockets.com/renewsblog/2014/09/1...

is an EXCELLENT post that covers what you are asking I think. Amanda writes a lot here on BP, just search her name for some good stuff. 

A summary is that YES, I am a 'passive' investor since most of my time is spent in a 'day job' in which I make less than 100K, a lot less actually ;-)

Since I am under 100K, I can take up to 25K in real estate losses, which in my case are not 'actual losses', meaning I am cash flow positive, but 'paper losses' due to the depreciation deduction. 

I *think* that even if I had MORE than the 25K in 'losses' that I could not write off in the CURRENT year, they can still be 'stockpiled' for lack of a better word to either deduct against future profits or when I see to help offset capital gains.

I *think* from how I read it, even if a person had such a high W-2  that they could not take ANY passive real estate losses, even they can still 'carry those losses forward' to offset future gains from operations or sale of the property.

Hope that helps, 

Dan Dietz

@Steve K. your post makes a LOT of sense on a basic level.

But, there is one big difference - almost ALL 'business equipment' DOES depreciate. Think trucks, computers, signage, etc..... Most real estate, especially residential, does NOT depreciate - it appreciates. Hardly NO other types of property to do business does that. 

With that in mind, I think of it as an 'interest free IOU to the IRS. And even then, there are ways to avoid that with 1031s and holding until you die and passing it on to your heirs who can choose whether to hold or sell

Dan Dietz