All Forum Posts by: Dave Versch

Thanks guys. I think what threw me at first was that I wouldn't be able to make contributions to a Solo 401(k) out of money I made from real estate investing, because paying myself out of that account would be prohibited, but I was thinking about it all wrong. My main source of income is software development. I spend most of my time as a software developer for my employer in my regular W2 job. But on increasingly rare occasion, I'll take on some consulting work on the side. I can use that income to contribute to the Solo 401(k), and use that money, along with whatever money I decide to roll over from my existing Traditional IRA into the Solo 401(k).

So now my question becomes, well what if I don't do any consulting work at all in a given year? Do I have to make a contribution in every year? And for that matter, do I have to make a contribution in any year ever? Can I just open the Solo 401(k) plan, roll a ton of money into it, never make a single contribution, and just start using that money to invest in real estate? If that's the case, then the decision between SDIRA LLC and the Solo 401(k) is really a no-brainer. Opinions welcome...

Thanks,

Dave

I've been reading a lot about both the Solo 401(k) and the Self-Directed IRA LLC. From my layman's perspective, it would appear at first glance that Solo 401(k) is the way to go. No custodian to deal with and higher contribution limits to name a couple of things seem to weigh in its favor. Can anyone tell me the downsides of a Solo 401(k) vs

the SDIRA LLC, if any?

I have two other considerations that I need to keep in mind as well:

1) The account will be initially funded by rolling over some money from an existing IRA. Subsequently, funds will come primarily from tax lien certificate investments and related activities. I'd like to be able to pay myself a salary out of the funds in the account. So, for example, let's say I roll 50K into the account initially, and during the year I make $7500 after expenses. I would like to be able to pay myself the $7500 (or any higher or lower amount, for that matter) as a salary for the work I do pertaining to tax lien investing - property research, attending auctions, administrative duties, etc. I'm thinking that this could be a way to get at some of the funds in my tax-deferred account without having to make early withdrawals and getting hit with penalties, etc. Has anyone done this? Which of the two structures would lend itself better to this type of thing?

2) I currently have a full-time job (unrelated to real estate), at which I already contribute to the company's 401(k) plan. Will this prohibit me from participating in my own Solo 401(k) or SDIRA LLC?

Thanks for reading,

Dave

Hi. I invest in tax lien certificates in NJ, and I'm looking to create what I think is called a "self-directed IRA LLC with checking". In other words, I want to be able to roll some money from an existing IRA into an IRA from which I can use the money to invest in tax lien certificates (or other real estate if I choose). The catch though, is that I'll need access to the money on demand, so that I can wire cash to a given municipality should I win an auction for a certificate. (You usually need to wire the money within a couple of hours of winning the bid in these situations.)

I found one company that does this, but they charge around $1500 to set everything up, which I thought was a bit much.  Is anyone doing this currently, or does anyone know how I can set this up without it costing so much?

Thanks,

Dave

Hi.  I'll be bidding in an upcoming tax lien auction in NJ.  The auction is for 2013 taxes.  Does that mean I'll also be able to purchase the 2014 subs immediately if I am the winning bidder on a property?

Thanks.

Hi Michael,

Living in NJ and having some limited experience in both buy and hold as well as tax lien investing, I can offer an opinion. I've never purchased an investment property within NJ, for the simple reason that it's all but impossible to come out ahead due to the high cost of entry. If you're willing to invest in places like Irvington or Trenton, you might get lucky, but the chances are extremely slim. For a buy and hold, I'd go out of state. Buffalo, NY has worked for me, but you'll have to find a property manager you can trust. They are few and far between.

On the other hand, I love tax liens. Yes, you will most likely pay a premium for a decent one these days, but 18% interest on subs can't be beat. If you want to avoid having to foreclose eventually, just pick the ones that have mortgages against them, since the mortgage company will usually pay off the lien before they let you foreclose on them. If you have the cash to pay the subs for up to 2 years, that's what I'd do.

My 2 cents.

Dave

I have a couple of questions regarding tax lien investing, specifically in NJ.

1) If I've been paying subs for a year on a lien I own, and the property owner sneaks in a quarterly payment after a year, can I still foreclose on the 2 year anniversary of the original tax certificate sale, or does that clock get reset because of that one payment?

2) Assuming there are no other lien holders (not even a first mortgage), what happens if the property owner declares bankruptcy while I own the lien (a) prior to foreclosure proceedings, or (b) after foreclosure has been started? Do I lose my entire investment, including any premium paid at the time of the certificate sale?

Thanks.

Thanks! That's very helpful.

Hi. I'm looking to get in touch with a foreclosure attorney in the Sussex County, NJ area. I own a tax lien which I may soon be able to foreclose on, but I have some questions.

Thanks.

I don't have an attorney yet. Anyone you can recommend? The property is up in Sussex County.

Hi. I own a tax lien in NJ. There is no mortgage against the property, and the property is owned by a land trust. Will this type of ownership (land trust) cause me any headaches when I try to foreclose?

Thanks.