All Forum Posts by: Alex Olson

Quote from @Dmitriy Fomichenko:

@Alex Olson,

I appreciate you sharing these details, but this discussion is NOT about typical investors you are working with. This discussion is about @Chris Fore using his modest Roth IRA to potentially buy an investment property. While his profile may not fit the profile of an investor you are working with, it certainly fits the profile of a typical investor using self-directed IRA to buy some rentals.

I'm not against using an IRA to buy real estate. But, I am against using an IRA funds for a down payment for active investors which is what Chris indicated he wanted to do. In my experience with the deals that are available, this won't work. I don't recommend active investors using IRA funds for down payment, in part, because of the tax consequences with adding debt. If he is buying real estate using no debt and wants to be active, maybe, but still not the most common way I would recommend. This is my opinion and advice about the info I have. Happy to chat more about it!

@Dmitriy Fomichenko Not sure the net worth of your investor base you are mentioning or the active investor status that you are looking at but typical investors that I work with don't have IRAs that are large enough to pay all cash for multifamily family properties in the $1mm to $10mm range and the difficulties of getting a loan through an IRA is not something that sellers in this market are willing to be be patient on. In addition, since these IRAs don't pay taxes you don't get phantom depreciation expenses, no mortgage interest deductions, and likely no loss deductions. And, you have to abide by much stricter accounting practices. You have to pay others to do the work for you and you can not self manage. As I allude to, this is my opinion and experience. For those that want to be active investors and be aggressive in this market and put funds in to Kansas City, it is not an option I can get behind. For others, I am sure it is great because as you had 100s and thousands of people have done it successfully. Just difficult, cumbersome, and can put any deal that is under contract at risk of losing. I don't see the benefit of deferring taxes on your gain with an IRA that has heavy requirements for maintenance and mortgages for active investors - especially with no tax year write off.

@Chris Fore Using IRA as ownership in real estate looks amazing on paper. But, they are difficult to maintain, manage and do well with for small, active investors. A 1031 exchange into and out of using an IRA can be very cumbersome. There are also certain rules and regulations (touched on above) that make it difficult to complete a transaction and can become costly. Not saying never to do it, but when it comes to long term wealth building, it is not a great option in my opinion.

@James Bailey what market out of state would you be looking to exchange in to? I can help you understand and evaluate the KC market. 

@Sarah Pelton Great work. This is how you are supposed to use a 1031 exchange. Upgrading your life and your wealth!

@Greg SchrefflerWhat markets are you looking it? I have some tri plexes for $125,000 a piece and some fourplexes for under $450,000 each here in the KC market but not sure what you are looking for?

Quote from @Sam Bhattacharya:

Quote from @Alex Olson:

@Dominic Pizzi Yes Kansas City is a great market for real estate investors. Appreciation is here as well as cash flow. I can show some really good examples of what some outside and inside investors have been able to accomplish, even with the rising interest rates.

Can you buy a house for $75,000, rehab for $25,000, and get an ARV of $150,000?

 Experienced investors in the KC market likely can. My bread and butter though is multifamily with price ranges of $1-$10mm. 

@Dominic Pizzi Yes Kansas City is a great market for real estate investors. Appreciation is here as well as cash flow. I can show some really good examples of what some outside and inside investors have been able to accomplish, even with the rising interest rates.

I recommend speaking to @Yonah Weiss He is the best I know at cost segregation. A great person, too!

@Glenn Driban Market here is projected cap rate of 7.5% with rates below 6.5%. Exchanging into this market in KC would not produce negative cash flow.