All Forum Posts by: Phil G.

Congratulations..  You're tying up someone's home when you don't have a clue of what you're doing.

As a disqualified person, you cannot provide services to the plan.

Maybe I've watched too many episodes of American Greed on CNBC, but rate aside, I'd be worried about the promise that you can take your money out with short notice.  That's what the Ponzi operators always say.

I lend at a fairly high interest rate, because I do non-recourse IRA hard money loans and will do small loans that are difficult to find. My radar would be up on this deal.

Not a lawyer, but I would have some concerns if I wasn't licensed and was involving your buyer in the transaction with their POF/Preapproval. Potential to be construed as brokerage activity without a license. Just a thought.

Not a lawyer and definitely not a wholesaler, but I would be concerned about using a P&S in a wholesaling transaction. Personally, I would want to use an option. I know that at least some states have a promissory fraud statute. Promissory fraud is when a promise is made when the promisor has no intent to perform on the promise.

Not a wholesaler myself.  But trying to wholesale listed properties seems to not be a very good business model to me.  You're going to have to deal with agents who aren't going to allow contracts with all the weasel words.  In addition, investor/agents like Shaun, myself and dozens of others are going to have offers in on the good properties before you get an agent on the phone.  Just thinking out loud.  Best of luck in your new investing journey.

I always carry Builder's Risk and GL policies.  Usually costs $800-$1000 per project.

No experience in MD, but I've done a couple of historic reuse projects here in Massachusetts.  There are lots of moving parts with this type of project.   There can be a lot of red tape, but they can be fun and rewarding projects.  I've looked at a couple of churches as potential projects, but the ones I looked at were difficult to make work architecturally.

Cities are often eager to work with developers in historic districts.  They don't want vacant buildings to fall in disrepair.  They will have some strict guidelines in terms of exterior preservation.  My projects were mill buildings so there wasn't any issues with what I did with the interior.  If there are historic features with the interior, that may complicate the process.

First thing I would check are zoning ordinances.  Permitted use in the zoning district.   Other zoning gotchas I've had to deal with are parking requirements.   There will most likely be an approval process, special permits, etc.  A pain to be sure, but if you're up for it, doable.

There can be benefits to this type of development.  If the historic district is recognized by the National Park Service or building is on the Registry of Historic Places, there may be historic preservation tax credits available to help fund the deal.  Federal tax credits for 20% of eligible project costs (excluding acquisition) are available for income producing buildings.  These tax credits can be sold (at a discount) to help raise capital.  This is a pretty complicated process in itself, so the project has to be big enough to be worth the cost/effort.  You can learn more about the program here:  

http://www.nps.gov/tps/tax-incentives.htm

When it comes to UBIT, you have to focus on the after-tax return.   I'll happily pay the taxes all day long, if my after tax return on a flip is 20% or more for a 6 month investment.

Since the trust tax rates are pretty flat and the corporate tax rate is a bit more gradual, it can make sense to use a "blocker" corporation. The 401(k) owns the shares in a C-corp and the corporation pays income tax on profits. The dividends returned to the 401(k) are tax deferred or tax free, like any passive investment. An LLC with an election to be taxed as a C-corp can also be used.

Your personal marginal tax rate also matters.   I can get a higher after tax return for a flip in my 401(k) than if I was to flip with personal funds.  

As always, seek the advice of a qualified accountant or tax attorney who understands this area of tax law.

@Ray S. 

Are you not getting showings?  Days on the market?