All Forum Posts by: Tanner Sherman

$2500.00 Subject To deal that I purchased in my Solo 401k and rented for 4 years.  Waited until the Market changed last year and sold it and made a $105k profit in my Solo 401k.

@Ted Kaasch that's totally BS. No offense but how?!?!

@Trey McGovern

"Im not concerned with creating or fabricating losses to reduce my liabilities"

It doesn't matter. Congress enacted the self-rental rules because people would rent to themselves to create losses. Now, whether you want to or not, this type of situation will be subject to the self-rental rules. There's nothing wrong with that, it's just another layer of information to navigate. 

It also doesn't matter what type of entity you are leasing from, how legit it's structured, etc. If you have a material stake in the lessor entity, you're going to be subject to the self-rental rules. 

If operating expenses plus depreciation/amortization puts the rental at a loss, the loss is considered passive. You will not be able to offset the loss (the amount below $0) with the income of the other rentals. Instead, it will simply remain suspended until your self-rental activity, or a passive investment (i.e. in a partnership or syndication), shows income. 

"What if the plan is to hold for 30+ years? And then if I do buy it personally at first, and want to turn it into an investment property to get it out of my name, what does that look like? And how do I avoid the potential taxes?"

Live in it for two years, then rent it. If, within the next three years after you move out, the property realizes significant appreciation, sell the property to an S/C-Corp that you own. The sale will be a taxable transaction, but you'll be able to use the $250/500k exclusion. On top of that, you maintain ownership of the rental at a stepped up basis. 

At the end of the day, self-rentals are more glamour than useful. But they can certainly be useful depending on the situation. One of the best reasons to utilize self-rentals is when you are an S/C-Corp and you need to extract profit from the Corp to either avoid SE taxes or 15% dividend taxes. The S/C-Corp occupies the real estate and pays rent to your LLC, which owns the real estate. That's where something like this becomes extremely useful, but not necessarily when it's in your own name.

130k in Tucson, AZ in 2020. Worth around 240k now. 

26k in Conway SC- bank owned. I've got it listed now for 100k on MLS, fingers crossed

question it appraises for that but what would it sell for.. a lot of what I have funded over the years in the mid west apprasial and actual sales prices were very very different.

those are monster spreads if you can actually sell for that..  many of us who build.. will make 50k on a 400k build job and think we hit a home run.. 

 Kind of.  No trick.  Simple logic and math.

Paying off a property adds to the cost of your property. It doesn't save you money. The only cost to the REI is the cash they pay...nothing else...as long as you have positive CF. Paying down the principle, negative CF, are two added examples of adding cost to the REI. It's based on the source of the funds used to do these things. The source of funds to pay the mortgage comes from the tenant...it's called rent. When you let the tenant do their job, it's free money.

Refinancing is a linear return at best.  Your just kicking the can called financing down the road.  Instead of getting it upfront when you buy, you get it after.  When you buy a property using 20% DP, the property is worth 5 times the cost to you.  When the property increases in value due to appreciation, it increases the equity equally...at a 1 to 1 ratio.  So if that same $100k property you bought for $20k (DP) increased in value to $120k (a $20k increase), the equity also increased $20k to $40k.  Sounds great right.  No so much.  Your equity lost value.  When you bought it, the equity was worth 5 times the cost, or $100k.  When it went up $20k, it went down to 3 times the cost.  IF sold, and used as 20% again, that equity ($40k) would now be worth 5 times its cost again...or $200k...and the CF would go up too.

Repeat this when the same conditions repeat themselves, and you are generating an exponential return on that original $20k

Humblebrag - I just bought a house (on 2 lots) on Monday this week for $1,000! It is in a small town about an hour outside of Omaha, NE.  It is by far the cheapest property purchase I have ever been involved in. She is a beauty!

I am curious what is everyone's personal record is for cheapest property purchase and where it was located?