All Forum Posts by: Bryan Martin

This sounds like a thoughtful plan, but there are a few things to keep in mind.

First, while you won’t be on the mortgage, you'll still be co-owner, meaning if things go south (like he defaults), the bank could come after the property, which affects your investment. Also, depending on how much the house appreciates, there could be capital gains tax when you sell. Just because it's a primary residence for him doesn't automatically exempt your portion from capital gains—you're still considered an investor.

You also need to think about what happens if your friend can’t buy you out or if your relationship changes. Owning a house together is like a long-term business partnership, so make sure you have a clear exit strategy in writing. Maybe think about a legal agreement outlining all these “what ifs.”

Overall, it’s not a terrible idea (not something I would likely do as it could go sideways though), especially if you’re confident in the property’s potential. Just make sure you protect yourself legally, so you don’t end up with half a house you can’t do much with.

There’s no right or wrong answer.  If you’re a high W-2 earner, $200 bucks a month in cash flow isn’t going to make much difference in your life.  Getting $200k in appreciation and $100k in loan pay down on 3 properties in ten years will though.

Don’t get me wrong, I think you can have both, but appreciation is where wealth is built.  Just make sure you have a good plan to sell or refinance to take advantage of that wealth and not get hit with a huge tax bomb when you’re ready to get out.

Quote from @Peyton LaBarbera:

What happens when I fully pay off a portfolio loan? Do I get to sell the properties individually if I wanted to in the future or do I have to sell them as a portfolio?

Just to clarify by fully paid off I mean at the 15 of 30 year fixed time frame not paying them off early since I don't wish to pay pre payment penalties  

Sure, once you've paid off that portfolio loan, you're the full owner of those properties. You can usually sell them one by one if you want to, unless your loan agreement has some special rules about it. But it's always a good idea to double-check with a lawyer.

Quote from @Account Closed:

David Greene's newest book, Pillars of Wealth is now available for pre-order at biggerpockets.com/pillars!

ORDER BY OCTOBER 17th!!

👉 All pre-orders come with a series of live coaching calls with David where you’ll dive deeper into the three pillars, discuss important concepts from the book, and get your questions answered. Order before October 17th to be included in these live calls!

👉 PLUS! One lucky person who pre-orders will win a one-on-one coaching call with David Greene that will be recorded and aired on the BiggerPockets Podcast!*

Get your copy at biggerpockets.com/pillars and screenshot your receipt for bonus access! 

Bought my copy.  In honor of David Greene, here’s some sports analogies for the book:

1. Bill Belichick's Game Plan: "Pillars of Wealth" is like having a game plan designed by Bill Belichick. It's comprehensive, well-thought-out, and sets you up for long-term success.
2. Michael Jordan's Work Ethic: Unlocking your earning potential is akin to Michael Jordan's relentless work ethic. It's the foundation upon which championships are built.
3. 
   Tom Brady's Protection: Learning to save money is like having an offensive line that protects Tom Brady. It's the safeguard that allows for long-term success.
4. Steph Curry's Three-Pointers: Investing in real estate is like Steph Curry's accuracy from beyond the arc. It's a skill that, when mastered, can be a game-changer.
5. 
   Babe Ruth's Home Runs: Starting your own business is like Babe Ruth stepping up to the plate. When you connect, it's a grand slam that changes the score dramatically.
6. Phil Jackson's Zen Leadership: Your financial advisors and mentors are like having Phil Jackson as your coach, guiding you with wisdom and a calm demeanor through the ups and downs.
7. 
   Usain Bolt's Marathon: Building wealth isn't a 100-meter dash; it's more like a marathon. It requires the stamina and long-term focus that even a sprinter like Usain Bolt would respect.
8. Jerry Rice's Draft Value: Picking the right investments is like drafting Jerry Rice in the late rounds. It's about finding undervalued assets that will bring immense value over time.
9. 
   Peyton Manning's Audibles: Protecting your money through tax savings is like Peyton Manning calling audibles at the line of scrimmage. It's about making smart, real-time decisions to maximize gains.  OMAHA!!
10. Vince Lombardi's Championship: Achieving financial freedom is like winning a championship under Vince Lombardi. It requires a well-rounded strategy and a commitment to excellence in every aspect of the game.

I hope everyone enjoys the analogies as much as I’ll enjoy the book!

Quote from @Jerry Hollifield:

I am a W-2 employee, have multiple K-1s, and operate a side gig that includes wholesaling and flipping.  Looking for a bookkeeper that understands wholesaling and flipping to keep the books in order.  Also searching for CPA to handle tax compliance, etc. for entities and personal.

Check the BP Directory.  Some CPAs on there and their firms may also offer bookkeeping services.

Quote from @Brett D.:

I bought a lot of land a couple years ago. Then secured a construction loan for a SFH to be rented out. Construction started, but between the lockdowns and a hurricane last year, it took too long and the lender bailed. Secured a replacement construction loan a couple months ago, and construction is under way. Hopefully completed in the next couple months.

I originally planned to add my wife to the title upon completion like we did our first rental home.

Then we got to thinking.  Our son is just starting college.  Now we're looking to switch gears and sell the new house when it's completed and 1031 that into a condo, townhome or multi-family where my son would live along with paying roommates.  Additionally, I thought it would be a good idea to also add our son to that mortgage as well as my wife and me.  Not to gift it to our son; but to get him added to the process.  He'd be owner-occupying, he'd be responsible for collecting rents and maintenance, and lift his credit experience.

First, does it seem like there's any drawbacks to this in general?

Second, specifically about the 1031, would this even be possible if adding our son?  I've seen a number of other posts related to gifting to children, but can't seem to find anything about adding them and not transferring.

Thanks!

Firstly, adding your son to the mortgage and title could be a good way to build his credit and give him some real-world experience in property management. However, there are some drawbacks. For instance, if he has a low credit score, it could affect the mortgage rate. Also, his financial liabilities become your liabilities, which could impact your ability to take out future loans.

As for the 1031 exchange, adding your son could complicate things. The IRS is pretty strict about "like-kind" exchanges and the use of the property. If your son is owner-occupying, it might not qualify as a pure investment property, which is generally a requirement for a 1031 exchange. You'd likely need to consult a tax advisor to navigate this, as the rules are complex and penalties for mistakes can be severe.

Quote from @Landon Mizuguchi:

I have 6 rentals that I and my investment partner bought through LLC (50/50), in 2019, for around $1m, before COVID. We're now planning to split the properties (3 each) and go our own separate ways. Over the last 4 years, the value of the portfolio has appreciated to $3m (thanks to the pandemic!).

If we each get our own Single Member LLCs and transfer the properties out. Will we need to pay taxes on the $2m appreciated value ($3m - $1 purchase price)

Typically, transferring assets between LLCs might not trigger a taxable event if it's done as part of a partnership dissolution. The IRS often views this as a non-recognition event, meaning that the appreciation in value might not be taxed at that time.

However, the specific tax implications can vary based on the structure of the LLCs, the nature of the assets, the jurisdiction, and the way the transaction is structured.

It's crucial to consult with a tax professional who can analyze your specific situation and provide tailored advice. 

Quote from @Michael Plaks:

@Kyle Daniels

It is far easier to find a new real estate accountant than a new real estate bookkeeper, especially on such a short notice.

This is because correct bookkeeping for rental properties is far more complex than most bookkeepers realize. Chances are that you might find a bookkeeper willing to take the job who is NOT a real estate specialist, and the results of their work will be unacceptable for tax preparation anyway. And by that time you will be out of time and out of options.

Tax preparation does not require any specific bookkeeping system, QuickBooks or any other. Well maintained Excel if perfectly acceptable for many tax firms. Some of our clients use Excel, and it's infinitely better to have a well-done Excel than a messed-up QuickBooks file.

This 100%.  Especially for Long Term Rentals that don’t have a lot of transactions, a spreadsheet is perfectly fine as long as it’s well organized.

1. I’ve had so many clients insist on doing their own Quickbooks and it takes me way longer to clean their books up, then to just do them myself in the first place.

2. Quickbooks can be expensive if you don’t have many properties to spread the cost across.

Quote from @Phil Contreras:

Hey all,

I've been reading a bunch of books about cost segregation (tax free wealth by Tom Wheelright) and there is this one question that I can't find the answer too.

Can I cost segregate my house for depreciation if I don't have the real estate professtional status?

Basiclaly, can I conduct cost segregation as a regular landlord person on my properties? or am I only allowed the standard depreciation of 27 years?

You can definitely do a cost segregation.  If I was doing your planning, my question would be, how soon do you think you’ll sell the property?  Variety of factors in play, but that’s where I’d start.

Quote from @Michael Plaks:

@Jason Kahan

Standard deduction is personal. Rental losses are business. They are not related. You can take both.

Michael is correct here (as usual!)