All Forum Posts by: Taylor L.

For $10k I would look for other value add opportunities first. A pond would be nice to have for some buyers, but others don't care about it. Additionally, there may be an increase in homeowner's insurance rates, so that is worth digging into (no pun intended) before having the pond put in place. The pond also invites a ton of questions regarding zoning, what the DEQ is going to have to say about it (assuming you're in VA) and so on.

I vote absolutely yes on ceiling fans. They really don't break all that often and they're not particularly expensive anyway. Window a/c units are all the more reason to keep ceiling fans, as ceiling fans can help a room feel quite a bit cooler. 

Yes, yes, yes, ceiling fans. Go to Lowe's and get some cheap Harbor Breeze units. Less than $100 apiece and they'll help keep your tenants happy. Get the kind with pull cords rather than remotes, as remotes can absolutely break and will for sure get lost. 

They're not expensive, they're pretty reliable, and they'll keep your tenants comfortable & happy. Win win win.

@Jack Malpass Thanks for the reply. The SDIRA pains include:

- Custodian: They are an absolute headache. Everything is a pain, has to be done the old way with wet ink signatures, they screwed up my 990-T filing last year, constant demands for FMVs, etc. I'd say their name here but I've done that in the past and they send me nastygrams. If I somehow were to continue SDIRA I would need to find another custodian, which means lots of further setup fees.

- UBIT/990-T: Impacts the return pretty considerably. Finding someone who could handle the 990-T prep was difficult years ago and their prices keep going up. Then, as mentioned above, my custodian managed to screw up that process as well.

I'm concerned about getting distracted by private lending because I have my own real estate private equity business and lending would take time away from that. Lending is out of my realm of expertise, so learning the lending business and building deal flow would distract me from my more lucrative real estate PE business.

`What would you do in my situation?

Invested my Roth SDIRA in a self storage deal 4ish years ago. The deal has gone well and a sale within the next few months is likely. My proceeds will be in the low six figures, I don't want to get too specific. It's a pretty healthy equity multiple on my original investment.

Option 1: Distribute the shares to myself prior to the sale and pay the early withdrawal penalty. Pro: I have a lot of deal flow myself, so this would allow me to invest the capital in my own deals. Cons: 1) The penalty is money out of my pocket. 2) If the sale of the property occurs within a few months, am I then in short term capital gains tax territory? That could be a colossal tax bill considering my tax bracket. 

We've had the property for several years, but do I technically wind up in a short term position if I distribute the shares to myself less than a year before the sale? The sponsor may be offering a 1031 Exchange DST option, which I may consider. I do not have the details on that quite yet.

Option 2: Let the sale go through, pay UBIT, and turn it back into a regular Roth IRA in publicly traded securities. I don't love this option but it gets me out of the pain-in-the-butt SDIRA.

Option 3: Other ideas?  I know many others who use their SDIRAs for lending, but I am very big on focus. All of the progress I've made in my syndication business boils down to getting focused and avoiding shiny objects. I am concerned that getting into lending would be too big of a distraction from my actual real estate business. 

What do you think? Am I crazy for thinking about giving up the Roth IRA's tax benefits? Am I potentially walking into a big capital gain tax bill?

I am in my mid 30s now so I have quite a long time to keep it growing. I also have many opportunities to reinvest the capital in my own deals. At my core I am a cash flow investor, I love seeing the funds hit my account every month. However, the idea of paying huge penalties and taxes to free up my money is quite painful.

Your pitch depends on the deal structure and your experience. IMO the experienced PE brokers will be focused on you and the team first over the property. Showing your experience is great. As with many parts of real estate, dig this well before you're thirsty. The earlier you can start building these relationships the better.

For me, legal services don't bring enough value to earn a significant portion of the equity. If the attorney in question doesn't have a background in real estate law then I really don't see where the value add comes in.

Where are you sourcing deals to evaluate? The MLS or off market?

The biggest thing people overlook in this case is, in my opinion, a proper Operating Agreement. Everything is hunky dory now and everybody is happy to work together, so they assume that it'll stay that way forever. Then, a few years down the line, they have no agreed upon plans to dissolve the partnership or get one person out. LLCs are incredibly easy to form, but the proper agreements & paperwork can be tough.

Scaling in real estate depends on partnerships far more often than not. Partnering up with others can be a great way to grow. Just be smart about it!

You may want to join the FatFIRE Facebook group (run by Physician on FIRE). He has a few other doctor-specific groups as well. All great places for high earners to network and get specific advice without pitches.

As a general comment I've noticed that my physician friends tend to under-value their own time outside of work. They often try to do too much of the day-to-day activities in their real estate investments, when in truth they'd be far better off to hire professionals (think PMs). You have an incredibly valuable skill set that people will pay a considerable amount of money for. It just doesn't make sense to spend your time on things that you could hire someone at $20-30/hr to do.

Asset protection is also a critical factor to consider. Protect your investments & assets from potential liability as a result of your profession. 

You need a securities attorney who specializes in real estate syndications. There are many of them who are active on BP and other real estate specific forums. Most real estate deals utilize LLCs for most, if not all, of the entities involved. If I were in your shoes I'd go to YouTube, search Mauricio Rauld (who is a securities attorney) and watch all of his videos. That'll get you a solid baseline.