All Forum Posts by: Tony Kim

 Yes, investing $1,000 in real estate would also be a lollipop. But you can't invest $1,000 in real estate. I stick to "realville" not hypotheticals when my money is on the line. ;-) What you are questioning Is called a "non-sequitur".

 That's like buying a lollie pop and hoping that since you got started, it will turn into a steak. It is false hope and wasted energy, the whole point of this thread. Better to plan bigger and prepare properly.

How much cash flow do you have each month? That would determine how much of the HELOC I would use.

@Mike M

This is very poorly thought out. 

1) You can "buy the market" with things like mutual funds or etfs for as little as $1,000 dollars. This will give you a share of ownership of "all the stocks in the market" depending on what fund you are buying. 

2) You gave one example of money you made from a real estate investment. It seems like you did a really good job and made a lot of money. However, I would be skeptical if this deal was the "Average" of all your real estate deals. 

3) You are comparing buying real estate on leverage with buying stocks NOT on leverage. You can also buy stocks on margin - which is a lot riskier, but the payoff can be huge is well. 

There is good things about both investing in real estate and the stock market. Fortunes have been made in both. It is silly to say one is superior then the other and only stick to one strategy. Your argument is equivalent to me saying " I bought Bitcoin at X and made XXXX%, this is the best strategy". I am not an expert, but I think the smartest people do both imo. 

@Account Closedundefined

@Tony Kim I am not sure  how much gain you are deferring through the 1031 but if you have to to QOZ you may still have a large tax bill.  Unless it has changed only the capital gains portion is eligible.  You may still have a lot of tax on deprecation recapture.  Hopefully it all goes through as planned.

Unless you are using tax deferred funds and planning for a major improvement your tax benefits will be $0...  I think a lot of people are confused about these.  This can be a big deal but I think the usefulness is narrow.  It is likely to be used more by private equity groups and syndicators to raise capital and move it into the real estate sector.

@Ben Zimmerman 

The "simple interest" mortgage definition in Investopedia doesn't really make sense, because it doesn't define what "calculating interest monthly" vs. "calculating interest daily" means. If you calculate interest by dividing 5.00% by 365 and apply it to the principal balance every day for a year, it is no different than dividing it by 12 and applying it at the end of each month when the normal payment is applied. What everyone is arguing about, is what happens when you pay a payment before (or after) the due date, or make an extra principal payment during the month. What happens on both standard amortizing mortgages and HELOCs, is that the principal balance on the loan is reduced by the payment minus the interest accrued to that DAY, and the interest for the next payment due, is recalculated. 

Virtually all amortizing loans are "simple" interest in the sense that there is no "interest on interest" or compounding, because every scheduled payment covers more than the interest accrued between payment posting dates unless you default. 

Wow @Scott L. and @Joe Splitrock

 Just because you don't like it the tool doesn't mean you have to bash it the way you continue to do. The process works. As usual, the ones that don't understand put out false/ bad information. 

    @Tony Kim

So if you have a 200k loan @3.25% , you will pay approximately 113k in interest over the life of the loan. If you use the velocity method at 10k every 5months, you will pay appoximatey 22k in interest over the life if the loan (approx. 7years). Looks like to me you will save at least 90k in interest payments. I don't know what you owe on your mortgage so I used the number I use most of the time.  (NOT 100k). The savings isnt made on the timing of paying your bills. Don't let that misinformation fool you. 

This isn't for everyone as has been said earlier. One needs to be financially sound and discipline to make this work.

FYI the sky isn't falling. I have a interest cap on my Heloc I am not really concerned with the slow  increase in interest rates either way. 

@Jimmy Klein @Lien Vuong @Jeffrey Holst @Russell Brazil - A few items to clarify.  First, I am not a lawyer nor a CPA.  That being said, I have spent a good number of hours on the phone with the IRS discussing this program.  A few points I have taken away from those conversations:

1.  The zones were created by the State and local authorities.  They are not necessarily "high risk" areas.  They are areas where the governing authorities wanted to encourage economic development.  They literally can ebb and flow from one street to the next in a city or region.

2.  The zone is not the investment vehicle.  It is the Fund.  The Fund has to invest 90% of its holdings into businesses or properties in designated zones.  The investment can be in any zone.  There is a minimum investment for establishing the Fund.  Opportunity Zones have gotten the news lingo, but the key is the Opportunity Fund.

3.  The investment into the Fund has to be from capital gains - any type of capital gains.  You have 180 from the realization of the gains to investment in the Fund.

4. As with Self Directed IRA's a disqualified investor is a major concern for the program. You can't create a fund and then buy your own property. Let's call the Investor "A". Investor A is interested in a development by Developer "C". Investor "A" can invest in a Fund by Fund Manager "B". A invests in B, and then B invests in C. It has to be an arms length transaction. A can not directly invest in C, nor can A say they have a fund and invest in A's own property.

Please keep in mind when I began the conversation with the IRS there were only 2 pages of tax code written at the time.  There has been more published, and the laws will continue to develop.  Is it a useful tool for real estate - 100% absolutely.  Does it fit every investment - no it does not.  However, it would be foolish to overlook it.