by on May 9, 2012 Leave a Comment

Getting Things Right – The Challenge For Real Estate Investors Everywhere

What’s frustrating for many real estate investors around income tax time, is the gnawing little voice constantly asking whether or not their income tax returns are correctly done. I’m here to tell ya that ain’t the biggest issue when it comes to tax returns. Sorry to do this to ya, but in my experience, investors are an accurate bunch. Their goal in life isn’t to turn their tax returns into giant red flags, attracting the nearest auditor. Besides, most of the math is fairly simple, even if the return’s instructions aren’t. :)

The real potential issue.

BawldGuy Axiom: In this age of uber-accessible information, finding answers to our questions is, generally speaking, not a major problem. What bites us where we sit are the answers to those questions we never knew to ask. Answers to unasked questions can be deadly.

One of the many ways you can look at your tax return is as a summary of the investment strategy(s) you’ve chosen to execute — purposefully or not. The question beggin’ to be asked is,  [Read more...]

Filed Under: 1031 Exchanges, IRS, Real Estate Investing
by on May 7, 2012 1 Comment

Can IRAs be Co-Jointly Owned? — Remember, the “I”

The simple answer is…..NO!

Why? Remember, the “I” in IRA stands for Individual, and not anyone else. While you can certainly make other individuals the beneficiary of your IRA, it is still YOUR IRA.

So, with regard to a self-directed IRA, a typical question will be, “Is there any way my IRA and my wife’s IRA can be brought together for greater purchasing power for an investment in real estate (for example)?”

Yes, of course.

Both individual self-directed IRA accounts could purchase in proportional shares the assets of a jointly-owned and managed LLC. Ownership would be in direct proportion to the value of each person’s IRA. As an example, if Jim’s IRA was $60,000 and Susie’s (his wife) was 40,000, Jim’s IRA would have a 60% proportional share ownership of the joinly-owned and managed LLC, and Susie’s IRA would have a 40% proportional share of the LLC.

In the second half of this series, we will review how, if Jim or Susie were self-employed, they may want to rollover their IRAs into a self-administered 401K of which they are both co-trustees.

Filed Under: 401(k)'s & IRA's, Real Estate Investing
by on May 1, 2012 3 Comments

Don’t Get Caught With Your Pants Down When Using Entities in a 1031 Exchange

BawldGuy Here: This isn’t just another post about Section 1031 tax deferred exchanges. I’ve talked numerous times on these pages on that topic. The key takeaway here is how to make use of asset protection techniques while not impeding a future option for exchanging, tax deferred. It’s always been more a ‘practical’ problem posed by the lenders, not primarily a tax problem. The lender requirement calling for the borrower(s) to buy/borrow in their own names caused the tax dilemma. The lenders were the ones who’ve inadvertently pulled investors’ pants down. I’ve seen it literally dozens of times in my practice. In this post Clint very simply and elegantly explains how to have your cake and eat it too. Enjoy . . .

1031 exchangeSection 1031 of the Internal Revenue Code is one of the few tax deferral strategies available for real estate investors.  It is basically an “avoid tax on the sale” provision for real estate.  It should go without saying that in order for this provision to apply, the sales proceeds are reinvested in similar or like kind property.  However, reinvestment in like kind property is just part of the qualification for an exchange.  For investors who utilize entities for their property, the knowledge of this has come at inopportune times.  The use of land trusts, limited liability companies, corporations, or other entities may nullify an exchange if you do not have a complete grasp of the requirements under 1031.

Basic Rules For a 1031 Exchange [Read more...]

Filed Under: 1031 Exchanges, Real Estate Investing Tagged With: , , , ,
by on April 25, 2012 Leave a Comment

Real Estate Investing For Retirement and The Wizard of Oz

Had a great conversation with a 20-something Millennial this afternoon. The guy is way smarter than the average bear, and blessed with common sense to boot. He’d sent me an email with several questions, most of which I found more than merely interesting. Among them was,

Why don’t people talk about real estate as a viable means for retirement?

It’s been part of my basic understanding of what I do. What with all the empirical evidence showing real estate is far safer, more reliable, and generates more wealth than the many alternatives, the vast majority choose everything other than real estate. Why is that?

[Read more...]

Filed Under: 401(k)'s & IRA's, Real Estate Investing, Retirement Income
by on April 19, 2012 Leave a Comment

Do You Want the Path of Least Resistance?

You know in the ‘ole days, it was not uncommon that many CPAs, Brokers, and Accountants would tell their clients that self-directed IRAs and 401Ks were “illegal.”  Many of these professionals may not have been trying to steer their clients out of selfish interests…they just may not have known that such accounts, as long as established and executed correctly, are quite legal.

Then 2008 came and not only did it seem that many of these professionals became aware of such plans, it almost seemed that “self-directed” anything became the new buzz words.  Heck, it even seemed as if everyone wanted to set up such plans (evidenced by the fact that I have had more than a handful of people ask PGI if we could train them to enter the field).

So, I never thought I would be doing a post on this topic…hey, it’s been so long, I almost feel like I am going retro :) .  But, I was speaking to a new client this week and he actually told me that he reviewed a self-directed 401K with his broker first and was told that such a plan was “absolutely illegal.”  Feeling discouraged, he felt as if his broker may have selfish interests, so he reviewed it with his CPA.  Guess what?  Well, his CPA never said it was illegal, but said he had “never heard of it before.” [Read more...]

Filed Under: 401(k)'s & IRA's, Asset Protection, IRS, Real Estate Investing
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