RAISING MONEY — LEGALLY AND SAFELY — FOR REAL ESTATE INVESTING

RAISING MONEY — LEGALLY AND SAFELY — FOR REAL ESTATE INVESTING

It is natural to indulge in the illusions of hope. We are apt to shut our eyes to that siren until she allures us to our death.  – Gertrude Stein Does the thought of increasing your real estate purchasing power get your “juices” going? If so, you’re not alone. Talk to any serious real estate investor and you will probably hear the same complaint: “I have more deals than I do money or credit.” Some investors solve this issue through simultaneous closings or with hard-money lenders. Others take a different approach by actively soliciting people with cash to invest in their deals. The allure is obvious: “get rich through real estate investing.” Heck, who wouldn’t want to do that? You partner with me, we invest together, and we all make money. Right? Well…yes. If it’s done right. And That’s the Tricky Part. Unfortunately, many investors make mistakes that unwittingly trade one problem for another, and it’s not a trade I’d make: lack of cash versus potential civil and criminal liability. If the investor’s fundraising activities are properly structured, then liability diminishes accordingly. But that’s just one of many “ifs” of which you need to be mindful when you’re working with

Selling Your Residence Tax Free without Section 121

Selling Your Residence Tax Free without Section 121

You know that you have up to $500,000 in capital-gain exclusions when you sell your personal residence—but what if your house has more value than that? This time, we’ll talk about how to sell even a pricey residence without having to take a heavy tax “hit.” The High-Ticket Dilemma As you know, under Section 121, if you’ve lived in a house for two out of the past five years, you can sell that property and exclude gains up to $500,000 as a married couple filing jointly, and up to $250,000 as a single. But anything over and above that gets taxed as long-term capital gains. This is the dilemma that faced some clients I had in California, who had a personal residence that would represent $1 million in gain. When they saw a potential of $500,000 more than what they could exclude under Section 121, they asked me, “Clint, how can we sell this property and not pay any tax?” It’s actually amazingly simple. I told them, “Move out of your house, arrange to rent a home in your new area, and then designate this home as a rental. List it on VRBO. Put it on Airbnb. Show the IRS

The Importance of Anonymity for Your LLC

The Importance of Anonymity for Your LLC

  Most investors are unaware an LLC can be set up without the investor’s personal information publicly disclosed to anyone with access to a computer.  A key component of creating an asset protection shield is to maintain a veil of privacy around your assets.  Its common sense that if you appear worthless, a creditor will be forced to weigh the options of bringing a claim because the possibility of recovery is highly suspect. Unfortunately, most real estate investors and professionals who establish LLCs either do not know how to create an LLC without the investor’s information being publicly exposed or downplay the importance of anonymity in planning.  (I believe the latter is a direct result of a professional not understanding how to create the former.)  When an LLC is organized, the organizer must select between a manager-managed, or member managed LLC.  With either LLC form, 45 states require the LLC organizer disclose the LLCs manager(s) or member(s).  This information is publicly available because on the state’s secretary of state website. How important is anonymity?  Very!  Consider a recent situation involving a real estate investor in California who I will refer to as John. Five years ago John established a California

Sell Your Home to YOURSELF for Tax Free Income

Sell Your Home to YOURSELF for Tax Free Income

Home, Sweet Home…Tax Break! Let’s talk for a bit about taking your personal residence and converting it into a rental. “Hold on a minute,” you say. “What’s there to talk about?” On the surface, it’s simple, right?  You might be ready to move up in the world, so to speak, but you don’t really want to sell your house. You know it’s got a great location, it’s probably going to continue to appreciate in value, and you suspect that it could bring in a handsome rental income for you. So why not just move out, spruce the place up a little, and put out the advertisement? Nothing Wrong With That…On One Level. It’s easy, it’s straightforward, and you’ll get a certain benefit out of it. But if you want to profit even more from this exercise, there’s a better way. In this post, I’ll show you how to take your personal residence and SELL IT to your business…and THEN rent it. It’s a difference you’ll feel at tax time! Here’s How It Works. Let’s say I bought my house 15 years ago for a purchase price of $200,000. Fast-forward to today, and that same residence is worth $500,000. Now, if

Found Money for Tax Deductible IRA Contributions

Found Money for Tax Deductible IRA Contributions

It’s about tax time, which is prime time to talk about contributing to an IRA with funds you already have…but may not know you have. We know this is a prevalent problem, because we get inquiries like this all the time from our clients: “Hey, I’d really like to put $5,500 into my IRA so I can get that tax deduction…but I don’t have that money just lying around! What do I do?”  This isn’t a frivolous concern. If you’re married and filing jointly, with an income around $100,000, you’ll save a tidy $1,000 in taxes with that $5,500 contribution. But there’s good news: you DO have this money around already, even if your bank balance doesn’t reflect it, and any “extra” you have is tied up in investments or the like. You just don’t realize you have it. So where is it? The Hidden Value of Your 401(k) Let’s say that you participate in a 401(k) plan with your employer, and you have $30,000 in the account; or, alternatively, you’ve set up your own IRA, to which you can contribute up to $5,500. The key is, however, that in order to make that contribution, you have to have at