Tag: videoshort

Last Call: Less Taxes With Bonus Depreciation

What’s up folks? Lane here. I’m gonna be talking about bonus depreciation and it going away here in 2022, but don’t worry, it’s not going away until the next few years. It’s just stepping down every single year. So first off, what is bonus depreciation and why should you even care about this thing now?

All right, so for you, those of you guys who know, you know, with rental real estate, one of the main reasons why I like rental real estate is because you can depreciate the asset and create a phantom loss or paper loss, whatever you wanna call it. But you can create these passive losses or pals for short.

P A Ls kind of clever, right? But you can take these pals and these passive losses can offset your passive Inca passive income from what you may say. Well, passive income from rental properties. So like your cash flow that you’re getting from it. Or you know, things you’ve held for a while and you’ve sold it.

Um, in terms of real estate, you know, you can use the losses from other investments to knock it out and not pay any taxes. And this is how I’ve kind of lowered my tax bill quite substantially over the last several years. Um, and this is, I think, the biggest thing that I’ve learned. Why do you wanna do real estate and why do wealthy people do real estate?

You know, for a lot of folks out there, before they even start working with us, they’ve got a high ordinary income or active income, maybe from a day job, or maybe they’re a business owner. But you know, we have a lot of clients that, you know, are maybe dentists or doctors making 600, $7,000 a year.

But that’s all ordinary active income. The problem with that is you can’t use passive activity losses or pals to knock it out because pals are, again, only used to knock out. Passive losses can knock out passive income. So what do we do? Well over time, you know, people work with us. They, you know, they join our network.

They get the connections and the deal flow to, you know, go from high active income or income where they can’t really shield themselves. And where, you know, the IRS is just absolutely destroying you every single year, and we’re moving you away from that to passive income. Why? Because you can use these passive losses to shield you.

From the taxes. And a lot of people who invest a lot in real estate, um, maybe not even more than like a quarter of their portfolio could possibly wipe out their entire tax load, um, from doing it this way. And this is the reason why I don’t invest in crypto or stocks because when you sell that stuff, it.

Consider all ordinary income before I go any further. Of course, I’m not a CPA, a tax attorney, anything like that. But hey, you know, um, I’ve been doing this for quite a while myself, and these are just some things that I personally do and also some of my, uh, colleagues who are also professional passive investors do themselves.

So what is this bonus depreciation thing? Right? So I think so. You guys have maybe owned rental properties before? No. You can write off the property over 27 years as a paper loss or depreciation loss, um, which is great. Just 27 years is a really freaking long time. Um, and this is excluding the land portion.

We’re only talking about the, the, um, property improvement portion that you can depreciate because land is not depreciable cuz it just stays there. But the cool thing about commercial real estate, and when you start to do these things called cost segregations, and we’ll get into what the heck a cost segregation is, is you can do these cost segregations and you can aggressively write off the property a lot faster than that really long 27 year cycle.

A lot of times you can write it off the entire building. Third of it in the first year, which we’ve done on many of our past projects, to create a huge, huge amount of these passive losses that dump on ourselves and passive investors, K one s, and now they can take this huge, huge loss and maybe offset their passive income and some of the people doing rep status.

Which is a little bit more of an event strategy that we kind of help people implement along with their cpa they can use these passive losses to lower their income. We’ve got a great example of that. Come to the next slide and how people are lowering their adjusted gross income from a million dollars maybe to a half a million dollars a delta to 500.

And at 50 cents on every dollar tax savings, that’s a quarter million dollar tax savings right there. But getting back to like this bonus depreciation via a cost, eg, right? So what the heck is the cost? So a cost e.g. is pretty much you pay a geeky engineer like how I was at one time to go out and itemize the entire building.

And if this is all kind of go, get you. It really doesn’t. You pay a guy about five to $10,000 to do this. There’s different ranges, and of course you wanna find a good one and we can kind of help you guys out if you guys need any referrals to this. But the engineer needs to actually go out and visit the property and, you know, take some notes and do their report.

But basically what it is, is this large report where they itemized all the little components of the building from, you know, from roof to plumbing, electrical, concrete, you know, everything. Basically what they’re doing is itemizing all the little components into dollar amounts into different categories, and those categories are five v, seven, 10 year category assets.

Certain things depreciate a lot quicker. Certain things to depreciate have a little bit longer lives than they might be in the 10 year category or more. So again, not really needed from a passive investor’s point of view. Passive investor’s point of view is to understand this stuff on a high level to know who to go get the cost tag or which in syndication to invest in that they’re doing a cost segregation, getting the bonus depreciation, and then be able to communicate.

To your CPA and what the heck to do with all this? Because most of the CPAs we find, or at least from what I see a lot of you guys out there, my clients, 95% of you guys have to change your cpa. Because a lot of CPAs just frankly don’t understand it and it makes sense. That’s why the CPA has a day job. They haven’t figured this stuff out yet.

Right. But hey, you know, maybe not everybody should know this stuff because then who would do our tax returns for us? Right? But anyway. So this Costa gets done, it’s passed off, uh, probably in a nice little PDF or Excel format, whatever. It gets passed off to the cpa, um, that you have and that can be distributed out to, um, yourself or as when we do it, we do a big syndication.

We do this all for our investors. We get the Costa, we pay for it, and then that allows us to pass it to our cpa, who then distributes all the losses, the passive losses to all I. Via the individual K one. So it all comes out at the end of the year on this nice little clean one page, K one document.

And what this does is now each individual past investor, or you know, if you’re doing this on yourself, um, doing it on your own properties, Um, you guys can check out the referral, um, partners at simple passive cash flow.com/coste. By the way, there’s some older videos and education on there if you want to do this all on your own.

But you know, you can go over there and, um, you know, you can do this cost segregation and get all this extra depreciation. Now, coming down here, you know, investors. You know, some of these deals I see, you know, you put in a hundred thousand dollars, you may get a hundred, $120,000 of depreciation losses more than offsetting, you know, maybe you made five, $10,000 a year more than offsetting that, and you’ve got this surplus and.

For those of you investors out there, you really want to have this form called the 85 82 form. Every investor needs to have this. If not, you need to ask your CPA for it. And a little dirty trick is the CPA is never like they give you this stuff because then they know you’ll probably just leave them after that point.

But, You know, I always check my 85 82 form and see how much passive losses I’m floating because that allows me to play strategy and whether I deploy the passive losses and activate it, essentially, you know, keeping it from my storage and using it to lower my AGI that year. Or do I keep it because maybe I’m having a big, uh, capital gain the next year or three, four years from now.

Right? And this is where it gets com complicated and every situation is just a little bit different. And that’s why we tell you guys well. You know, join our organization, you know, a book of free intro call with myself. We can kind of walk through this. Um, I’m not gonna give you any tax illegal advice here, right?

But I’m gonna teach you how this kind of works so you can make the best decisions for yourself. Or at the very least, have an educated conversation with your CPA because, um, you guys need to educate yourself. If not just CPA’s, just gonna do it the easy way, right? You ask most CPAs, how do I save tax?

They’re just gonna give you a bunch of lame stuff like, um, you know, do a 401k, do some pretax, post tax, maybe Roth ira, lame stuff, folks. That stuff is like playing checkers where we play chess. So, moving on. So what’s this bonus appreciation thing, um, going on? So in the following year, um, you know, this is gonna be stepping down.

So from the tax cut and job act, uh, I believe that was maybe around when Trump came into office, he signed in this, uh, nice little, uh, carrot for real estate investors. There was gonna be 100% bonus depreciation, and this is gonna be phasing away starting next year, 2023. Um, where right now in 2022, you get a hundred percent of it.

Next year you get 80% and a year after you get 60%, and then the year after that 40% and the year after that is 20%. So it’s phasing away is. Slowly, right. Not to say that 80% isn’t just as good as a hundred percent, and what I’ll kind of cover is that it’s just, it’s not like you’re getting 20% less.

It’s just for the bonus part. Right, so it’s, you’re still getting the normal, regular depreciation, so it’s not like you’re getting 20% and I don’t know exactly how much, and cuz I haven’t seen it, I haven’t compared my K one s from this year to when? Next year. it’s only 80%. But when I look at cost segregation reports from my own viewpoint and look at the numbers, I really don’t feel like it’s that big of an impact that a lot of people are kind of making their way out to be.

I all kind of feel like it’s a little bit of a scare tactic saying You better invest now, right before it’s a hundred percent before it goes down. Um, if you’re a passive investor and. Number one, your adjusted gross income is not higher than $340,000. Don’t even worry about all this stuff. Right? And I, I think this is a big mistake I see a lot of passive investors making is that they hear about these opponents appreciating passive losses, and they’re great.

But they may not be able to use the damn thing. So again, book a call with us, get to know us. Um, we can dive into your strategy, we can talk specifics, but if you are, again, you’re not a high income earner, this stuff doesn’t really, really pertain to you. It’ll, it only may, uh, mean something later on. But if you’re one of those people like myself who, um, likes to hoard passive losses just for the heck of it, even though I don’t need it, it may not be the best thing.

And you should maybe focus on investing. Better investments, better returns than forwarding passive losses that you may or may not need.

Where does that three $40,000 number come from? Well, these are the tax brackets in 2022, and I think they’re gonna be in inflation and adjusted for next year. So the premise is gonna be the same too. There’s, a lot of my clients who fall right around this red line in terms of income, and that’s why I talk about it a lot.

But also when you look at this, like if you look at. The progressive tax system, you know, most people are paying 22, 20 4%, but there’s a big jump between the 24 to the 32% range and that’s where that, this dotted line where I draw this dotted line where, you know, for a starter strategy for, you know, just somebody listing, you know, just kind of the default.

It probably is a good idea. Uh, above, stay above this line or below the line, however you want to call it. Right? Or keep your adjusted gross income under $340,000. Married, followed jointly. I’ll say that again. Keep your AGI under $340,000 adjusted gross income. Um, if you’re single, uh, it’s a lot lower at $170,000 adjusted gross income.

Now, personally, I’ve kind of taken the strategy where I wanna drive my income down way, way. Um, I use this in conjunction with real estate professional status and also I don’t have very much ordinary income, and if all my income is passive, I can use as much passive losses that I have to offset my passive income.

So if I have a million dollars of passive income and I have a million dollars of losses, I can drive my income down to zero if I wanted to. Right. And that. We’ll save that for your guys’ individual calls, right? If you guys, um, choose to step forward with that and, you know, we, we work with the credit investors here, so, um, if you guys are not a credit investor, maybe check out some of the free content.

Send me an email with some specific questions and we’ll point you where this stuff is in the podcast, on the website. But for, you know, kind of a typical client making say $500,000, you know, What are they gonna do to drop themselves down to three 40? Well, they, that’s a delta of about $160,000 that they need to lower their agi.

So if they can turn, if they can create that passive income to get that and also create the passive losses, they can use the passive losses to drop them down. Um, But if they are somebody who just has, you know, and this is probably you listening right out there, you don’t have any passive income. You only have ordinary income, right?

Ordinary income sucks because you can’t use the passive losses to lower it unless you have real estate professional status. And this is again, where a lot of new investors like this idea of passive losses from real estate. But if you don’t have rep status, It doesn’t do you any good, and it doesn’t really help that you’re hoarding these things too much.

And also, if you’re under, you know, if you’re making less than $300,000 a year, you’re not paying that much taxes as it is. You’re in the 22 or even less tax bracket. It may make sense just to pay the debt taxes, right? Not until your AGI goes up higher. Does it really make sense? Pull these levers again, every situation is different and we give everybody a free introduction, one complimentary conference call with myself because, um, you know, time is important, but I like to help out people.

Um, as this was all new to myself and like when I was, when I graduated college, started working for the man as an engineer in my twenties, the most useless information I got was investing in a 401k. And that’s just crap in my opinion. Sorry if you, that’s all you. But you know, welcome to the simple passive cash flow where we do things Definitely a little bit differently.

But what is this sales tactic that, uh, folks like myself are telling everybody, bonus depreciation is going away. You know, well, it’s, it’s phasing down, right? And you know, like next year it’s gonna go down 80%. But, you know, if you were to think about the bonus depreciation portion is just a portion of all the losses that you get.

There’s. A lot of that, that stuff may not be taken in the first year. And, again, I just don’t think like, it’s, like it’s literally gonna step down 20%. So an example would be maybe you invested a hundred thousand dollars and you got a hundred thousand dollars of passive losses because, you know, the deal is using pretty good leverage and that’s how you’re getting that much capital and equity, um, to contribute to so much of that losses.

So in that, Um, what, what I, what I would say like in the next year when bonus appreciation goes down to 80%, it’s not like you’re gonna get 80%, if it was the same amount of capital contributed the same deal, but in the 2023 instead of 2022, at that point, um, I probably guesstimate that it might be maybe like 10% less than what you got.

Still pretty good, right? Um, you’re just gonna have to invest a little bit more. But you know, at some point this stuff is phasing. And the best time to do this was yesterday. Like, you know, we talked to a lot of our clients about infinite banking, right? And how there was last year there was this big, um, harrah over like the 77 0 4 changes or whatever it was.

But you know, this stuff is never getting better, just like investing, right? The best time to invest was yesterday. But, you know, another thing that these passive losses can do other than just manipulating your adjusted gross income from that year is also. Offsetting capital gains. So capital gains is, you know, when you sell an asset or syndication comes full cycle and you get your money back, and you get your nice returns exactly why you went into an investment for the first place.

Um, you’re gonna get this, uh, hit with these capital gains. And this is straight from my tax form. And back in 2017, I sold, uh, I believe this year I sold six or seven of my little rental properties for a capital gain of, uh, almost $200,000. They’re in line 13, $198,000, right? Oh, crap. Right? That’s a lot of, uh, taxes.

Um, if I’m, if I was in like the $300,000 range, Exploded my AGI up to $500,000. But what I did was I used my passive losses because I was investing in syndication deals prior to this, or maybe in the same year. Um, I was compiling all these passive losses via cost segregation, bonus depreciation, and I was, um, I.

I had a pretty good amount just, um, being suspended is what they call it, suspended passive losses or passive losses that haven’t been executed or used yet. And what I did is I just pulled it down from the cloud in a way, um, and I put it there on line 17 to offset it. Boom. Knocked it out, and then paid no tax.

And this is where a lot of like old school investors, they always talk about this 10 31 idea. Um, 10 31 is just another way to defer, but the problem there is you’re putting all your money from one deal to another and the deals are getting bigger and bigger, which totally violates one of my big things. I tell a lot of my investors, you never want to have more than five to 10% of your net worth into any one.

So old school investors, what they’re gonna do is they’re gonna buy a single family home, 10 31 into a duplex 10 and 31 into a fourplex Aex 16 unit. You know? Then they’ve got all this capital gain and the only way that they can get away from the taxes is die. And the problem with doing it that way is everybody knows when you’re a 10 31 buyer, you’re a sucker.

Right? We love it when people buy our apartments that are 1031 buyers because we know that they are motivated buyers. In fact, they’re so motivated that because if they don’t close the deal in 180 days or whatever, that they have to pay all this taxes to the IRS and to get absolutely killed. Right?

Maybe their four might look like this, but like add another zero here at the app. And this is where this whole new school way of thinking of get rid of that stupid 10 31 exchange and break up your portfolio into many, many deals. Like personally, I think I must be in like 80 or a hundred syndications at this point.

And all my net worth is di like very diversified geographically, different asset classes, different deals. Um, I do a lot of apartments personally and we operate that, but I also go into many, many other asset classes that are a little bit diversified on how it’s correlated with the economy, right? We never wanna know what’s gonna happen with the economy and we never know how it impacts anyone.

Asset class sector. So well, from a tax perspective, what this is doing for me is it’s allowing me, you know, these deals that I’m in, they may cash out and gimme a huge gain, which is good. The bad part is you’re gonna get the capital gains and depreciation recapture. But if I break this up so much, And I keep a certain level of passive activity losses on the 85 82 form.

Then at some point I’ve created this Nirvana world where, you know, if I’m in a hundred deals and 10 of ’em cash out, it gives me a whole bunch of money. You know, my passive loss, suspended passive losses, maybe a million or $2 million. But it may go down to 800, but then when I invest, reinvest the money, it’ll go way back up and it just keeps going up and up and up.

And this is kind of the concept of passive loss nirvana. And you really never pay taxes just like you were with a 10 31. But with a 10 31, everything is pegged on one asset, right? Again, not diversified. Um, Just a different concept, right? Like if you’ve been, think you’ve been kind of beat to death by the 10 31 guy or the salesman selling it, you know, you probably think it’s the best thing.

It’s one alternative. And to me, um, a lot of these, what I try and do, and I try things, make, make things very simple, especially for the people in our ecosystem, right? Like, there’s so many things out there financially, but for high net worth, high paid, professional, professional investors, passive, I. Things are very simple and when it comes to deferring taxes, you know, other than you know, the Section 1 21 where you only have $500,000 in your primary residence in opportunity zones, which is something very different to cover, maybe in another video, but.

The only other options you have is deferring it right? And a 10 31 is just one way you’re deferring your taxes, whereas doing it this kind of chopped up method into diversified many deals with bonus depreciation is so much more of a superior strategy. Um, 10 31 is just a tool, right? And it’s all tools.

You only use the tools in the ripe situation, in my opinion, my humble opinion, because apparently I’m not a financial planner, right? I can’t sell you garbage commission products like they can. Um, a ten one exchange is used in certain situations where you have a highly, highly appreciated asset. You know, so for example, like say a, a guy has a business that he started like a dentist franchise for 50 grand and you know, 30 years later it’s now worth 10 million and now you’re looking at a $10 million capital gain that you made 10 31 into something like kind.

But in that, in that situation, I may probably consider more of a monetized installment. So which is more superior to 10 to one exchange, but either. Like before you got to that point, you should have took the money out and invested in a syndication deal, started to compile your 85, 82 form padded with passive losses.

So when this fateful day comes, and it does always come, um, you have these passive losses to as a, as kind of like a pill to sell the asset and offset that. And then if you come short, maybe there’s some other advanced strategies like land conservation easement. Uh, oil and gas deals, uh, what’s in an op, the combo with opportunity zone and your rep status.

Um, you know that there’s a myriad of different ways, and at that point, if it’s that huge of a, uh, capital gain of over a million dollars, $2 million, then yeah, maybe you would need to do a myriad of different things. But if you’re. Average investor and you bought a rental property for a hundred grand and it went up by a few hundred thousand dollars capital gain.

Dude, that’s not that much capital gain. You should be able to invest, you know, several hundred thousand dollars or at least, you know, refinance and get that money out and invest it. And then you should get, you should be able to pick up, you know, a few hundred thousand dollars at least a passive loss is pretty dang easily.

If you don’t know how to do that, you need to get around other passive investors that are accredited and figure out how to do it, because this is, I mean, taxes are your number one expense in life. But anyway, that’s then on my spiel folks. If you guys like this video, Please leave a comment below or ask any questions.

If you guys have any specific questions, send it to the team at simplepassivecashflow.com. If you’d like to hear more and enter into our free e-course. To learn more about this stuff in a more curated form, um, you guys can join the club at simplepassivecashflow.com/club. Thanks.

Never Invest in Real Estate Based on an Internet List

https://youtu.be/NPHXCfRR7lE

And this is an extreme example that 10 90 premium split. In some cases, some of the people in the family office group have found that the 70, 30 premium split is actually better. That’s an, I actually. And this is just more of the extreme about that example, where you’re still complying with those mech limits.

So you’re getting the tax free treatment, but you’re stuffing as much money into the cash value and you’re minimizing your fees. One unique way that someone explained. To me, as far as understanding the premium keyway relationship was relating it to your house, the base premium is like your mortgage. So that’s an expense or a cost that you have to for your house by slowly paying down the principal.

So base premiums does add a small amount of cash value. Just like how paying down your mortgage slowly pays down the principle. You can think of your paid up additions as if you were to do that. Renovation where you spend $50,000 to renovate the kitchen at $50,000 spent on the kitchen, basically increase the value of your house.

Hopefully, almost exactly the same or even more so that’s the home relationship. As far as the base premium, paid up additions to mortgage and our renovation, again, different ways to understand this and it to me personally. And it really took me about a year and a half to. The school and the differences between typical whole life insurance, configuring it in a way and using it in a way that the wealthy do have for some of you guys use that strategy where you’re taking a hilar out on your mortgage and paying down your mortgage with simple interests versus amateurs interests.

It operates in a very similar way. And in fact, when you’re using a whole life overfunded or infinite banking or whatever you want to call it, simple, passive cashing, it is superior to using a heat. In my opinion. And I actually think that this is a lot better than using a 5 29 plan for your kids’ college savings too. .

What to Tell Your Lender When Applying for Mortgage Loan

https://youtu.be/RvQ3t9TrZro

I always tell my clients to give me the full story. I don’t want to have any surprises while we’re in escrow it’s oh, so you own a house with your parents and you forgot to tell us. And we always ask for the full story up front, then we can know how to what’s going to come our way and how we can prepare you when we submit your file to the underwriter.

And try to rent them out

For you guys, this is how the industry is made, right? Like you have lending brokers, you have the people on the sales side interacting with you, but there’s a person in the back office. Maybe it’s an agent at a different company. Whereas the. Now, this is where you need to have a good broker or front office person to take your story to that, that if you have just some bureaucratic idiot on both ends, you’re going to run into all these types of problems, but you need to have somebody to Excel your story the right way.

See, even if you do have a bureaucratic idiot as the. You can pass all these barriers. I always tell my clients to give me the full story. I don’t want to have any surprises while we’re in escrow. Oh, so you own a house with your parents and you forgot to tell us. And we always ask for the full story up front, then we can know how to what’s going to come our way and how we can prepare you when we submit your file to the underwriter.

Benson’s a licensed loan officer. So he has no comment on this. I’ve had clients where they change jobs the last second and let it slip on they’re on email and their lending broker kind of kibosh as the loan I had. So my guys will, if anything like that happens, use the full. We’ve had lungs where we call.

So a lot of people, then you’re a couple of times where they submitted their stubs. We’ve got into ESCO, got loan approval and they quit. I quit my job and my wife can cook my job for jobs so we can get real professional status or some other random tax schemes. Yeah. We actually do a final verbal verification of employment three days before you close.

Meaning you sign documents a lot of lenders. They wait until that last minute. When you think about it, Hawaii or California, we close escrow in 21 days, 30 days. It’s very typical. But when we’re in the Midwest, other states, they might take 60 or 90 days to close an escrow. Heck their appraisal process.

Probably two months right now. There’s appraisals shortage right now. So like in two months, who knows if you’re still going to be employed. So they always do a verbal verification of employment right before you close. Sometimes Fannie Mae picked about 10% of loans. So sometimes they will call after the loan is closed to see if you still work there.

It’s okay. If you don’t work there, you just don’t want to make sure they want to make sure there’s no loan from, I think they’re just in the back office there, the Johnny Walker, red DayQuil and checks with people over at the very last second. And we’re talking a lot about like primary owner occupied houses.

How does this change for you? If you’re buying a rental property, non owner occupied, first of all, If you’re talking about conventional owner, non-owner occupied, no gift is allowed. No gift is allowed at least in the last two months, we look at your bank statements and there shouldn’t be any gifts in the past two minutes.

And if you’re looking to do some DSCR loan and for those who don’t know, DSCR, it’s a debt service coverage ratio. It’s a terminology that’s often used in the part mid and loan world. They have it for one to four unit for people who don’t want to show their tax returns. And we base it off of the income of the property that you’re buying to qualify you.

And a lot of those programs will allow a gift letter or will allow gift. But what is that debt service coverage ratio, that magic number that they’re looking for. One that managing numbers one can do less than one. You just need to take. That’s actually not hard that it like for the larger apartments, it’s usually like we’ll fight to fight.

Yeah. So commercial loans, Fannie Mae, Freddie Mac, the multifamily home loans, they asked for 1.2, five. And the one to four is private investors so they really only ask for one or even less than one, depending on the LTV.

This website offers very general information concerning real estate for investment purposes, every investor situation. Always seek the services of licensed third party appraisers inspectors, to verify the value and condition of any property you intend to purchase. Use the services of professional title and escrow companies and licensed tax investment and or legal advisor before relying on any information contained here in information is not guarantee as in every investment there is.

The content found here is just my opinion and things change. And I reserve the right to change my mind above all else. Do your own analysis and think for yourself because in the end, you’re the only person who is going to look out for your best,

Want to Get a Loan? Do It the RIGHT Way

https://youtu.be/zoaZOzv4-m4

I typically suggest there are two ways of sending money into escrow. You can have the donor write a check and deposit in the borrower’s account, but you would need a lot of documentation showing how the money is deposited. We’ll ask for a canceled check or check image and the transaction history.

 

Sometimes it takes three, four days for it to clear. So depends on where you are in the contract. You might not have that luxury. The cleanest way. I always tell people is just have the donor and wired directly into the escrow’s account.

 

try to rent them out and

 

Let’s get to some of the problems you’re seeing through transaction. Maybe we’ll break it down. Order occupied it, non owner occupied too. But the first one is when I was buying a lot of these rental properties, of course I was using my own money. My parents never give me anything. Nobody gives me.

 

But some people when to buying their primary residence, shoot, what kind of 20 something year old kid can afford to $300,000 down payment. A lot of these guys are getting it from their parents. What’s the best back to sit there, like work that in a lot of people, when they come to me, obviously there’s some gifts.

 

But for gift letters, for the most part, conventional loans are pretty easy. They make it really easy for us lenders and also the borrowers. I typically suggest there are two ways of sending money into escrow. You can have the donor write a check and deposit in the borrowers. But you would need a lot of documentation showing how the money is deposited.

 

We’ll ask for a canceled check or check image and the transaction history. Sometimes it takes three, four days for it to clear. So depends on where you are in the contract. You might not have that luxury. The cleanest way. I always tell people is to have the donor and wired directly into the escrow’s account.

 

So this way there is a receipt and there’s no way the money is going wrong anywhere. But for FHA loans do know that we will ask for the sourcing of the donors funds. So meaning I will ask for two months of bank statements from the donor, I’m trying to sharp shape this. If I get a random check for my friend, Two and a half months prior to when I throw this money into escrow.

 

Nobody checks or there’s nothing I need to write that this is when the real estate industry, I hear a lot of real estate agents would say, oh, you need to have two months of bank statements, clean bank statements, or seasoned funds really that’s a myth, but it really depends on what the deposit is for. We call them large deposits.

 

So large deposits definition is basically any positive. That’s more than 50% of the total gross income used on the loan application. So let’s say if you and your wife combined $10,000 gross ran knowing gross income on the loan application. So anything higher than $5,000 deposit into your account, we just have to know what it is then.

 

Why is it deposited? We just want to make sure. You’re not loaning a $5,000 to go buy this house and now you have to pay back and we need an attitude that we can come or get, or it can’t, it gets, it’s a gift. And we just need a documented source and explain, I just got it from my block five or crypto deposited from Coinbase.

 

We can use a crypto as down payment. I’ve got this other, wasn’t he wasn’t annoyed, but the bank was being really at the way. They’re like, oh, we see her in these private placements. And we amount to make sure, like LPs don’t both sign on debt. They’re the best investors, but they’re asking all these questions.

 

Any thoughts on that? Other than finding a VA letter, you can explain all you want. If you met with an underwriter that won’t let go. Sometimes it’s just easier for you to change lenders to someone who can get that scenario ran by their underwriter. And if you get the, okay, then resubmit that application over there, that’s what we do as brokers.

 

Sometimes we run into cases like that. Yeah. Lender aid doesn’t work out. So we quickly, we have your application. We it’s so easy for us to go to the second lender, go to the next lender that can get this done ASAP.

 

This website offers very general information concerning real estate for investment purposes, every investor situation. Always seek the services of licensed third party appraisers inspectors, to verify the value and condition of any property you intend to purchase. Use the services of professional title and escrow companies and licensed tax investment and or legal advisor before relying on any information contained here in information is not guarantee as in every investment there is.

 

The content found here is just my opinion and things change. And I reserve the right to change my mind above all else. Do your own analysis and think for yourself because in the end, you’re the only person who is going to look out for your best in.

How to Structure a Syndication With Development?

https://youtu.be/1q-Q_Z8slXU

You figure out what your asset allocation or time horizons are, and money is money. Try to rent them out.

What do you think about the syndication and the laddering with the development at county line? Developments, I would personally go to more of a stabilized cash flowing asset, especially if you’re new to this type of world. You think of deals in terms of risk adjusted returns, right? Stabilize assets it’s like buying an existing lemonade stand with existing profit and loss statements.

You can see what it runs or development is a shot in the dark in a way. Technically, if you could build it, there’s more room for error, but you have to wait a lot longer to see the egg hatch. The way I did it and the way I preached general wealth building to people is start off with singles and basics.

And in the syndication, that is the more stabilized assets that give cash flow quickly and have lighter value add or in the rental property world for people under half a million dollars net worth , just go buy rental properties like how I did.

Yeah, I think in my situation though, I need to be a little bit more passive. I’m not going to go out and buy individual properties that’s what makes your multifamily deals attractive to me ‘coz I can be passive.

I just have to say it because something Dawn who was a young kid is going to listen to this podcast and then think they’re going to go on an apartment deal and they have no money. And so I have to say that, but yeah, if you’re an accredited investor, in my opinion, people joke about this all the time in my groups usually tell me any good reason.

To own a rental property, that in your name, the headache, the fact that you’re getting abused as a robot rental, that’s not get started with all this BRRRR stuff. Right? I think that general strategy is going into intermittent deals, spacing it out and just dollar cost averaging, same technique. They taught you with stock market investing.

So my biggest challenge now is just negotiating it with my spouse because the conventional way to invest is just through these 401ks and these other vessels to invest. I’ve got to convince her that this is going to pay off and be able to produce some passive income. But the current deal is two years lag.

You screwed yourself you shouldn’t have done that, man!

I screwed myself, but I think that county line project is going to be fun to watch to be a part of. This is why I’m going back to the 401k, because I think it’s a good strategy with Horton negotiating with her that it’s, if I want to retire early, let’s use some of my retirement and not really hit the family.

Which is just an emotional thing, right? Whether it’s retirement or money in your wallet, it’s all the money at the end of the day.

I think where people get gummed up, they emotionally feel like 401k Roth, IRA, that’s your retirement! And I even have sophisticated investors, earmarking things in their own mind that way too. So I get it. They think one is more long-term, one is more short term. But to me, it’s all the same. You figure out what your asset allocation or time horizons are and money is money.

This website offers very general information concerning real estate for investment purposes, every investor situation. Always seek the services of licensed third party appraisers inspectors, to verify the value and condition of any property you intend to purchase. Use the services of professional title and escrow companies and licensed tax investment and or legal advisor before relying on any information contained here in information does not guarantee as in every investment there is.

The content found here is just my opinion and things change. And I reserve the right to change my mind above all else. Do your own analysis and think for yourself because in the end, you’re the only person who is going to look out for your best in.

Today’s Real Estate Condition: Good or Bad?

https://youtu.be/-9qqMO57pSg

But in the commercial world, we haven’t had that big run up yet but you’ve seen rents rise the first half of 2021. It’s obvious what’s happening in cap rates are dropping. You’re having cap rate compression.

Try to rent them out.

And do you see the fluctuation or the opportunities to tailing off or increasing? What do you see as far as the market conditions?

Right now the getting’s good, right? Because in the residential market has gotten really overheated in my opinion because of low supply. I think demand has even gotten lower, but because supply has dropped so much, that’s what dictates the prices.

Which is very emotional driven and that’s why I don’t like residential properties. But in the commercial world, we haven’t had that big run-up yet, but you’ve seen rents rise the first half of 2021. It’s all completely obvious what’s happening. And cap rates are dropping. You have a cap rate compression, but it’s not to a place where your average internet investors like jumping into commercial properties quite yet.

Maybe this time next year, for sure. There always be deals because what makes for investment banks lend money at X and the cap rates are Y and there’s always a difference between X minus Y. There will always be a differential or always be a difference in then you apply leverage and that’s how you make yield.

Your big cap rates will always be making yielding more than interest rates. In a world where gravity works. I’m sure it could go backwards for a little bit. I don’t think it ever has, but that’s what makes the world run. I think what you’re getting to is like, “Hey, what if I wait”. If you wait the best time to do anything was yesterday, they always change.

Like for example, infinite banking, they always change the rules. Best time was yesterday, best time to buy another one was yesterday. It’s just constantly going to be that. You guys are just like making it tough for your guys. Just be prudent, stoic, and just constantly dollar cost average into stuff that makes sense.

And it’s difficult now because you’re getting started. But to me, that’s the outlook that you have. You don’t need to be like me and have a hundred percent of my stuff in alternative investments. That’s for sure. I totally respect if you want 20 to 50% into paper assets, that’s fine. But over time, the kind of the percentage definitely goes to the alternative assets size and look at, I seen as group tiger, 21, it’s all $10 million families and above all paper assets.

They don’t own like mutual funds and stuff like that.

I do think that we’ll always try to be conventional in some manner from our perspective, but I have a job to do and just convince my spouse that this is legit. And try to jump into one of these more conventional deals you do.

This website offers very general information concerning real estate for investment purposes, every investor situation. Always seek the services of licensed third party appraisers inspectors, to verify the value and condition of any property you intend to purchase. Use the services of professional title and escrow companies and licensed tax investment and or legal advisor before relying on any information contained here in information is not guarantee as an every investment.

There is. The content found here is just my opinion and things change. And I reserve the right to change my mind above all else. Do your own analysis and think for yourself because in the end, you’re the only person who is going to look out for your best in.

How to Travel and NOT Be Broke

https://youtu.be/lFg9ohH6EZ4

Just by leveraging the loyalty programs that are set by credit card companies or airline companies or hotel companies try to rent them out and for anybody who’s not familiar with travel hacking at all, it’s a way that you can get free travel or a lot of cashback if you want. Just by leveraging the loyalty programs that are set by credit card companies or airline companies or hotel companies. And if you’re not aware, there are dozens of different credit card options and different loyalty programs out there.

And it’s all about how to strategically approach the game so that you can meet the travel goals that you want. You can get the travel that you want for almost free, very close to next to no cost while just learning to play the game and plan strategically. Which I think a lot of people in your audience obviously do as they’re researching different real estate and different passive income opportunities.

Yeah and I think that people listening, they’re like myself optimizers and this whole travel hacking thing, you’re literally collecting points and then you have to figure out where that cash in those points at the highest value. It’s like a video game! It really is addicting. It can be a time suck. Maybe let’s start off with do you have a list here of some highest or biggest bang for your buck type of tactics? What’s at the top of your list?

It’s not just a game for how to use the points, but also even how to bring in those points and so my number one advice to people is I have a few. The first is the best travel hack is finding friends who can show you even more travel hacks, because so many people do it the very unoptimized way of I’m going to watch 14 hours of YouTube videos and read blogs.

But really if you just join a community, whether it’s on Instagram or a Facebook group or something, I host different Hangouts. If you just find somebody who’s already into this kind of thing, like you went to the frequent traveler university conference.

It speeds it up so much. If you can just ask your questions there. Secondly, if you’re like, I really just don’t want to interact with people. How do I do this quickly on my own? My advice is to work backwards. So some people will make the mistake of researching different cards and saying, I’m going to go get a Chase card and then an Amex card, and then a Citi card, a Hilton card, a Marriott card or United card.

And then I’m going to figure out what to do with all of those and that’s a really inefficient way to go about it. Instead, I would recommend start with the goal that you have in mind for free travel and work backwards from there. If you’re telling yourself, okay, I want a free trip to New York city and I currently live in Hawaii.

Here are the airlines that fly from Hawaii to New York city. I want to stay in this area of Manhattan. Here are the different hotels that are servicing in that area. Here’s how many points I would need to get that free flight and to get however many nights in the hotel for free. And then here are the credit cards that can earn me kinds of points that can actually be transferred correctly to that airline or that hotel.

Then it really narrows down how many things you actually have to research and figure out and how many points you need to get in the exact currency that you needed in, rather than just shooting all over the place in the dark. Makes some travel hacking friends and also work backwards to get to your goal faster.

This website offers very general information concerning real estate for investment purposes, every investor situation. Always seek the services of licensed third party appraisers inspectors, to verify the value and condition of any property you intend to purchase. Use the services of professional title and escrow companies and licensed tax investment and or legal advisor before relying on any information contained here in information does not guarantee as in every investment there is.

The content found here is just my opinion and things change. And I reserve the right to change my mind above all else. Do your own analysis and think for yourself because in the end, you’re the only person who is going to look out for your best in.

For Beginners: Get To Know Your Credit Cards

https://youtu.be/uv2iOi6T4N8

Who are in this hobby are really frugal and they’re just like savers by nature. And they don’t like to go out and spend the points, but it’s not like money. You don’t save these points until retirement or something. You want to earn the points, know how you’re going to use them and then know how to get more points.

try to rent them out and

If you are a very beginner, like this is the first you’ve ever heard about this, the most popular beginner card these days is the Chase Sapphire Preferred and as ofyesterday or two days ago, March 21st, they just increase the sign up bonus to 80,000 points instead of 60,000 points that’s worth more than a thousand dollars in travel credit.

So Chase Sapphire Preferred is one of the most popular ones for beginners these days. We always recommend start with your Chase cards instead of starting with American express or another family like that, because of something called the5/24 rule, which says that if you have already opened five or more accounts with any carriers in the last five years, Chase’s just gonna reject you if you apply with the chase card. So it’s good to get the chase cards out of the way first.

And then you can move on to American express that doesn’t have this rule. You can move on to Citi cards, bank of America something else like that.

Good advice. I have a love & hate relationship with Chase . I do the tradeline hacking thing where I kind of piggyback authorized users of my cards. People want to learn more about it. Go to my simplepassivecashflow.com/trade and I had a little e-course on that. But chase cancel all my cards. So I’m not in the phenomenal rewards, credit cards. Great place to start there.

Why did they cut off all of your lines, too many authorized users?

Yeah, it was getting a little ridiculous. I was turning people a lot quicker than I do these days and I have flagged on about it. It’s good that you see a company actually has checks, so it make sure that there’s no weird activity such as mine so I think it’s good business. It sucks for me , but I applaud Chase for doing it,shows that they have their S together.

How many points did you lose when they shut you down?

I think at the time, I think I lost myself west point 200,000 points. Goes to show, right? Savers are losers, just like people with all this equity in their house or the bank.

There is a strategy called churn and burn where earn and burn where you’re earning points really quickly and then you want to use them quickly as well. You don’t just want a whole bunch of points sitting there in your account not being used because a lot of airlines will de-value their awards programs. And so if you just have hundreds of thousands of points sitting there and you’re thinking, okay, it’s like around the world trip or something is going to cost 200,000 points and then the next year they’re like, oh, now it cost 250,000 points. And your points were just sitting there and never used.

This website offers very general information concerning real estate for investment purposes. Every investor situation is unique. Always seek the services of licensed third party appraisers inspectors to verify the value and condition of any property you intend to purchase. Use the services of professional title and escrow companies and licensed tax investment and or legal advisor before relying on any information contained here in information is not guarantee as in every investment there is.

The content found here is just my opinion and things change. And I reserve the right to change my mind above all else. Do your own analysis and think for yourself because in the end, you’re the only person who is going to look out for your best in.

BIG MISTAKE in Managing Real Estate Property

https://youtu.be/3tRnTjDXY2s

What are any lessons learned to open up the spending money stuff? Because I think you’re a big inspiration and building your portfolio but I think people here they’re already doing that. They know it works but how do you take it and get from scarcity to abundance mindset.

Yeah. I think part of it is there’s two ways to go about something. You can try to figure something out on your own, and certainly you can do it. There’s a lot of free resources out there but you’re probably gonna make costly mistakes. It’s going to take you a lot longer. And this is a lesson I’ve had to learn. There is such a thing as being too cheap and too frugal. And if you’re not willing to invest in yourself or invest in a way that can help you grow and get ahead or just invest in the right things and not be cheap, then you’re really going to be holding yourself back.

A perfect example of this is when I first wanted to hire a property manager. I was trying to look for ways that I could do it frugally and not give up so much of our rent money. And we had these two people that have been working for us really hard workers. They did a lot of the cleaning and the maintenance at our properties.

They seemed really intelligent, always went above and beyond, and we decided to hire them as employees of our company and train them on how to be our property managers. Everything started out great but then six months in my husband went to the rentals to collect rent one day from the lockboxes. And he realized there was a lot missing and it wasn’t just the normal tenant paying late.

It was a significant amount. So we come to find out that the property managers stole $6,000 in rent that month and run away. We still don’t know where they are to this day. And we found out they’d been squatting in vacant rooms and units in our properties for almost a year. That was awful like such a violation of trust.

The huge moral of the story is there are certain places where you don’t be cheap. It doesn’t make sense to cut corners because being cheap can end up costing you a lot more in the long run. And we definitely should have hired a reputable, licensed, bonded insured property management company and then that wouldn’t have happened.

Yeah. I call it CFE cheap easy free. Anytime you try and do that, you get burn. And I started to adopt this maybe four years ago, maybe I think five or six years I was doing. I had a dozen rentals at lease. I don’t know what the hell I was doing, but like I was doing the dog sitting thing. I was watching other people’s dogs because I like dog.

But this one dog attacked me and I was like, what the hell am I trying to do? Trying to make a few hundred bucks every other week. And I have this scar on my leg that helped me understand that yeah,don’t be cheap, easy and free. And also, I think you’re seeing like the syndication world, like a lot of this building networks or other peer passive accredited investors. Accredited investors can smell cheapos from a mile away. They know for sure.

For sure. I think a big difference between non-accredited and accredited investors is that there’s different goals. I think when you’re first starting out, you don’t have any money, but you do have more time and you’re willing to hustle and work harder and maybe self-manage and do things that you wouldn’t be willing to do later.

But then when you get further into your realistic, investment journey it flips the other way. Where suddenly you have a lot more money and you don’t have a lot of time. That’s why we’re actually selling some of our rental properties right now and transitioning all of that money into syndications because I’m sick of dealing with him.

I’m sick of the liability. I’m sick of having tenants. I would rather make a little bit less money. You still make great money in syndications. I’d rather make a little bit less money and literally not have to do a thing. What we found is that investing in syndications aligns so much better with our passive income goals.

Another thing that accredited investors realize is relationships are the currency of the wealthy, but the right relationships with also abundance mindset at people and if you want to call it accredited investors too. Non accredited investors, not saying they’re bad people, but they just don’t have money and they run on a different operating system.

Yeah, and I used to be one and I totally see now how my mindset has changed over time. And it’s really fascinating. I just had different values and goals then, and definitely was more in this scarcity mindset. Now I’ve totally flipped in the opposite direction, but surroundingyourself with people you’re absolutely right.

Is the most important thing. And that’s another thing I’ve had to be okay with investing in is especially with growing my business with my books and my courses. I definitely hit a wall because I’ve been trying to figure it out all on my own. I was like, what do I do now? And I ended up investing into a mastermind that really helped me strategize and be clear on where to go.

In my opinion, I want to be the dumbest person in the room. I want to surround myself with people who are already five or 10 steps ahead of me so that I can mimic everything that they’re doing.