investing strategies and tax considerations for passive ... · * how to get all of the advantages...
TRANSCRIPT
Investing Strategies and Tax Considerations
For Passive Real Estate Investors
Kaaren Hall - Presidentwww.uDirectIRA.com
David Campbell - CEOwww.HassleFreeCashflowInvesting.com
Amanda Han - CPAwww.KeystoneCPA.com
Begin with end in mind
RELATIONSHIPSIDEAS
OPPORTUNITIESNOT a sales pitch
NOT investment, legal, or tax advice
www.HasslefreeCashflowInvesting.com Today’s agenda...* How limited partnerships and real estate syndications can be a powerful alternative to investing in the stock market
* How to get all of the advantages of being a real estate investor without the hassle of dealing with tenants
* Ways to reap the tax benefits of real estate investing like the wealthy do
* Strategies to write-off your vacation trips using your rental properties
* the 3 biggest myths about real estate tax deductions - debunked!
* Strategies to pay yourself rather than the IRS
* How you can make smarter choices about your retirement investing using a self-directed IRA
Disclaimers & Cautionary Notes
This educational seminar is not a substitute for getting your own professional advice. This webinar is offered with the understanding that the speakers are not offering legal, financial, tax, investment or other professional advice. Any actions with regard to the information contained in this seminar should be undertaken only upon the advice and counsel of competent legal and tax and investment professionals. Receiving this information does not create a fiduciary or client relationship between you and the speaker. The information contained herein may be inaccurate and the speaker makes no representation about its accuracy.
DON’T SUE US!
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ProfitMoney + Time + HassleROI =
More profit with less invested
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How can I make my real estate investments PASSIVE!!!
(aka Hassle-Free)
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Notes
You are the bank
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1099-INT * Tax Rate* Active versus Passive Income* IRA Tax Reporting Considerations
Notes
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Fee Simple OwnershipYou are the owner and the landlord.
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Schedule E* Tax Rate* Active versus Passive Income* IRA Tax Reporting Considerations
Integrating Schedule E with Schedule C
(income / expense shifting)
Fee Simple Ownership
(877) 975-0975 www.KeystoneCPA.com
Vacation and Travel
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General PartnershipYou are the co-owner and
the semi-landlord with a partner.
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Schedule E* Tax Rate* Active versus Passive Income* IRA Tax Reporting Considerations
Claim all and divideOR
Claim prorata ownership
General Partnership
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Group Investing (aka syndication & LLC)
Several individual investors combining their financial resources into a single investment
managed by a team of professionals.
www.HasslefreeCashflowInvesting.com K-1* Tax Rate* Active versus Passive Income* IRA Tax Reporting Considerations
Syndication
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Asset Liability Tax Considerations
Pros Cons
Notes (you are the bank)
Minimal liability to loan
originator
Ordinary Income - 1099 IRA Friendly
8-18% ROI / very passive /
lower risk
semi-illiquid / potential hassle of foreclosure
LLC (entity) Membership
Isolated to capital invested
Mixed Income - K-1 Tax Return IRA Friendly
???% ROI / very passive /
risk? / illiquid / dependent upon
manager
Fee Simple Ownership
Full liability exposure
Mixed Income - Schedule E - IRA
Semi-Friendly
???% ROI / semi-passive / control
rely on property manager /
potential hassle
General Partnership
Full liability exposure
Mixed Income - Schedule E - IRA
Semi-Friendly
???% ROI / semi-passive / semi-
control
rely on partner / potential hassle
Passive Investments Comparisons
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Real Estate in Your IRA???BENEFIT INSIDE YOUR IRA OUTSIDE YOUR IRA
Profit from Cashflow
Tax Deferred Taxable
Profit from Appreciation
Tax Deferred Tax Deferred - potential 1031
Depreciation Losses do not offset other gains
Losses may offset other gains
Use of Financing Lower LTV / Higher Int. Rate / potential for UDFI
Higher LTV / Lower Int. Rate / no UDFI
Management business write off
Not allowed: excess contribution
Deductible expenses may shelter active income
(877) 975-0975(877) 975-0975(877) 975-0975 www.KeystoneCPA.com
Retirement Contributions
Redirect Tax Dollars to Your Retirement Accounts
• Pay Yourself Rather than the IRS
• Create Tax Deferred Money to Invest and Grow Your Wealth
(877) 975-0975 www.KeystoneCPA.com
How to Self-Direct Your Retirement Savings
uDirect IRA Services, LLC is not a fiduciary and does not render tax, legal, accounting, investment, or other professional advice. If tax, legal, accounting, investment, or other similar expert assistance is required, the services of a competent professional should be sought.
Self-DirectionWhy Haven’t I Heard About This?
• Few attorneys are knowledgeable – About self-directed plans
• Few CPAs are knowledgeable– About self-directed plans
• IRS rules have allowed self-direction since IRAs were created in mid-1970s
What’s the Difference?
Typical IRA• Stocks• Bonds• Mutual Funds• CD’s
Self-Directed IRA• Rental Property• Notes• Private Stock• LLC’s• Tax Liens• Foreign Property• Raw Land• Etc.
What Are The Limits?
A Self-Directed IRA can invest in anything EXCEPT1. Life Insurance Policies2. Collectibles
1. Artworks2. Coins3. Collectible Cars4. Antiques5. Gems6. Stamps7. Rugs
What if your funds are with your current employer?
Your plan will probably NOT allow you to self-direct
Must wait until you leave the companyTo rollover retirement plan
You can request an “in-service” transfer from your current plan administrator.
Prohibited Transactions(IRS Publication 590)
• Borrowing money from the IRA• Selling property to it.• Using it as security for a loan.• Buying property for personal use (present
or future) with IRA funds.
Disqualified Person
• Disqualified persons include your fiduciary and members of your family (spouse, ancestor, lineal descendant, and any spouse of a lineal descendant).
Qualified Persons
• Aunts & Uncles• Cousins• Brothers & Sisters• Unrelated friends• Nieces & Nephews
Prohibited Transactions
• Neither you nor any disqualified people may benefit from IRA
• Cannot buy, sell or exchange property between plan and – Self or – Disqualified people
• Cannot provide goods, services or facilities
Self-Directed IRA - Structure
• You
• Your IRA
• TPA
• Custodian
UDFI
• Unrelated Debt Financed Income tax• Any property held to produce income is
debt-financed property if at any time during the tax year there was acquisition indebtedness outstanding for the property.
UBIT• Unrelated Business Income Tax• If a tax exempt entity engages in a
business that is unrelated to its primary purpose, any income derived from such business will be subject to UBIT
• IRS Pub 598• UDFI & UBIT are reported on form 990-T
3 Types of Plans
• IRAs– Individual Retirement Accounts– What you are doing for your own retirement
• Qualified Plans– ERISA controlled– Typically, what an employer provides you
• Other Plans– Education– Health
Types Of Self-Directed Plans
IRAs Qualified Plans Other Plans
Traditional 401K/ 457/ 403b Coverdell
Roth Defined Benefit Health Savings Account
SEP Profit Sharing
Simple Individual K
Spousal
How Do I Self-Direct?
1. Complete an application1. Provide copy of driver’s license2. Copy of statement
2. Fund your account1. Annual Contribution2. Transfer3. Rollover
3. Tell us what you want to invest in
For More Information
Kaaren Hall, PresidentuDirect IRA Services, LLC(866) [email protected]
uDirect IRA Services, LLC2522 Chambers Road, Ste 100
Tustin, CA 92780
• "What is the best way to keep from paying taxes on your real estate investments"? I just bought my first property through my self directed IRA and LLC.” - Steve
• “My husband and I would like to look for a another company that will have our Self Directed IRAs and will not charge so much money "for managing the accounts", even when the accounts were not funded yet. These fees continue to increase. We would like also to in control of the accounts and not wait forever for the company to act. We would like to have a customer service that is knowledgeable and answer your call in a timely manner. Do you have few recommendations?” - Z. Keller
Q&A
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