Building a rental portfolio without paying taxes
What should one do with a cash out [mortgage loan]? Are they used to buy other properties? If so, how best to do this? Please explain in common terms 😉 Investing jargon is a bit heavy for me. Thank you.
Tim
What makes cash out financing so favorable for RE investors is that all the interest expenses are an above the line deduction, depending on how the proceeds are used. For me, I devote substantially all the loan monies towards my RE portfolio.
I have spent the past two years upgrading my SFR holdings, while getting out of certain areas. I have sold a number of condos in order to buy the same number of houses in areas I feel more comfortable investing. This takes money as I have also been using tax free 1031 exchanges, which allows me to indefinitely defer paying any capital gains taxes, while not having to recognize recaptured depreciation, which is taxed at my marginal tax rate. Depending on the length of time I owned a sold property the size of this accumulated depreciation can be very sizeable.
Through these tax free exchanges, I have not had to pay any cap gains taxes, which would otherwise be six-figures. Maryland has not received a dime from me, since these are MD properties. But this takes money, because I have to fix up the properties I sell, while all the sales proceeds are devoted to the subsequent purchase. Plus, the purchase price of the replacement property is anywhere from $50k to $100k greater than what I get at the sale. Plus, I need more money to fix up the new property to get it rent ready. Thus, I need to raise money to facilitate this process.
So, over the past year I have taken several cash out loans on some of my holdings, while paying off a loan that resets later this year at a rate near 10%. It’s a 180-day SOFR plus 4.5%. That was fine when the Fed funds rates was < 2%, but things have changed. Short term rates will not be falling anytime soon, so I am preparing accordingly.
These DSCR (debt service coverage ratio) loans provide needed liquidity with minimal paperwork and little hassle. The loan is based on the rental income the subject property generates. Since these types of lenders typically only lend to LLCs and other business entities, these loans are not reported to the credit bureaus as long as I pay as intended. This past 12 months I have worked with one lender and they have made the application process easy as they already have all my personal information and are comfortable with my professional background.
Depending on the investor, this money can be many hundreds of thousands of dollars to over a million, and while it’s tempting for less disciplined people to go out and take vacations and buy cars, all of the money is plowed back into the business. My accountant asks me every year what I did with the loan proceeds from the prior year, because the interest I pay on any portion I use for personal use is not tax deductible.
Using a prudent combination of 1031 exchanges, LLC financing, and a CPA who just charged me $4,200 to do my tax returns I pay close to nothing in income taxes every year, yet I live off the cash flow.
This is why I drive around in a 2002 F-150 with an 8′ bed. I live like a pauper and cut my own hair. I wear rags, too. But why should I care what I look like? I’m married.🤣🤣🤣
I was just over at a camp I grew up going to in the 70’s it was affiliated with the Evangelical Covenant Church. I go over there because its on a lake and a good place to walk and reminisce. The camp hosts different groups. I was looking at the bumper stickers on some of the cars.
One says ” Im a powerful f- ing women” another one with all the different religious symbols and says “Prays well together” one says “We welcome immigrants” and a few with the 🌈 stickers. It’s sad but we are done there is no going back.
Could you please elaborate? I have read the book of Revelation at least three times, but still have many questions and believe it’s more nuanced that I originally thought (and has certainly been manipulated by the pre-tribbers.) I did think that the horses came after the antichrist appeared…or is it actually an antichrist system (that we are in already)? I have heard convincing arguments that, in translation, this book references an antichrist/beast system more than a deceptive reference to a single man who is the antichrist. I also originally thought the mark of the beast would be after the appearance of the antichrist. However, if the antichrist is a beast system (and not a single man), then it might be fair to say that the mark of the beast has already appeared in the jab, perhaps as a two part system, the second being needed for the upcoming CBDC to buy, sell, trade. However, given the self-assembling nanotech and graphine in the stratospheric aerosol injections (a.k.a. chemtrails), and food, water – because they are determined to get the vax in everyone – I surmise that even the unvaxed are becoming transhuman (like the vaxed), just at a slower rate, and developing their own WBAN’s. I have no doubt the Synagogue of Satan – the same demons that brought about the Holodomor, the Bolshevik revolution, the fire bombing of Dresden (and according to Gary Wayne, sponsored attempts at the Antichrist before its ordained time) – is now facilitating another version of the black horse. Look at the many food suppliers burned to the ground since the beginning of the scamdemic. Here are some references below if anyone’s interested. Thanks for your thoughts.
List of destroyed food facilities https://nemosnewsnetwork.com/here-is-the-updated-list-of-us-based-food-manufacturing-plants-destroyed-under-biden-regime-interactive-map/
Why most people are transhuman https://theserapeum.com/why-most-people-are-already-transhuman-the-vax-is-just-one-reason/
The Antichrist Investigation https://www.youtube.com/watch?v=BrUVRxUoJy4
https://www.geoengineeringwatch.org
Tom are you still taking the MSM? Also with the markets what are your thoughts on oil here?
There are a lot of things worse than death.
I also know a lot of people with cancer and various other illness, most likely related to the mrna injections or at least some other environmental exposure. Its a multi-faceted attack and nobody can really hide from this. If you could hide from it completely, there is probably some psychosomatic aspect to your life situation that would cause a cancer to manifest if you didn’t face it and deal with it.
Either way, the medical complex has ready cures and solutions. Just accepting those and taking them into yourself is probably in some form accepting the mark. Even when you think you win, you lose.
Canst thou draw out leviathan with an hook?
It is very costly and a waste of resources to be the same. People who buy into the multi culturalist guilt trip are the suckers.
I completely understand why these residents want to split from a city with a majority of blacks.
I see from my experience that when blacks, Latinos, or any other non- whites run the show there is tons of corruption and mismanagement.
Look at these cities with black mayors where they overspend on poor public service and jack up taxes. Areas with a majority of blacks and Latinos have much higher crime.
Look at the African countries with corrupt dictatorships. Latin America has the same problem.
The countries with mostly whites tend to be cleaner and more organized. Look at Iceland, Norway, and Finland.
I don’t care if I sound racist but facts are facts.
It is very interesting how the mainstream media is highlighting stories of those choosing living in a van and loving it. They are conditioning the masses to enjoy living on a lot less. Soylent green here we come.
This is really a ploy for government takeover of the insurance business and also healthcare. Once government takes over everything especially healthcare then you will not get served unless you are up to date on your vaccine shots.
There will be complete government control of all services and therefore government control of your life. Be prepared for that.
Andrei, that is exactly what I was about to say but you beat me to it.
I saw this in CA when PG&E was under the microscope for the fires. Newscum radically overhauled the BOD after that. I said then that PG&E was going to be a state owned utility company, and any searches you do now implying that, suggests I’m not too far off in my thinking.
Thanks for your insights. In your assessment, will the Gog and Magog event (Jacob’s trouble) of Ezekiel 38 and 39 be the Great Tribulation?
And the Great Tribulation (which you state is also the Great Reset) – is that when they will institute CBDC, having finally destroyed the supremacy of the dollar and the pound that you write about?
I mentioned the complete destruction of Dresden (and shared the documentary called Hellstorm – actual footage and historical corrections) in the context of our possible future, surmising it was orchestrated by the same Synagogue of Satan that also told us the mass graves of the concentration camps were of the jews, when they were actually Germans killed after the war in open air camps. The relentless fire bombing of Dresden killed almost everyone and destroyed everything.
In context of the twelve tribes of Isreal (which you have described) these germanic people were of those tribes and were deeply hated by the SOS, probably because of their rich culture and their humanity (Dresden being only one example). The history of these people – and our own history – has been completely subverted. An excellent series is Our Subverted History by Asha Logos. It should be required watching, IMO (but won’t be while the SOS is in charge). https://www.youtube.com/watch?v=eOM2fT6tBFE&list=PLru9zi8j7G3Nsz03pkBzFdv_1tRxdCMJo&index=1
History seems to go in cycles, and you have to sift through the lies and the subversion to try to begin to understand the truth… And I agree with your assessment on how bad it will quite likely become, judging from the past and also judging from prophesy. (Revelation 9:6)
Thanks again for sharing your thoughts.
Thanks for these thoughts. It sounds like you have done well selling through Redfin… Would you also recommend them for buying real estate? ( Is there an advantage using Redfin as a buyer, or only as a seller because of reduced commissions?) I did check out their site, and it looks to have much the same information as other listing sites for buyers. I am wondering, what website do you use/recommend to find houses for purchase? And do you go through a traditional realtor to do so? And do you have any thoughts on whether it’s better to sign up with a buyer’s realtor to “respresent” you as a buyer (seems like a nice way to characterize a middle-man) vs. just going directly to the seller’s realtor, and if the later, would you recommend finding your own real estate attorney to represent you and help you process the purchasing paperwork? And finally, when you do your like-kind exchanges, are you using Redfin for both selling and buying transactions, or is that just something that you deal with an accountant on separately? Thanks again!