Rental Real Estate - Tax-Free Wealth - Live Q&A

all right welcome everybody to this week's live broadcast with yours truly mark kohler a business owner myself since age six with my lemonade stand out hawking lemonade and uh attorney cpa author main street business consultant help clients around the country just loving small business and i want to help you all here every week answer your tax and legal questions that can be really complicated or sometimes hard to get a straight answer and you can find any answer you want on the web but then is it the right answer well i'm a partner in a law firm accounting firm and a trust company with amazing team members partners paralegals accountants all around me making sure i say the right thing i just happen to be the face for tv and it's not pretty people so hopefully so you can put up with me today so uh thanks for being here if you're on facebook or youtube you have an instagram you have an opportunity to type down below some questions our topic today is real estate i'm not going to take a lot of time on it i want to make some important points about real estate and the tax benefits of it and the wealth so many benefits so i'm going to hit them as many as i can here and field questions i've got so many questions i won't be able to answer them all but i'm going to do my best today and i think we uh we'll do ourselves oh and i got instagram over here so they're gonna think i'm cross-eyed today so instagram i apologize you're gonna have to deal with but you're still important even though i'm you know not looking at you directly all the time here today but i've got a lot of the instagram questions right here in front of me i've got another attorney with me darren cherrington you can't see his face but i assure you is here say hey hey everyone hey there he is that masculine deep voice over there cory my producer over here ashlyn my marketing director today helping me out answering questions so we're gonna try to put together a good live presentation for you all right real estate now let me give you a couple disclaimers i know some of you do not want to buy real estate you're like real estate is a stupid idea it takes too much work it's too risky yada yada yada just put your guard down for just a moment if you could let me tell you why i like real estate and it may not be the real estate you're thinking of if you're being critical of it first of all sometimes you can be your best tenant for example you might have a commercial location already you're running an online store internet business shipping landscaping consulting maybe multiple employee employees maybe no employees at all but you've got a commercial location and you're renting space stop it go out and buy a commercial space and rent to yourself and maybe that little commercial building you go by can also rent to some other commercial tenants so you're not out there dealing with single-family homes and plunging toilets or whatever parties it's a commercial location very different type of tenant but you're your best tenant and just this week i went out on site again i'm building a 3 000 square foot steel building i'm going to move my studio to it as well as storing a lot of business equipment and tools and supplies and i'm paying rent in five locations right now for storage units in the studio and i'm going to move it all to a little steel building by the time the building is finished i'll have equity in it a mortgage that i can pay off within 15 years and i'll have cash flow and i'm getting a tax write-off in my business to rent from myself with no taxable income on the other side see that's not that hard that's number one when clients say should i buy rental property i'm like are you paying rent somewhere number two some of you may have a child a family member i'll come back to mom and dad but some of you might be helping someone in college why not buy a rental property that they can live in and manage for you and you're not paying rent to someone else your family who you're helping is paying rent back to you very very powerful buying a college rental for your college age kids young or old number three i'm trying to hard time here number three an airbnb if there's a place you go visit on a regular basis and there's an airbnb opportunity why not get into the rental market short-term rental market which is still considered long-term and passive in the eyes of the irs in fact let's get our little whiteboard going here all of you know we've got our masterful trifecta type structure we got a revocable living trust for privacy and a probate avoidance no probate here we got our will yada yada yada we split our lives in half over here we may have a commercial building and in this little commercial building we are renting it to our s corp or llc so on our operational side we quit paying rent to someone else and we now start paying rent to a building we own so this is our asset side you guys know the drill so commercial building owned by an llc boom but a bang next you might buy a college duplex four plex multiple rooms and college housing and one of your kids or grandchildren might be living there and learning how to be a property manager and you're saving the cost of rent paying someone else third an airbnb you might have a llc for an airbnb in a state where you visit for vacation and you rent it out most of the time throughout the year but when it's not rented it's okay you're getting a better value per day or week and that rental income offsets the cost of a home that when you go visit you're working on it and it's a hundred percent rental 100 percent tax write-off to go visit your own airbnb location and number four uh storage units if you're renting a storage unit why not buy some sort of operation boy i'm having a hard time with my riding here today forgive me folks um let's use our eraser here and clean that up okay so you have a storage unit and if you're paying for storage units buy a storage unit you're gonna again be your best tenant right out of the gate what's another good one darren that i like i like commercial building college housing oh parents mom and dad want to get rid of their house so they can ultimately quali qualify for medicaid and so you buy the home for mom and dad they don't pay any taxes on a sale of home exemption and mom and dad become your tenant in a house that they don't own any longer so now they can qualify for state assistance under medicaid and i have a lot of clients that will buy a home and for mom and dad to let them rent any other ideas you like just going to ask that site on this one yeah just ask that side why would i buy a rental i mean because you're getting some awesome tax right now so i mean there's kind of the four main benefits right okay you'll get the appreciation in the property so there's a return there typically if you're doing it right you're gonna have the cash flow coming in there's a return from that you're gonna get the mortgage pay down there's another return but then there's the huge tax benefits of being able to get the depreciation and all the expenses on it okay and depending on what kind of status you qualify for that can offset your other income love it and i wish you all of you by next week we're going to have darren sit up here with the camera so you can see him good-looking guy uh thanks darren for those comments i'm going to jump on the first comment darren said these are the different types of rentals and of course i didn't say apartment building multi-unit you could do single-family homes low-income housing all sorts of ideas so when someone says buy rental real estate be open number two in our trifecta i have so many clients that are building wealth and they're like where do i deploy my money now i know right now we're at about a 10 to 12 year high on real estate values across the country so it's a little harder to find a really screaming deal because it's kind of a seller's market but there's always a deal out there and there's opportunity so we need to keep our eyes open also this could be a good time to stockpile pile your money from the profits from your llc profits from your s corp profits from your day job let's put that money over here in a new in a bank account it could just be a plain old bank account it could be an llc in which you do plan to buy rentals we just don't know where we're going to buy yet and so you're going to stockpile profits from your business and move them over to this side so you're ready to pounce when the real estate market adjusts which it will we know it will now there was a question on instagram and darren brought it up in his first thing this was from investing young said what makes a rental a business what makes a rental a business well an llc doesn't make a rental a business having a property you become a a a land baron you become a landlord you become a building owner and when you collect rent that's revenue by definition a rental property is a business so when you have this this little llc that owns one or two rentals in what state i don't know we'll we can talk about that but these rentals you're gonna collect rent in this llc and we're gonna write off cell phones home office auto travel to go check on it dining equipment tools supplies attorney accountant kids mom dad print material cell phone cases headphones study material chargers cameras i got to take pictures of the of the rental property see all these expenses and darren said the big d and i don't mean dallas depreciation the property is going to appreciate in value but you get to write off depreciation so the property loses money on paper and then that loss comes down and goes into a bucket that you can carry forward for many years to come or you might be able to write this off against your day job or your s corp or your llc see rental properties build wealth but rarely do you pay taxes on those properties until you sell them and then you have capital gain you might have a 1031 exchange you might use an opportunity zone you might just pass it on to the family through stepped up basis all sorts of strategies the llc is so powerful to hold this real estate to give you protection but the llc is not the business the rentals the business and then we want to take all these write-offs to generate that loss on paper all right now a couple last thoughts and then i'll just field questions the rest of the time rental property to me and darren mentioned these four benefits and any of you that have followed me or seen some of my videos before know where i'm going this is a chapter in my book tax and legal playbook is we want to get four benefits from rental real estate and when you analyze rental real estate you want to put it in a spreadsheet and try to figure out what's my roi so your ultimate goal is roi which is return on investment and when i i want to back up and say this too when i go speak at a dental conference a realtor conference uh mortician conference lawyers wherever wherever i spoke to a group of chick-fil-a owners i i restaurant owners where are you going to put your profits i want to deploy them in stocks that's cool maybe in cryptocurrency maybe in some precious metals other businesses but real estate wealthy people buy real estate they have losses from the real estate depreciation and they don't pay taxes joe biden on his tax return last year when i analyzed it when he was in the race he had a rental property he had an s corp joe biden had an s corp and an llc donald trump who was a real estate professional before he ran for president he had hundreds of doors of real estate thousands of doors of real estate he paid zero tax and it made people mad i was like hey has anybody been listening to me that's what i've been teaching for 20 years being a real estate professional so many of my clients were like bam and they could have hated donald trump that didn't matter don't worry about trump or biden worry about what they were doing they were both buying rental properties it's just trump owned so much of it he qualified as a real estate professional and the losses from his real estate would wipe out his income from the apprentice this is part of mark kohler's master plan this is what i want my clients doing this is what i want you doing so when you go to analyze whatever type of real estate you might buy all those examples we used you want to look at the roi what's your return on investment now your investment's not what you bought up for the beauty of real estate is you can use leverage and banks will loan you money on real estate so if i put ten thousand dollars and buy a hundred thousand dollar property my investments 000. now somebody like oh my gosh mark you've got to put down 20 or 30 and then you got to close in the name of the llc and and this is just about a realistic bull crap you can close in your name with a fannie mae freddie mac loan and then deed it to your llc in 20 years i've had one client have problems with the due unsealed clause because they the the bank was going to call the loan due frankly i'm con i was co i was um convinced that he walked in the bank and asked permission you don't walk into the bank they already sold your mortgage once you close on a property in your own name with the lowest down payment you can get away with you deed it over to your llc and you turn it into a rental property you still own it you didn't transfer ownership to someone else you're still on the hook for the loan now you're not going to lie and say it's your primary residence but you don't have to go get a commercial loan every time this is why you're going to go to real estate conferences and learn about real estate there's so many cool ideas now real quick before we take questions if you want to type up a few questions darren's over here i can hear him typing like a little gerbil over here typing away answers to people's questions if you see someone darren cherrington answer your question that's my lawyer here right beside me i tried to recruit three other lawyers in the office to come over today but they're swamped let's just do the quick math here's the four benefits appreciation mortgage reduction and some of you you may be like oh this is boring i don't need to listen please listen to this for a moment please i beg of you mortgage reduction tax benefits tax bennies and cash flow now i i usually go through this much longer i've got some youtube videos on real estate and let me say this too is you go to analyze your real estate if you want i got a couple spreadsheets a big basic and advanced and a little email with some videos and some charts that i like if you want to email me i'll send you my spreadsheet that i use and i'm not a real estate pro i own rental property eight to ten properties and i'm trying to build my little portfolio just like many of you but if you'd like to see what i've kind of built from seeing clients do their thing over the years let me just say this is free if you want to just email mark at mark j kohler dot com and uh in the subject line put real estate spreadsheet re spreadsheet and my assistant whitney she'll send off to you a real estate spreadsheet and a little list of some good articles and videos to start watching um i've got some referrals i can send you to for some real estate education that i really like as well if you want to say mark send me a place where you'd recommend to learn more about real estate and i'll send you some places okay return on investment that's what we're looking for so if i buy a house for a hundred grand i put down ten percent which is ten thousand dollars i have a mortgage for ninety okay well my investment's ten thousand now if i get a five percent appreciation rate i buy a property for a hundred grand next year might be worth 105. next year 110. if i buy a property now and i hold it ten years could it be worth 150 next year and 10 years sure you know you're not going to sell this this is not a fix and flip you're not going to sell it in two or three years you might hold it five to seven so if you get five percent appreciation on a hundred grand that means you made five thousand dollars tax-free you're not gonna pay tax on that the property's going up in value it's hidden in the appreciation of the property now we're going to sell it someday and you'll have selling costs i get it but just hang with me five grand on a ten thousand dollar investment that's a 50 roi let's put that in red 50 roi i made 5 000 on a ten thousand dollar investment fifty five grand divided by ten all right now next mortgage reduction i'm not paying the mortgage the tenant's paying the mortgage right even if my own business is paying the mortgage to me my business isn't paying rent to someone else it's paying rent to me so i want to cover what's called p-i-t-i principle interest taxes that's property taxes and insurance now my rent can cover p-i-t-i i didn't put any more money in and the tenant paid the mortgage so look what's going on the property's going up in value and the mortgage is going down i'm building more equity and let's just say it's 150 bucks a month of mortgage reduction we know there's going to be a lot of interest but let's say i can drop the mortgage by 2000 a year not realistic it's realistic in this okay so two thousand i invested ten i made two that my friends is a twenty percent return two thousand divided by investment of ten my roi would be 20 in the mortgage reduction column now tax benefits darren said this for a moment if i can create losses that i can use on the other parts of my tax return and this was about my realtors or my contractors this is how donald trump did it they took rental losses and used them against other income so i didn't pay any tax now if i'm in a state tax of 10 percent and fed of 20 that's 30. let's say i'm state tax of 5 and federal 25 let's just say i've got a tax effective marginal rate of 30 percent so if i can save 6 grand i'd say the average losses are around 8 000 on a single family home rental but my losses are six thousand times thirty i'm saving two grand now you may say well mark hold it how are you having so many losses because when you have a rental you get to write off depreciation the value of the property even though you put down 10 grand you get to write off the entire building now in a situation like this the building might be oh i'm going to get fix that the building might be 80 grand and the land might be 20 for a total of 100 grand so we get to depreciate the building for 80 over time that's a write-off even though it's not cash out of my pocket so if i can get six thousand losses so over here my rental generates a six thousand dollar loss so i pay less tax that means i save two thousand dollars two thousand divided by ten i've got a twenty percent roi all right now the last one and i'm trying to move through this quickly i've got other videos on this longer but cash flow let's say i just cash flow a hundred bucks a month ninety bucks a month i cash flow a thousand a year do i pay tax on the cash flow no because it's a business and you get write-offs for that business so i've got a thousand dollars a year in r in cash flow that i don't pay tax on a thousand dollars of cash flow i didn't have before so if i take a thousand dollars divided by ten thousand dollars i've got a ten percent roi ten percent roi in this column now many of you have seen me do it before i want you to memorize this this is why i use the same numbers every time twenty percent ten percent that's thirty two twenty that's fifty plus another i made a hundred percent return on a little rental property in the first year if you go mark that's too aggressive there's no way you can do it fine cut it in half 50 oh you're getting 50 on your stock okay in your etf in your mutual fund now i know some of you have risked a little bit more and bought some cryptocurrency and you're killing it i get it but that's not where we want to put all of our investments so in summary and i'll just start filled in questions is we want to take let's go back to the black here okay we're going to take our trifecta and this is what my successful clients do this is what i'm trying to do we're using our day job d day g o b i'm using my side hustle which might be a little llc or if i'm really graduating my business to the s corp level watch my videos on s-corps this is my op side i'm going to use my profit from all of these operations where i'm killing myself and i'm going to deploy this money up into llcs to buy rentals the rentals will generate losses while the properties grow in value i'll create carryforward losses that i can write off in the future or write off currently against other income this is how the rich get richer buy rental property that your kids are going to rent your mom and dad's going to rent airbnbs that you're going to use your commercial business might use it and think of single family homes okay now the last thing in my advertisement for today's broadcast i talk about tax-free real estate and yes you can have your ira or your 401k or your hsa buy real estate and i do this myself llc buy rentals now listen there was a comment here i want to get this off instagram it was a really good one someone said isn't it this is dr john dr john you're here every week i love you man he says isn't it bad to put a house rental in a tax advantage structure don't i lose the depreciation benefit yeah but what do you gain the fact you can sell this tax-free see it over here you get depreciation i'm going to do this in red everybody pay attention i buy rentals in both places you've got two buckets a rental with pre-tax money and a rental with after-tax money boom so now i'll never pay tax on this again or i'll pay tax when i sell some call this after tax and pre-tax whatever but the point is i've got a rental property here that i won't pay tax when i sell it but the depreciation's lost to the into the ira because the depreciation doesn't flow down to me but over here i get depreciation but when i sell it i got to pay tax you can't have the best of both worlds if unless you're patient because here ultimately a roth ira is going to give you tax-free income in the future while your rental grows now tax-free so if i can build this over time you're going to be a thousand times better off now if you want last comment then q a peter thiel in the news today a six billion dollar roth six billion dollar roth ira is it five only five billion oh sorry sorry five billion six billion whatever yeah let's get it right okay will you fact check me fact check me corey fact check okay i think it's five as well five billion roth and he did this self-directing six hours ago six hours ago was five billion from right now it's probably five point two yeah it's grown anyway yeah man you guys can set up your own rod okay all right let's do some questions i already took a couple questions off instagram um darren did you get a question you thought was good you want to comment on or do you want i actually like this one at the top so uh this one they mentioned can i open an llc and deed the house to the llc do i have to change the insurance and everything to the llc name yes remember you don't own the property anymore now sometimes you can go in and list the llc as additionally insured sometimes you can get a little cheaper policy that way but if we go back to our trifecta and this is what i'm doing in my life too i've got two or three llc's the own rental properties and once i buy it in my name i'm sorry i'm so visual here once i buy it in my name i deed it up to the llc and then i get a new insurance policy to cover it so you want to let your insurance company know what's going on a lot of times i have clients take my diagrams that my attorneys build or we build for you in a consult and they take it to their banker their insurance agent they're like oh my gosh this is awesome and they just know how to solve it we want to be a part of your team your accountant lawyer should be building you a diagram like this when you have a consult with one of my attorneys i'm begging them to do this diagram with you now if you're just getting a rifle shot question and you don't want to do some global planning fine but we're here for you and you take it to your insurance agent and get your insurance nailed in um one other one that i liked here that was in the mix um ashland where did all these go i lost them all they were here in my app right oh here they are okay so the other one was someone said um oh my gosh what was it i've lost it you're going to want to make sure you get the right kind of policy too you're not going to just want a regular homeowner's policy you want to make sure you get the landlord policy um some people even look into the umbrella policies and whatnot as well that i wanted i can't remember the umbrella question who was that anyway someone said um can i um thanks ashlyn they said what's the difference between an llc and just getting umbrella insurance okay so let's do our diagram so you've got a rental property over on this side and you say oh i'll just get it insurance and i'll let my trust own it you least want to do that or i set up an llc owned by my trust and then my llc owns the property and i just get regular insurance but do you stop there no i do both i have umbrella and regular insurance because you're ultimately going to get both here they're saying well no llc i'll just get a really kick-ass umbrella in policy and i'll get regular too i don't need an llc now the people that are complaining about this are in california because like mark the zillow z goes me 800 i'm sorry i lived in california for eight years i moved out of california i know the pain i love in and out burger and that sea breeze i get it great people great food airports great doctors but there's a cost that comes with it it's called the franchise tax and it's 800 bucks for an llc so you got to pay the piper now i've done podcasts umbrella policies pay out less than one percent of the time because it's after the regular insurance and they're looking for ways to get out of it and umbrella only pays after your regular insurance policy limits have been tapped out so it's so rare that it's even going to pay and sometimes let's say there's an asbestos or a latent meth lab or mold or 10 other things the insurance policy doesn't cover you're screwed but with the llc you're getting a layer of protection you're getting a layer of insurance and a second layer of insurance bam bam bam and it's so affordable just do it i if you don't want to get an llc don't get an llc but do not think umbrella insurance is your savior it's not okay all right next question i am victor jones on youtube your mega roth video said that you can only do that in a roth 401k not a roth ira but many other videos say you can do it in your roth ira which one is true victor i love it they're both true i'm going to show you right now it's a combination of both okay let's say victor everybody listen this is so freaking cool let's say you're making good money and you're like i want to put as much money as i can into a roth ira okay how much can you put into your roth ira this year if you're under age 50. anybody darren knows 19-5 all right so i'm going to put 19-5 into my 401k now can you do that with a roth yes i can put that in my roth 401k okay how much can you put in your regular ira your regular roth not a traditional ira but a roth ira this year you can put 6 000 all right so we're already at 24 500 because you're going to do your roth ira and then you're gonna do your 401k contribution okay now i'm getting to mega don't worry victor okay can you put any more into the roth no the mega there's no such thing as a mega roth ira there's a mega roth strategy that involve involves both your 401k and ira victor that's what i'm trying to say and he says you say you can only do that in a roth 401k not a roth ira well i want to use both so okay so hang with me so next you got your company match now you can have your own 401k with your small business and a day job 401k you could have both but let's say between your day job 401k or your personal 401k whatever it is the company does a ten thousand dollar match okay so here's ten thousand dollars and this is traditional okay because when a company does a match even on yourself now i know this is deep everybody hang with me i've got videos on this i've got an article on my blog on this with little diagrams you want i just got chills i love this i know i'm a cheese ball but hang with me okay so you're going to do your traditional ira sorry it's traditional money because when the company puts in traditional you're gonna pay tax when it comes out now hang tight okay so the company does let's do the math the company does ten thousand in match we'll call that green and together with your contribution and the traditional which is the match you have twenty nine thousand five hundred now let's back up for a minute in a 401k you have to think of a 401k as an overall plan with your name on it you can have a bucket for roth and you can have a bucket for traditional when you put money in you get to choose how much you want to put in there you could put nineteen thousand and one and five hundred and the other you could put five thousand and one and fourteen five in the other you can split up your nineteen five however you want when the company does the match it goes straight into the traditional okay so you're gonna have two buckets under your name in any 401k one's roth one's traditional okay so we're back over here you put in your 19-5 the company put in 10 you're at 29 500. oh but on the side you did 6 000 in your back door roth at any age and any income level you can do your backdoor roth so you're getting your six and then you're getting your 29.5 now how much can you put into a 401k this year in total the maximum you can put in in the entire 401k is 58 000. so what you do is you take your 19.5 add it to whatever the company matches and do the math so let's go to our little handy dandy iphone here okay and i'm going to take 58 000 minus 29 500. it's 28.5 28.5 right there so this bucket and this is a very important term that you need to use this is called everybody an after tax employee contribution and what it does it kind of goes into a little holding tank here and you put your your that money there and then it goes boom you do a second form and you convert it to roth so now you've got 28.5 in roth and we'll make that yellow because it's going to be roth and if you combine the yellow and yellow i've got 19 five plus 28 five and roth or do i have more yes this is where the mega roth comes in the minute you convert this to roth so you do your 28.5 as an after-tax contribution you don't get a write-off for it you convert it to a roth and then the next day you convert your company match to roth as well and so this morphs into yellow oh my gosh and remember you're doing your backdoor roth now in this one you call it a non-deductible ira contribution and then you convert to roth see these are this part takes two steps and this part is a conversion and then this part is two steps but once you complete and they're not that hard these are one page forms people now look at what happened i can take my six we're going to add all this up victor i hope some of you like this stuff i'm into it and one casual i'm going to talk about your home office here because we got to talk about some easy stuff too but don't go anywhere people don't go anywhere but this is big this is big so i'm going to take my 58 000 bunk bunk bunk which is all roth and add my 6 000 my backdoor roth i'm at 64 000 i can put 64 000 into a roth ira this year if you've got the money to do it now what's cool if you're married you could do that for you and your spouse now i've got 128 000 in roth money to start investing how do you think peter thiel got 5 billion he takes that money and he used it in a startup company called paypal you may use it in a startup company as well too but see this is your mega backdoor strategy victor i you can call this part a mega backdoor 401k you can call this a backdoor roth but the mega roth or the mega backdoor roth strategy the mega is when you take the whole thing and that's where i may be a little different than someone else you combine the whole thing and that's when you get your 64. i wish i could hear victor give me a high five but that was fun i i got excited sorry michael actually has a really good question here on uh youtube so he's asking about his employer plan with his 403 b or similarly with the 401k so he's asking do you have to leave your employer in order to roll this over into a self-directed ira okay so let's use our same chart here and this is michael yeah okay now you tell me if you think i'm right or wrong i'm gonna use darren here as our litmus chest here for mark kohler doctrine okay typic let me say this there are as many colors of 401 k as there are in the colors of a rainbow some 401ks will let you roll out it's called an in-service rollover after you've been there a while they'll let you roll out your contributions anytime you want to an ira convert it to roth you're in the money right right okay so option one call your hr department call your 401k administrator and go hey can i do an in-service rollover i really want my freaking 401k the money i put in not the match not the match not the green part i just want this yellow part i want it and you call it an in-service distribution rollover in service transfer all right and you're going to try to get your money out sometimes you can take the match out if you vested different companies vest immediately some mean you have to stay there five years or 10 years or they don't vest until you leave okay or would you retire or buy or whatever so you want to find out what your 401k allows for but if they allow it you can roll that out to an ira third option once you've paid that this is an after tax employee contribution and converted it to roth typically most 401ks are going to let you roll that out because it's they didn't get a write-off it's not a company match you've already paid the tax on it so you should be able to take that out too but i will give you the be the bearer of bad news the majority of the time you can't take the bulk of your money out of your 401k at work and roll it to an ira until you quit or fired retire sort of thing but again there may be options and if you call up the hr department they go oh no you can't do that hey this is your money people call them call the next day and get a different person is it possible i do this say it differently right don't take no for an answer you keep knocking on that door and go why can't i take an in-service roll over the people at microsoft and att get to why can't i usually it's greedy wall street brokerages controlling that 401k that don't want your money out from under their little purview that's really what's going on so you go to your employer and demand that money how can i get that money i've been a good employee you keep the match until the day i die i don't care or whatever but i want my money that i deferred talk to him be respectful be smart talk to different people go up the chain of the ladder all right one casual says why can't i use a space within my apartment rental as a home office you can you can the home office deduction is you can use it if you own a house or you rent an apartment studio apartment what you have to do is you've got to take the square footage of your apartment so here's the front door and here's the kitchen and you know and here's the dining room and here's a bedroom over here and here's a bath and maybe you've got a little entryway here i don't know but you say oh this is my home office right here and you carve it out and you take the square footage and divide it by the overall square footage and that tells you your percentage of use and if the percentage of use in this example might be 15 you know what's that use and if it's 15 then you take 15 percent times the rent you pay utilities and crap like that and that becomes your home office deduction there you go now there's a simplified method where you can take up to five dollars times 300 square feet for a total of fifteen hundred dollars you can do the standard method there's i've written a lot on this and there's some good youtube videos by me just put caller home office and see what you come up with okay where do we want to go next anything on facebook looks like youtube big time oh man samuel and teddy asked some big questions should i give it a try what do you think samuel okay samuel go back one i just want to give a little shout out here teddy i love your question but oh my gosh this is a big one i would really recommend you get a consult for just a half hour with one of my attorneys even if it's out a couple weeks he launched an e-commerce he's generating two to three hundred grand he wants to do this and contribute to a roth and a 401k those are awesome questions teddy but more for a consul on your situation and we can help you this is right up our alley samuel says if i own an airbnb as my personal home am i able to write off all the same things okay do i need to rent out more than 14 days a year to be able to take deductions well i hope if you have an airbnb in your home i hope you're renting out more than 14 days of your freaking day sam depreciation and personal home airbnb assuming it's one or the other personal or home sale of home exemption or write-offs today any advice on how to decide which okay everybody i'm going to take a little liberty with samuel's question here so don't be offended samuel i feel is and don't be offended samuel i'm just throwing this out i feel he's being a little tax aggressive now i'm not saying that's bad but he says his home's his primary home but it's also airbnb that's not common because how do you live in a place a hundred percent and it's airbnb now you may say well mark i just airbnb one room or an airbnb half the apartment or half the house okay cool for example i went to hawaii once and there was a home on the beach and the homeowner lived downstairs and the upstairs was all airbnb and so what you would do in that situation is you'd say 50 percent of the house is business and 50 of it is sale of home or primary residence which you take the sale on the home exemption primary residence so um sam that's what i'm hoping is going on that you're saying i've got this home and it's and it's 2575 or 5050 and so anybody out there that's doing an airbnb i want to know how much is business and how much is personal now what i like and i'll tell you this is what's typical is an airbnb is a hundred percent airbnb and when you visit it's to fix and repair to paint to check on things so it's still a hundred percent business you just visit it once in a while to really to work on it and make it more profitable that's what most of my clients do with the airbnb they get their visits as a tax deductible travel trip to go work on the airbnb when samuel says i live in my airbnb then i need to find out how much is airbnb and how much is primary residence and once i can figure that out then i can um start to really um carve out the write-offs so samuel you mixed this 14-day rule you get to use it 14 days or less and it's still 100 rental it's not that you rent it 14 days or more um if you rent it for 14 days or less it's tax free if you use it for less than 14 days it's 100 rental but when you say it's your primary residence that blows the whole 14-day rule out of the water because it's your primary residence unless you're only airbnb in it 14 days out of the year which is a little odd so anyway sam i don't know if that helps at all everybody out there just when you have your primary residence that's part rental we got to carve it up it's like a bed and breakfast or a duplex half of it's yours half of it's a rental take the sale of home exemption down here the rest is a rental property 1031. all right okay next question darren yeah so he says first of all hello mark thanks for all your tips to help to live the american dream um he mentions i have a townhouse that has paid off i want to rent it what is the best way to protect my property okay so tin tin he uh he or she has a home and your primary residence would typically be in your revocable living trust so your trust owns your home and i don't know if tin tin they have a day job they have a side hustle they've got a s corp i don't know oh that's a big question mark we're not worried about that they want to turn their primary home into a rental okay cool well the best way to protect it is transfer it to an llc you're no longer going to own it your trust is going to own the llc guys that's that's asset protection 101 is the cheapest most efficient way to do it even in california it is the cheapest and best way to run it mortgage payments go to the llc bank account the ein is set up in the name of the llc the insurance is set up under the llc you have an operating agreement you do minutes you have bylaws the lease agreements in the name of the llc the bank account pays the all the utility bills and out of the bank account you don't own it anymore we can set up privacy strategies to protect your personal residence that you're going to go out and buy once you convert this to a rental now matt sorensen my partner on my podcast every week he's done this three times ever he's kind of made it a goal of his every time he moves he always keeps his house as a rental he's got three rentals right now that used to be his own primary home and that's a great strategy uh he knows the home and he's like i'm gonna sell it when the time's right but i'm gonna put a long-term renter in there he has an airbnb to any of them but just a long-term tenant so you just move it to an llc tintin okay um vic says how much do you determine how to depreciate each year well a rental remember you find the building value so let's say the total purchase price was 100 grand typically you go 80 20. other times it can change but we're going to go 80 grand with the building 20 grand with the land the building if it's a residential home is 27 and a half years so you take 80 grand divided by 8 27 and a half and that's your depreciation every year the first year is this half year convention thing and makers acres and you accountants out there we geek out on this but the point is 27 and a half years divided by the building value that you determine looking at the hud statement and appraisals and all that but this is the goal now if it's commercial it's 39 years it's 39 years okay i'm gonna go back to instagram here so let's oh ashlyn's gonna i'm gonna repeat this for everybody okay what's the question was the first name again um wolf i'll just say mr mrs wolf okay said i've got my primary residence over here and i've got a home office and this llc for my rental gets to ride off this home office oh but i have a i have a garage over here you know here's my driveway and my cute little driveway and here's my garage and over here i store supplies and equipment and it's all office for my s-corp oh cool oh but in my basement over here i have another space that my wife uses for her business and she does um a hair salon with a door that comes down into the basement we write that off over here maybe in an llc you can have multiple home offices on one property boom boom boom so let's carve it up very common with an outside building casita garage storing supplies equipment stuff like that okay now i've got to get over to my um i'm just going to grab this i'm just gonna take the first question that comes i probably should be more choosy rich says what if i bought a property fsbo for sale by owner and i only have a memorandum in my name can i still make an llc for the property or would i have had to have the memorandum in the llc name rich if you were my client i would never recommend you buy a home with a memorandum um what what's some other terms people use for this kind of like these yeah a purchase for sale contract where rich really doesn't have title to the property you don't have title you've got this weird memorandum do you own the property do you not is this person claiming depreciation are they claiming rent from you are have you put it on your books have they claimed a sale i know they're trying to do a memorandum so if you don't pay they can just rip the property back and avoid a foreclosure that's not the way to do it and you could make a big stink in court if they try to do it you have what's called an equitable interest and you can fight this kind of land contract and say hey i own this property you got to go through normal foreclosure procedures and rich you might say well not in this state you know in arizona we can do for the contract and or in texas i can do this and then you know mississippi i can do that i'm just the older i get the more i just want to follow normal protocol i just kind of get sick of some of these slick willy strategies to take action on properties i'm not saying they don't work but you got to know what you're getting into and your accountant better be up to speed your lawyer better be up to speed and you've got to think through all the consequences let's say you don't make payments can they really rip the property back from you let's say you make all the payments and this person dies along the way when do you get your property do you have a deed in the drawer that you can record who's holding the title who's not who's insured on the property their names on title not your name i mean there's weird stuff here rich um i don't know i would probably stay away from it okay i'm going to do marissa even if it is a multi-family you can close it under your name and get a mortgage like an individual or if it is a multi-family even if it is under your name it qualifies as commercial to fannie mae marissa i will say this if you get 10 bankers in a room and ask him the strategy to take title to a multi-family and the best loan to get you're going to get 10 different answers am i right and all 10 are going to pull your credit and jack it up what i when it comes to lending my experienced real estate investors find a lender they can trust and a lender that's not going to jack up their credit pull in their credit every which way until sunday and they understand commercial loans and they understand residential loans and as you get involved in real estate education communities or real estate clubs and i've got clients that are dentists and doctors and lawyers and i go to real estate club meetings to learn how to do real estate and you're right like rich if you get a for sale by owner deal and they carry the paper with a normal mortgage and a trustee note you know that's cool but you got to be careful there's good ways to be creative with financing and then there's ways to go a little too far so just get a second or third opinion here's here i'm going to say this right now okay everybody if there's one thing today that i think is one of the most important things i'm going to say i'm going to propose this be careful taking legal or tax advice from this friend of yours that's really successful and they say yeah this is what mark kohler is going to say but you really don't need an llc you can get an umbrella policy or you know you can go over here and you can get um a a trustee contract a note contract or buy on property value this that another and it'll be recorded but it's not recorded it's in the drawer but then when you pay you get it recorded because your credit sucks and right that crap drives me crazy but you say well mark it works because this person said it did really why don't you get it in writing from them that if it gets jacked up in court they pay the bill they're going what about that person that says it's a great tax write-off are they signing your tax return if the irs comes knocking are they paying the bill they're gone we're trying to be a creative law firm in a creative accounting firm but we're licensed we carry malpractice insurance and if we're wrong we pay the freaking bill be careful taking advice from someone on a blog or this person a club that's obviously smart and successful you go ask them if they'll stand behind it they'll say well go talk to your accountant or lawyer but this is the way to do it well then why don't you go to effing law school you know gee sorry i got a little out of control okay i'm in one of those moods today okay give me a good question corey come on scroll into something darren gets one question i get to choose one question and ashlyn gets to choose one question how about that okay darren okay i kind of like this one so she she asks is there a way to use a 1031 exchange from a house i plan to sell to buy a piece of property and to build a house on it oh my gosh love it christine do you want to get a shout out you do it what do you want to say all diagram this is pictionary okay all right start talking okay well i think uh the way that she's asking it it almost sounds like she's trying to build a personal residence for her for herself that's my concern okay no residents involved in this question so let's just do that this is k or with the c okay so this is christine she owns this home and she wants to do a 1031 exchange so walk us through it you need to find a qualified intermediary okay this is going to be a person who's going to walk you through the process and there's going to be a lot of timing and different dates and things that you're going to have to meet but essentially she's gonna sell that property over to the qualified intermediary so here's a buyer that's gonna buy the property and the buyer's gonna put the money in does she get the money no no sits in the qr all right then what and by a property or multiple properties of equal or greater value so here's the replacement property of equal or greater value and that's where the money goes and then the title flows back through the qi to steam and there you go now if she buys land and gets a loan and builds a building can she do that as long as it's equal or greater value as long as it's equal or greater value this is called a construction 1031. the trick with the construction 1031 is you've got 180 days to finish building this thing they're tricky because you've got to take the replacement property in the money and have this building finished by the time the deadline hits now that's my current understanding there might be a 1031 expert out there that says mark well there's a sub rule to a sub rule there's a way around this um if anybody christine and anybody that's trying to do a construction 1031 go talk to a couple qis we do 1031 exchange consulting here but on your basic vanilla 1031s when they start get a little technical we'll get qi's involved and other accounts that exp our experts in them okay ladies first ashlyn your question okay um this question comes from anna at cordero and she asks my family owns real estate a sense of pride my accountant recommended us to open an imc property okay so um so she said i'm everybody i'm gonna repeat this this is from anna and anna says i um she has some family property i'm not getting it and she wants to do what incorporation okay all right so anna went to their accountant and there's five partners in this deal one two three four five and they went to their accountant and the accountant said to set up a corporation holy crap no heaven no no not an s corp not a c corp never ever ever ever ever ever do you want to put rentals on your operation side don't do it anna now i have a feeling he may have met an llc because if an accountant says a corporation you got to fire them but normally we would do an llc owned by the five family members and the llc would take title i'm loving that and if the rentals are in arizona then we set up an arizona llc if the rentals are in tennessee then we set up a tennessee llc that's how that works okay last question corey where am i going okay arizelle azell 226. how can i generally prepare for a consultation to enable you to help me the most but i did not choose this question people this is corey being self-serving as as simple as financial statements and goals okay i'm going to say this to everybody no matter what lawyer or accountant you go to at whatever firm don't feel like they have to be local they can be on a phone across the country with a zoom camera whatever but you want to go in with a diagram make it easy for darren and i in our first 10 minutes sketch out your trifecta say i don't have a trust i have no structure and i have rentals boom boom okay cool just give us what you got just rough it out you don't have to make it look pretty in powerpoint but give us a visual of what you have that's number one try to just so you don't have to like you could just see here with ashland i'm like what they say what they say i'm trying to interpret their question so if you can lay it out in a picture a picture says a thousand words that's number one number two have a spreadsheet have a spreadsheet that lays out all of your assets and all of your debts asset asset asset asset debt debt no debt debt and then equity equity equity no equity crappy equity and then that way we can see what we're dealing with you know and then number three i want to know all entities that you do have set up and that are in good standing just give me a little list oh i got abc corporation and abc llc and then number four darren and i we love tax returns oh turn me on hop bother you know just just if you want to get me in bed and just read me your tax return oh man it's it's it's magic so give me your tax return i want your last year's personal and business tax return and then i i i want your family breakdown marriage single kids how old is everybody what do you have in your bank accounts now that's kind of part of your asset spreadsheet you know i have this ira this ira this bank account this rental this home this any debts involved and then what's the equity and if you can show up with this breakdown for any consultant they should be able to to fine-tune your diagram make a checklist of things we recommend you get done and take your time and do it anybody that wants to charge you five or ten or fifteen or twenty thousand dollars for some trust set up in a offshore location or they want to give you unlimited llc's or unlimited crap get a second opinion just pay for what you need all a cart as you grow and expand we'll be there for you anyway hey everybody thanks for being here this week i'll see you next thursday at four o'clock mountain save up your questions i'll have a kick butt topic for you hope to wow you thank instagram thank youtube thank thank you facebook and entrepreneur magazine for letting us broadcast on their networks love entrepreneur magazine the number one magazine in the world for small business owners so we'll see you around see you next week thanks everyone

Channel: Mark J Kohler

Views: 130,582

Keywords: real estate investing, asset protection, wealth building, mark j kohler, real estate

Id: uQwDMmvN2-Q

Length: 66min 43sec (4003 seconds)

Published: Thu Jun 24 2021