RENTAL PROPERTYBOOTCAMP
name:
7/7/2020
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Fortune BuildersRental Property Bootcamp
Fortune BuildersRental Property Bootcamp
Code Of HonorCode Of Honor
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Be on time
Code of Honor
Code of Honor
Code of Honor
Don’t multi-task
Computers for NOTES only!
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Code of Honor
PARTICIPATE with the class!
Code of Honor
QuestionsQuestions
Code of Honor
Be POSITIVE
and
Give
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ENERGY!ENERGY!LEARNINGTAKES
The Cone of Learning
After 2 weeks we remember
When you’re greenyou grow….
When you’re greenyou grow….
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Who Is This Guy?
Who is John Blackburn?
WHYPassive Income?
YOUR WHY…
FinancialFreedom
Technician
Manager
Entrepreneur
Struggle, Confusion, Constant Work
Consistent Work with Payoff
Business Growth
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Rentals - Multiple Paths
Entrepreneur
Manager
Technician Marketing, Deal Sourcing, Negotiating, Rehabbing, Tenanting, Managing
Rehab Yourself & Hiring ProfessionalProperty Managers
100% Turnkey
Why Rental Properties?
Why Do We Choose
Rental Real Estate
As Our Investment Vehicle?
ConsiderationsHard Asset (Intrinsic Value)
LeverageControl Asset for 20%of it’s value Principle Pay-down
Equity & AppreciationCherry on Top - but its a big potential cherry!
Tax Benefits DepreciationDeduct Interest PaymentsImprovements & Expenses
High YieldAll Cash Purchase 6-10%Conventional Loan 8-15%*Non-Recourse
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Considerations
Lack of Liquidity
Subject to Market Risks (Economy)
Bad Property Management (Biggest Killer)
Problem Residents
Potential Risk Factors
Entity Structure for Rentals
FinancialEngineering
Property Management
EvaluatingMarkets
Passive Income
Club
Rental Bootcamp Outline
AnalyzingDeals
1 HousePortfolio
BecomingA Bankable
Investor
RenovatingRentals
BuildingYourPlan
The 1 House Portfolio
It All Starts With
ONE House!
It All Starts With
ONE House!
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The 1 House Portfolio
LeverageLeverage
The 1 House Portfolio
Time is
Everything
Rental Property Intensive
Feed The P.I.G.
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Rental Property Bootcamp
Doors To FreedomDoors To FreedomDoors To Freedom
Entity Structure for Rentals
FinancialEngineering
Property Management
EvaluatingMarkets
Passive Income
Club
Rental Bootcamp Outline
AnalyzingDeals
1 HousePortfolio
BecomingA Bankable
Investor
RenovatingRentals
BuildingYourPlan
1. Learn to Identify YOUR Investment Objectives
2. Outside in Approach to Evaluating Rentals
3. 6 Factors of a Great Rental Market
4. Ninja Tips
Our Objective:
Evaluating Markets
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Evaluating Markets
What’s Most Important To You?
Cashflow?Growth?Stability?Predictable?
What’s Your Risk Tolerance?
Volatility? Risk vs. Reward
What’s Your Time Horizon?
Money Now?Money in the Future?
Identify Investment Objectives:
Evaluating Markets
Outside in ApproachLaws & Legislation for the StateEconomic Metrics for for the CityEvery Market Performs Uniquely Match Market to Investment ObjectiveSocio-Economic AnchorsLocation, Location, LocationThe Right Property
Evaluating Markets
Resident Friendly
vs.
Investor Friendly
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6 Factors of a Great Rental Market
GMP - Gross Metro Product
RPR - Rent to Price Ratio
HAI - Housing Affordability Index
MSA - Metro Statistical Area
Percentage of Renters
Socio-Economic Factors
6 Factors of a Great Rental Market
• A monetary measure of the market value of all final goods and services produced in a period (quarterly or annually)
• Used to determine the economic performance of a whole country or region, and to make international comparisons
GMP - Gross Metro Product
Ideal Measurement = 1 Year / 5 Year / 10-12 YearYear over year growth of 1-3%
6 Factors of a Great Rental Market
RPR - Rent To Price Ratio
Annual Rental Income / Median Price
$1000 Monthly Rent X 12 Months = $12,000
$12,000 / $125,000 (Median Price) = 9.6%
Ideal RPR = Depends on the Objective Growth Market vs. High Yield Market
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6 Factors of a Great Rental Market
HAI - Housing Affordability Index
$150,000 Median Price / $50,000 Median Income = 3
Ideal HAI = 4 or Lower
Median Home Price / Median Annual Income
6 Factors of a Great Rental Market
MSA - Metro Statistical Area
Population = Tenants & Regional Stability
Ideal Measurement = 1 Year / 5 Year / 10-12 YearYear over year growth of 1-3%
6 Factors of a Great Rentals Market
Percentage of Renters
National Average 20-25%
Ideal % of Renters = 30-40%
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6 Factors of a Great Rentals Market
Socio Economic Anchors
Large Stable CompaniesMajor Manufacturers Health Care ProvidersTech CompaniesFinance Companies Fortune 500 Companies
Location of Those JobsTraffic PatternsNiche Down NeighborhoodsEtc…
Housing Markets Are Driven By Jobs
NINJA TIPS
High Traffic StreetsHighway NoiseSteep DrivewaysClose to Highway ExitsSloped Back YardsSmaller Square FootageIndustrial Areas
MASTERY RESOURCES
www.RPBDownloads.comPassword = RPI
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Evaluating Markets
Market Evaluation Chart
Evaluating Markets
Local MLS Data & REIA Groups
https://www.neighborhoodscout.com/
https://www.huduser.gov/portal/home.html
http://www.city-data.com/
https://libguides.princeton.edu/urbanstudies/data
https://www.census.gov/econ/geo-city.html
Resources
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Evaluating Markets
www.bea.gov - GDP/GMP-> Data -> By Place -> Metro -> Interactive Data ->
GDP by Metro -> Current Dollars -> Pick your Metro -> All Industries Total -> All Years
www.bestplaces.net - MSA / Income / Home PricesName of City -> Scroll down to “Metro” ->
Find the Data you are looking for
Resources
Evaluating Markets
www.deptofnumbers.com - Rental Data Right side of page ->
Datasets -> Rent -> Rent by Metro ->
Click on the Metro
www.forbes.com/places - Quick SummaryGoogle “Forbes name of city”
Resources
Entity Structure for Rentals
FinancialEngineering
Property Management
EvaluatingMarkets
Passive Income
Club
Rental Bootcamp Outline
AnalyzingDeals
1 HousePortfolio
BecomingA Bankable
Investor
RenovatingRentals
BuildingYourPlan
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1. Identify Core Numbers
2. Learn The Key Calculations
3. Learn The 4 Profit Centers of Rental Real Estate
4. Deal Analyzer for Rentals
Our Objective:
Analyzing Deals
1. Purchase Price (+Repairs)2. Monthly Rent3. Property Management Fee4. Insurance5. HOA6. Property Taxes 7. Mortgage (If Applicable)
Core Numbers:
Analyzing Deals
Key CalculationsKey Calculations
Net Operating Income (NOI)
Cap Rate
Cash On Cash Return (ROI)
Internal Rate of Return (IRR)
Analyzing Deals
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1. Purchase Price (+Repairs) - $100,0002. Monthly Rent – $10,000/Year3. Property Management Fee (10%) – $1,000/Year4. Insurance – $500/Year5. HOA – N/A6. Property Taxes – $1,500/Year7. Mortgage (If Applicable) – N/A
Core Numbers:
Analyzing Deals
Net Operating Income - NOI
Annual Rental Income - $10,000- Fixed Annual Expenses - $3,000
Net Operating Income (NOI)***Cash Purchase***
= $7,000
Formula for NOI:
Cap Rate
Formula for Cap Rate:***Assumption – We are purchasing the property
for CASH
NOI / Purchase Price = Cap Rate$7,000/$100,000 = 7%
***Purchase Price = $100,000 ***NOI with Cash Purchase = $7,000
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Analyzing Deals
What If We Use Leverage?
1. Purchase Price (+Repairs) - $100,0002. Monthly Rent – $10,000/Year3. Property Management Fee (10%) – $1,000/Year4. Insurance – $500/Year5. HOA – N/A6. Property Taxes – $1,500/Year7. Mortgage (If Applicable) – $4,000/Year
Core Numbers:
Analyzing Deals
Net Operating Income - NOI
Annual Rental Income - $10,000- Fixed Annual Expenses - $7,000
Net Operating Income (NOI)***Leveraged Purchase***
= $3,000
Formula for NOI:
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Cash on Cash Return (ROI)
Formula for COCROI
NOI / Down Payment = COCROI$3,000/$25,000 = 12%
***Purchase Price = $100,000 ***Bank will require 25% Down Payment***Cash in the Deal = $25,000***NOI with Monthly Mortgage Payment = $3,000
Cinderhill Cove Case Study
Purchase Price - $108,000
Monthly Rent - $975
Property Management Fees - 10%
Annual Real Estate Taxes - $1,620
Annual Insurance - $500
Monthly Mortgage (P&I) - $435
Dandy Case Study
Purchase Price - $153,000
Monthly Rent - $1,150
Property Management Fees - 10%
Annual Real Estate Taxes - $1,800
Annual Insurance - $500
Monthly Mortgage (P&I) - $616
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Deal Analyzer for Rentals
LIVE WALK-THROUGH!
Rental Property Bootcamp
BUY, RENOVATE, REFINANCE, REPEAT MODEL
40K Purchase+
30K Renovation= 70K Private Money Loan
100K ARVLong-Term Lender
will Finance 75% of ARV
Long-Term Lender
Pays Off PML
Deal Analyzer for Rentals
Deal Analyzer for Rentals Review!
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Deal Analyzer For Rentals
The 4 Profit CentersThe 4 Profit Centers
Cashflow
Increased Equity(Mortgage Pay-Down)
Tax Benefits
Appreciation
Analyzing Deals
The 4 Profit CentersThe 4 Profit Centers
Cashflow
Analyzing Deals
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Cash Flow Purchase Price: $108,000
Down Payment (25%): $27,000
Mortgage (75%): $81,000
Monthly Annual
Rent: $975 $11,700
Principle & Interest (5%): ‐$435 ‐$5,220
Real Estate Taxes: ‐$135 ‐$1,620
Insurance: ‐$42 ‐$500
Property Management (10% of Rents Collected):
‐$97.5 ‐$1,170
Total Cash Flow: $265.50 $3,186.00
NOI$3,182 $27,000
= 11.78%/
Down Payment ROI
Cinderhill Cove
*All income or earning statements are based on this property. There is no assurance your earnings or income will match this case study.
The 4 Profit CentersThe 4 Profit Centers
Increased Equity(Mortgage Pay-Down)
Analyzing Deals
Increased Equity
Cinderhill Cove
*All income or earning statements are based on this property. There is no assurance your earnings or income will match this case study.
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Increased Equity
Cinderhill Cove
*All income or earning statements are based on this property. There is no assurance your earnings or income will match this case study.
Increased EquityYear 1
$1,196 $27,000 =
4.4%Down Payment ROI
Loan BalancePrinciple Paydown
Total Increased
Equity
Original Loan: $81,000 $0 $0
Year 1: $79,804 $1,196 $1,196
Year 2: $78,548 $1,256 $2,452
Year 3: $77,228 $1,320 $3,772
Year 4: $75,840 $1,388 $5,160
Year 5: $74,381 $1,459 $6,619
/
The 4 Profit CentersThe 4 Profit Centers
Tax Benefits
Analyzing Deals
Tax Benefits
Cinderhill Cove
*All income or earning statements are based on this property. There is no assurance your earnings or income will match this case study.
1. Mortgage interest 2. Depreciation3. Repairs4. Insurance5. Local travel6. Long distance travel7. Home office8. Employee’s or independent contractors
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Tax Benefits
Cinderhill Cove
*All income or earning statements are based on this property. There is no assurance your earnings or income will match this case study.
Land Value$19,008
$88,992
= $3,236/
Building Value
DepreciationPer Year
$88,992 Building Value
27.5Depreciation Rate
Tax Savings$1,132 $27,000
= 4.19%
x
Down PaymentROI
$3,236 Depreciation Yr. 1
/
35%Tax Bracket
= $1,132Tax Savings
The 4 Profit CentersThe 4 Profit Centers
Appreciation
Analyzing Deals
Property Appreciation***
Cinderhill Cove
*All income or earning statements are based on this property. There is no assurance your earnings or income will match this case study.
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Property Appreciation***
Cinderhill Cove
*All income or earning statements are based on this property. There is no assurance your earnings or income will match this case study.
Appreciation @ 3% Annually
Property Value
TotalAppreciation
Purchase Price: $108,000
Year 1: $111,240 $3,240
Year 2: $114,577 $6,577
Year 3: $121,014 $10,014
Year 4: $124,644 $13,644
Year 5: $128,383 $17,383
Appreciation Year 1
$3,240 $27,000 = 12%/Down Payment ROI
4 Profit Centers
Cinderhill Cove
*All income or earning statements are based on this property. There is no assurance your earnings or income will match this case study.
Profit Centers Profit ROI
1. Cash Flow (Year 1): $3,182 11.78%
2. Increased Equity (Year 1): $1,196 4.4%
3. Tax Savings Depreciation (Year 1): $1,132 4.19%
4. Appreciation (Year 1 @ 3%*): $3,240 12%
5. Maintenance Expense (5%): ‐$585 (2.16%)
6. Vacancy Expense (5%): ‐$585 (2.16%)
Total Return: 28%
Saving vs. Investing
*All income or earning statements are based on this property. There is no assurance your earnings or income will match this case study.
1% 12% 24%
Year 1 $100,000 $100,000 $100,000
Year 3 $103,000 $143,000 $203,000
Year 6 $106,000 $204,000 $416,000
Year 12 $112,000 $419,000 $1,731,000
Year 24 $127,000 $1,756,000 $29,981,000
Saving Investing
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Entity Structure for Rentals
FinancialEngineering
Property Management
EvaluatingMarkets
Passive Income
Club
Rental Bootcamp Outline
AnalyzingDeals
1 HousePortfolio
BecomingA Bankable
Investor
RenovatingRentals
BuildingYourPlan
Financial Engineering
1. Learn Basic Passive Business Structure
2. Best Financing Options for Rental Properties
3. Learn How To Leverage Retirement Accounts
4. Learn to Accelerate Wealth Using C3X Calculator
Our Objective:
Financial Engineering
Fill 4 Buckets
Pay Yourself Back FB Education Investment
Pay Yourself! (W-2 or 1099)
Reinvest In Your Business
Save $$$ For Your Taxes
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Financial Engineering
Active IncomeLLC / S-Corp
Rehab$$$
Wholesale$$$
W-21099
Solo-KContribute up to 19K
EmployeeMatch up to 19K
Max Contribution 56K
Contribute up to 18K
+
Passive IncomeInvestments
Financial Engineering
Stay In Your Financial Swimming Lane
Personal Solo-K
Conventional Loans
Commercial/Portfolio Financing
Subject To or Seller Financing
Cash
Cash
Non-Recourse
Financial Engineering
CONVENTIONAL FINANCING
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Financial Engineering
COMMERCIAL/PORTFOLIO FINANCING
Financial Engineering
SUBJECT TO or SELLER FINANCING
Financial Engineering
NON-RECOURSE FINANCING
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Financial Engineering
Self Directed Retirement Account:
Hybrid Investment Strategy
NON-RECOURSE FINANCING SRATEGY
Financial Engineering
Hybrid Investment Strategy Use Inside Self Directed Retirement Account
Assume: Solo K = 150K
• Cash 100K • 50K Down• 50K NRC
Buy Property #1 Buy Property #2
$700 NOI $200 NOI+= $900 Month
Free & Clear in 4-5 Years
Financial Engineering
Hybrid Investment Strategy Use Inside Self Directed Retirement Account
Started With: Solo K = 150K
Buy Property #1 Buy Property #2
$700 NOI += $1400 Month
After 4-5 Years
$700 NOI
$1400 x 12 = $16,800 $16,800 / $150,000 = 11.2%Plus 50K Equity Gain
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Financial Engineering
Want To Pour Fuel On The Wealth Building Fire?
CONVENTIONAL FINANCING STRATEGY
C3X Strategy
Financial Engineering
$300
$300 $300
15-17 Years
15-17 Years
$300 $300
1st House 8-9 Years= $600+
$700 $300
2nd House 6-7 Years Later= $1,000+
C3X Strategy
Financial Engineering
C3X Strategy
= $3,000
$300
x 10
5-7 Years
Cashflow
Years To Free & Clear
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Financial Engineering
C3X Strategy
= $3,400x 10
4-6 Years
Cashflow
Years To Free & Clear
Financial Engineering
C3X Strategy
= $3,800x 10
2-5 Years
Cashflow
Years To Free & Clear
Financial Engineering
C3X Strategy
= $4,200x 10
1-2 Years
Cashflow
Years To Free & Clear
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C3X Calculator
Entity Structure for Rentals
FinancialEngineering
Property Management
EvaluatingMarkets
Passive Income
Club
Rental Bootcamp Outline
AnalyzingDeals
1 HousePortfolio
BecomingA Bankable
Investor
RenovatingRentals
BuildingYourPlan
Passive Income Club Consultation
YOURGOLDEN TICKET
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Your Real Estate Super Team
What is a Customized Investment Plan?
• Discuss Financial Goals• Define Financial Resourcesavailable to build Portfolio
• Short Term / Long Term Time Horizon• Cash Flow Now or Growth Focus• Level of Risk Tolerance
• Passive IncomeRentals • Passive Lending• Solo K Investing• How to use types of leverage
• Performance tomatch Objectives
• Education• Build a Criteria
• Turnkey Partner Education• Investment & Deal Review • Purchase Rental Properties from
Turnkey Inventory Provider
a
Feed The P.I.G.Feed The P.I.G.
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Fortune BuildersRental Property Bootcamp
Fortune BuildersRental Property Bootcamp
Dandy Case Study
Purchase Price - $153,000
Monthly Rent - $1,150
Property Management Fees - 10%
Annual Real Estate Taxes - $1,800
Annual Insurance - $500
Monthly Mortgage (P&I) - $616
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Entity Structure for Rentals
FinancialEngineering
Property Management
EvaluatingMarkets
Passive Income
Club
Rental Bootcamp Outline
AnalyzingDeals
1 HousePortfolio
BecomingA Bankable
Investor
RenovatingRentals
BuildingYourPlan
1. Creating a Financial Portfolio
2. Learn How To Calculate Debt-To-Income
3. Creating a Personal Financial Statement
Our Objective:
Becoming a Bankable Investor
Personal Financial Portfolio
1. Have A Plan
2. Credibility
3. Credit
4. Financials
5. Introduce The Team
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1. Annual W2 or 10992. 2 Years of Tax Returns - Personal & Corporate3. 2 Months Bank Statements4. 1-2 Months Pay Stubs5. Credit Report6. Personal Financial Statement7. List of Existing Investments8. LLC Paperwork 9. Insurance Agent10.Lease Agreements
What will the Bank Need?
Personal Financial Portfolio
How To Calculate DTI
Debt-To-Income Ratio
Monthly Debt Obligations / Monthly Gross Income = DTI
How To Calculate DTI
Debt-To-Income Ratio
Monthly Debt Obligations / Monthly Gross Income = DTI
Monthly Debt ObligationsRent or Mortgage PaymentAlimony & Child Support PaymentsStudent Loan PaymentsAuto Loan PaymentsCredit Card Payments Other Monthly Debts…
Monthly Gross IncomeW-2 & 1099 IncomeBusiness IncomeRental IncomeOther Monthly Income…
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Personal Financial Statement
Personal Financial Statement
LIVE WALK-THROUGH!
Entity Structure for Rentals
FinancialEngineering
Property Management
EvaluatingMarkets
Passive Income
Club
Rental Bootcamp Outline
AnalyzingDeals
1 HousePortfolio
BecomingA Bankable
Investor
RenovatingRentals
BuildingYourPlan
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Successful Structures for Rental Properties
DisclaimerThe information presented is for educational and informational purposes only. Any and all of the information presented is not intended to be legal, financial or investment advice, or any other professional advice; instead it is intended to be general in nature and is not specific to you or anyone else.
Please consult with an attorney and tax advisors before implementing any of the following strategies.
What we will cover to build your Rental Portfolio
1. Active versus Passive
2. Tax Strategies
3. Real Estate Privacy Trusts
4. Buying Property with
Retirement Accounts
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Entity Tax Status
CORPORATION: Corporation = Tax form 1120 Corporation (s-election) = Tax form 1120S
LLC: Corporation = Tax form 1120 Corporation (S-election) = Tax form 1120S Partnership = Tax form 1065 Disregarded = No Tax Return
Investor Structure
Living TrustEstate Planning/Privacy
LLCDisregarded
Wholesales/Rehab Rentals/Passive
REPT
LLCS- Election
1120S
This information is a structure illustration, assembled by Harris Law Office, based upon a large sample of NCH clientele. Individual results may vary.
REPT
REPT
Passive vs. Active
Passive Income
Rental Properties
Interest Income (Lending)
Passive Income can only be offset with
Passive Losses!
Active Income – derived from “working” to
earn the money.
Short Term Investments
Wholesale & Rehabbing
Self Employed Income
Points (Lending)
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Passive Income
Rental Income is Treated as Ordinary Income
State and Federal Taxes based on your tax bracket
No Self Employment Tax!
Capital Gains Treatment When Property is Sold
15% Long Term Capital Gain
20% if over $400k (Single) $450k (Married Filing Jointly)
Depreciation Losses
One of the most valuable deductions in Real Estate
Requires no money to be spent, yet creates cash flow via tax savings! Depreciation losses (passive losses) offset Rental Income
Understanding the Difference in Deductions
Capital Improvements(Amortized Deduction)
adding an addition adding central air conditioning installing a security system installing brand new carpet replacing an entire roof replacing all existing plumbing replacing all existing electric renovating a kitchen replacing all windows
Repairs & MaintenanceFully Deductible ”This Year”
finishing a wood floor repainting a room repairing a roof repairing existing plumbing repairing existing appliances replacing a doorknob replacing a window replacing a broken smoke detector replacing rotted floorboards replacing cracked floor tiles
Depreciation Schedule 5-year property. This class includes computers and peripheral
equipment, office machinery (typewriters, calculators, copiers, etc.), automobiles, and light trucks. This class also includes appliances, carpeting, furniture, etc., used in a residential rental real estate activity.
7-year property. This class includes office furniture and equipment (desks, file cabinets, etc.). This class also includes any property that does not have a class life and that has not been designated by law as being in any other class.
15-year property. This class includes roads, fences, and shrubbery (if depreciable).
27 ½-years Residential rental property. This class includes any real property that is a rental building or structure (including a mobile home) for which 80% or more of the gross rental income for the tax year is from dwelling units. 39-years on Non Residential Property.
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Significant Tax Advantages
IRC Section 162 Designed for Business Owners
IRC Section 179 Designed for Growth Years
IRC Section 199A New savings for REI!
IRC Section 162
Allows business owners to deduct Ordinary and Necessary expenses:
Seminars Training Conventions Travel** Auto Marketing Management Equipment, Supplies Legal and other professional services
IRC Section 179
An immediate expense deduction that business owners can take for purchases of depreciable business equipment instead of capitalizing and depreciating the asset.
The Section 179 expensing method is offered as an incentive for small business owners to grow their businesses with the purchase of new equipment.
A great option for those Growth Years!
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IRC Section 199A
The basic deduction is 20% of net qualified business income which is huge. If you are married and make $200,000, the deduction is $40,000 times your marginal tax rate of 24% which equals $9,600 in your pocket.
Income Limits
– Based on taxable income including all sources (not just business income). Also limited to 20% of taxable income.
– Single is $157,500 completely phased out by $207,500 (adjusted for inflation)
– Married filing jointly is $315,000 completely phased out by $415,000 (adjusted for inflation)
Who Benefits from 199A?
Pass-thru entities and structures for real estate include:
• Disregarded entities (Single member LLCs).
• Multi-member LLCs. (Partnerships)
• Any entity; LLC or Corporation taxed as an S corporation.
Who Will Not Benefit from 199A?
Anyone in a specified service business or trade:
• Traditional service professions such as doctors, attorneys, accountants, actuaries and consultants.
• Performing artists who perform on stage or in a studio.
• Paid athletes.
• Anyone who works in the financial services or brokerage industry.
• And now the hammer... “any trade or business where the principal asset is the reputation or skill” of the owner.
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Passive Loss Limitations
Concern for both people making more than $150,000 yearly and those making less than $150,000.
Strategies to “side step” these loss limitations.
Real Estate Professional
By meeting the IRS requirements to be a treated as a real estate professional, you’re able eliminate the passive loss limitations regardless of income
Allows you to use depreciation losses to offset active income!
Dealer vs. Investor
How to Qualify as a Real Estate Professional
You must be an eligible Tax Payer Not eligible are limited partners, C-Corps, Irrevocable
Trusts
You must be in the real estate business: Rental Properties, Management, Development,
Construction Acquisition, Conversion, Leasing, RE Brokerage
751 Hours per Year (spouse hours count)!
Property Management - Material Participation
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1031 Exchange
Two Simultaneous Requirement 1 – have 45 days
to identify replacement property
Requirement 2 – 180 days to close on replacement property
Beware of Exchanges starting October 15th!
Reverse Exchange “Starker Exchange”
Allows you to “defer” taxes on the sale of property by exchanging like-kind property for like-kind property
Your CPA is only as good as …
The details of your accounting make a significant difference in the tax liability.
The details provided regarding your rental properties. Discuss the specifics with your accountant to ensure you’ve properly accounted for expenses related to your rental.
Discussion
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Investor Structure
Living TrustEstate Planning/Privacy
LLCDisregarded
Wholesales/Rehab Rentals/Passive
REPT
LLCS- Election
1120S
This information is a structure illustration, assembled by Harris Law Office, based upon a large sample of NCH clientele. Individual results may vary.
REPT
REPT
What is a Real Estate Privacy Trust (REPT)?
The REPT can conceal ownership of rental properties.
The REPT can create separation between properties.
The REPT eliminates probate fees when used in conjunction with a Revocable Living Trust.
The REPT allows for the transfer of beneficial interest which will avoid Transfer Taxes.
Eliminates concerns of Due on Sale
“When to use an REPT”
It is best to have the trust already in place
Submit offer using the name of the trust
Sell Beneficial interest of trust
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Garn Act
The Garn–St. Germain Depository Institutions Act of 1982, enacted October 15, 1982, is an Act of Congress that deregulated savings and loan associations and allowed banks to provide adjustable-rate mortgage loans.
An important consumer change was to allow anyone to place real estate in their own trust without triggering the due-on-sale clause that allows lenders to foreclose on a current loan upon transfer to another.
The bill states "... a lender may not exercise its option pursuant to a due-on-sale clause upon ... a transfer into an inter-vivos trust in which the borrower is and remains a beneficiary and which does not relate to a transfer of rights of occupancy in the property.”
Passive Partnership
Living Trust (Partner B)
Living Trust (Partner A)
LLCPartnership
1065
This information is a structure illustration, assembled by Harris Law Office, based upon a large sample of NCH clientele. Individual results may vary.
REPT REPT REPT
Self-Directed Strategies
Self-Directed Solo 401k:
Wholesale Rehab Long Term Rentals Private Money Lender
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SD IRA LLC vs. SD 401k LLCIRA LLC SOLO K LLC
Protection NV Veil Protection NV Veil Protection
2019 Contribution Limits$6,000
$7,000 if you’re age 50 or older
$56,000$62,000 if you’re age 50 or older(Employee:$19,000/$25,000 if
age 50 +)(Employer: 25% of earnings up
to $37,000)
Allows for Loans
No! 50% of account value up to $50,000
U.D.F.I.Yes! 37% Exempt
RothContributions
Phases out at:Singles – $122,000-$136,999
MFJ – $193,000-$202,999 No Phase out!
Investor Structure with Solo K
Living TrustEstate Planning/Privacy
LLCDisregarded
Wholesales/Rehab Rentals/Passive
REPT
LLCS- Election
1120S
This information is a structure illustration, assembled by Harris Law Office, based upon a large sample of NCH clientele. Individual results may vary.
REPT
REPT
Solo KLLC
WifeHusband
Solo KLLC
Solo K
Prohibited Transactions(A few examples of prohibited transactions)
The self-directed IRA or Solo 401k account holder may not:
Sell a property that he/ she owns personally to the Solo 401k or self-directed IRA
Lend money from the self-directed IRA or Solo 401k to his or her parent, child, or other disqualified person
Personally guarantee a loan for a real estate purchase by the Solo 401k or self-directed IRA
Use any property owned by the self-directed IRA or Solo 401k Receive a salary or fee for managing one’s self-directed IRA or
Solo 401k Receive a commission on a property purchased or sold by one’s
Solo 401k or self-directed IRA
(This is only a sample of prohibited transactions, we recommend that you seek professional advice to address specific questions regarding your individual situation)
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Prohibited Transactions(A few examples of prohibited transactions)
The self-directed IRA or Solo 401k account holder may not:
Hire a business owned by oneself or other disqualified person to provide a service to a plan asset
Personally purchase a property owned by one’s Solo 401k or self-directed IRA
Lend money to one’s self-directed IRA or Solo 401k Allow a son or daughter to live in a rental unit owned by their self-
directed IRA or Solo 401k, even if he or she pays fair rent Pay oneself, or other disqualified person, for performing work to a
property owned by one’s Solo 401k or self-directed IRA, (similarly, performing that work for free would be considered a non-cash contribution to your self-directed IRA or Solo 401k which is also not allowed.)
(This is only a sample of prohibited transactions, we recommend that you seek professional advice to address specific questions regarding your individual situation)
Disqualified PersonsEvery IRA/Solok has a list of persons and entities that are considered disqualified from interacting in certain ways with the IRA/Solok. IRS rules prohibit the IRA/Solokfrom dealing with these people and entities. These prohibited parties are called Disqualified Persons.
Disqualified Persons to Your Plan are:
You Your Spouse Your Ascendants Your Direct Descendants Your Direct Descendants' Spouses Entities owned or controlled by Disqualified Persons Certain Fiduciaries (CPAs, Attorneys, Financial Planners, etc.)
Disqualified Persons
Disqualified Persons Cannot:
Buy an asset from the retirement plan Sell an asset to the retirement plan Live in any property owned by the retirement plan Rent property owned by the retirement plan Personally use the retirement plan's asset (for example, living in
or renting out an IRA's property) Use personal finances to pay an IRA asset's expenses Handle money related to any IRA asset Make improvements to an IRA asset (for example, cannot
personally work on an IRA's real estate property) Take a commission on the purchase/sale of the IRA's assets
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What’s Next?
Text the word CONSULTto
31996
For a FREE 30 minute Consultation from NCH
Thank You!
Entity Structure for Rentals
FinancialEngineering
Property Management
EvaluatingMarkets
Passive Income
Club
Rental Bootcamp Outline
AnalyzingDeals
1 HousePortfolio
BecomingA Bankable
Investor
RenovatingRentals
BuildingYourPlan
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1. Understand The Importance of High Quality Property Management
2. Understand The Fortune Builders Philosophy
3. Learn The 4 Pillars of Property Management
Our Objective:
Property Management
Property Management
Blake Street
Cinderhill Cove
VS.
Importance of Property Management
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FortuneBuilders Philosophy
Entrepreneur
Manager
Technician Marketing, Deal Sourcing, Negotiating, Rehabbing, Tenanting, Managing
Rehab Yourself & Hiring ProfessionalProperty Managers
100% Turnkey
1. Property Manager2. Real Estate Attorney3. Rental Attorney4. Contractor5. Handyman6. Bookkeeper7. Real Estate Agent or Leasing Agent8. Great Software!
Team Members:
Building Your Team
Property Management
1. Resident Selection
2. Money In
3. Money Out
4. Consistency and Stability
4 Pillars of Property Management
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Property Management
Resident Selection
Marketing Systems For Residents:
- What is your marketing strategy to find quality residents?
- Internal Leasing Staff or Outside Rental Agents?
- What Percentage of Applicants do you Approve?
Property Management
Resident SelectionResident Application Screening Process & Requirements:
- Criminal Background Check
- Employment & Income Verification
- Rental History
- Credit Reports
Lease signing:
- Where does lease signing take place?(kitchen table/coffee shop isn’t professional)
Property Management
Resident SelectionExpectation Setting:
- What is expected of the Resident?
- What is expected of the Property Manager?
Communication Is KEY!
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Property Management
Money InDecide What Money Is Import To You?:
- Rent Increases Vs. Vacancy
Alignment of Interests:
- PM Fees - How do you make your money?- Average Resident Length of Stay?
Rent Collections:
- What % Collected by Each Day of Month?- What day is rent considered late?- Partial Pays vs. Eviction
Property Management
Money OutMaintenance & Repairs:
- Systems?- What % of Gross Rents are Allocated to Maintenance?- What is communicated to the Investor & Resident?
Vendors:
- Are They Licensed? Bonded? Insured?- Systems?- Are the Vendors also Inspectors?
Property Management
Money OutVacancy:
- Average Length of Tenant Stay?- Average Time to Re-Rent?- Average Turn Over Cost?
Evictions - Know The Law?:
- Eviction %?- What’s the Timeline?- Systems - What day is rent late? When do you file?
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Property Management
Consistency & StabilityLease Agreements:
- Do You Offer Multi Year leases?- 2 & 3 Year Leases Are Ideal!
Renewal System:
- When Do You Start Renewal Process?- Proactive or Reactive?
Communication:
- Consistent Communication w/ Investor & Resident?
The Quick & Dirty…The Phenomenon of the “2 Year PropertyManagement Company”
Get What You Pay For!
The 2 Minute Test
- Phone Interview- Track Record and Experience- How Many Properties? 500-700+
Alignment of Interests and Expectations
Property Management
Property Management
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Entity Structure for Rentals
FinancialEngineering
Property Management
EvaluatingMarkets
Passive Income
Club
Rental Bootcamp Outline
AnalyzingDeals
1 HousePortfolio
BecomingA Bankable
Investor
RenovatingRentals
BuildingYourPlan
LIVE WALK-THROUGH!
Renovating Rentals
Entity Structure for Rentals
FinancialEngineering
Property Management
EvaluatingMarkets
Passive Income
Club
Rental Bootcamp Outline
AnalyzingDeals
1 HousePortfolio
BecomingA Bankable
Investor
RenovatingRentals
BuildingYourPlan
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Building Your Plan
BEGIN YOUR PLAN BUILDING PROCESS BY ANSWERING FOLLOWING THE SLIDES
BELOW!
Building Your Plan
BEGIN YOUR PLAN BUILDING PROCESS BY ANSWERINGFOLLOWING THE SLIDES
BELOW!
List in order of importance for you (#1 - #7)…
___ Stability of Rental Income.
___ Consistent Growth of the Value of my Investments.
___ Prepare for Retirement.
___ Aggressive Growth.
___ No headaches.
___ Highest ROI possible (from monthly cash flow).
___ Highest growth amount possible in the value of my Investments.
Building Your Plan
Building Your Plan
1.) How much monthly Cash Flow ($) would you like for retirement?
- What will this cash flow allow you to do/gain?
2.) What is your time horizon to use this cash flow? (Ex. 5yrs)
3.) How would you describe your risk tolerance? (Check One) ___ High Risk & High Reward ___ Middle of the Road ___ Low Risk & Consistent
- Please tell us anything additional about your risk tolerance that will helpus serve you better:
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Building Your Plan
4.) What are your biggest fears about holding real estate?
5.) Do you want to invest in Rentals Actively or Passively?
6.) Is there any other information you would like us to know in order to build you a customized investment plan?
7.) Complete the following Asset Outline…
Building Your Plan
Rentals:Current # of Rental Properties Owned: __________________ Net Cash Flow per Month from Rentals: _________________
Retirement Accounts:Total Value Self Directed Ret. Accounts: _________________Total Value Ret. Accounts NOT Self Directed: _____________
Personal:Current W-2 Income Level: ______________Current 1099 Income Level: _____________Personal Cash/ Savings: _____________Non-Retirement Accounts Investments: _____________Credit Score: ___620 or below ___ 620-700 ____ 700+
What’s Next?
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PIC Consultation Request
Text “PIC” to 33222
MASTERY RESOURCES
www.RPBDownloads.comPassword = RPI
C3X CalculatorDeal Analyzer for RentalsProperty Management QuestionnaireBuy & Hold Market Evaluation ChartAnd Much Much More…
FB SUPPORT IS HERE!!
Teachers - Mentors - Coaches - Trainers
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Fortune BuildersRental Property Intensive
Fortune BuildersRental Property Intensive
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What would you like to talk about in your consultation with NCH?
Full Name
Cell Phone(Where we can text you for your appointment during the event)
Partner(s) / Spouse Name
Consultation RequestEmpowering Your Purpose Through
Financial Education
Full Name
Cell Phone(Where we can text you for your appointment during the event)
NCH Client: Yes / No
RENTALPROPERTYBOOTCAMP