Deals here and deals there!
Wholesale deal in Gardner, MA; 5BR, 2BA, 1084 sq ft, 2 car garage, 2nd lot
ARV – $114k, asking $44k, Rehab est. $30k, needs to close by 8/29/2014. Contact us today for details.
For you out of area investors:
Cascades – Pfl – 412 Cascades Ave, Unit #2, Pflugerville, TX 78660
2215 Creekside Gtown 4Plex, Georgetown , TX 78626
Choosing an IRA custodian is as important as choosing investments. Some custodians do not allow alternative investments to be acquired as assets using your IRA. Some self-directed IRA administrators that allow alternative investments (such as real estate investing) may restrict the types of investments they allow as holdings. Additionally, there are strict rules and regulations one must follow when purchasing assets. If you make the mistake of acquiring an asset your custodian does not allow, you and your IRA may suffer harsh penalties handed down by the IRS. The same is so if you perform a transaction that falls outside the boundaries set forth in the rules that govern retirement funds. Access the Advanta IRA ppt that Kevin Collins presented at our meeting in June – Retirement Revolution Presentation
If you want to control your own investment funds in your IRA, you must first make sure you open an account with an administrator that facilitates self-directed IRAs. These accounts allow a myriad of alternative investments in them, such as real estate, private lending opportunities, precious metals, oil and gas options…and much more. As the account owner, you have the freedom to choose your own investments to build wealth toward retirement. The custodian acts only at your direction to acquire assets in your account.
Even though laws governing IRAs allow real estate and other non-traditional investments in your account, not all custodians allow those assets. A recent example of this was illustrated by the tax court in a proceeding filed by Guy Dabney. Although Dabney familiarized himself with IRS allowances of assets in IRAs, he failed to comply with the rules of his IRA custodian, Charles Schwab & Co., Inc., who does not allow real estate in the IRAs they administrate. Even so, Dabney performed an action to acquire the real estate that he thought would constitute a permissible trustee-to-trustee transaction. He had Charles Schwab wire $114,000 directly from his IRA to the company selling the property and asked the property be titled “Guy M. Dabney Charles Schwab & Co., Inc. Cust. IRA Contributory.” The purchase was made, however, the property was accidentally titled in his name. Dabney was able to have that clerical error officially fixed, but Schwab still sent Dabney a 1099-R form, declaring he had taken an early distribution which was taxable to him as he was not yet of the age of 59 1/2. Dabney did not report the withdrawal on his income tax that year, stating the real estate purchase was made by the IRA and / or should be considered a trustee-to-trustee transfer because of the way the property was acquired.
In considering the case, the IRS made several determinations. First, Schwab does not permit real estate investment purchases or holdings in their accounts; second, the title company to which the $114,00 was transferred was not, in fact, an IRA trustee and therefore, no trustee-to-trustee transaction was performed. There were a few other reasons the tax court based their decision on, which can be read in full in an article published by Parker Tax Publishing, and the withdrawal was considered an early distribution—and taxable for Dabney under IRS regulations.
The main takeaway here is that even though self-directed IRAs give you control of your investment decisions—you are responsible for adhering to your IRA custodian’s own set of rules regarding investments they will allow your account to hold. Not all custodians are created equal! Due diligence in researching a custodian that is a good fit for your investment endeavors is critically important. Dabney could have avoided his unfortunate complications had he decided to roll funds from his Schwab IRA into a self-directed IRA administered by a custodian that allows real estate assets and made the purchase from that account. Be sure to select a firm that is accessible, willing to discuss your transaction, assist you in completing the required forms, and ensures you provide the proper documentation. Most importantly, a firm that give you and your retirement portfolio the personalized service you deserve.
With Boston AREIA’s vendor, Kevin Collins of AdvantaIRA, you will get the personalized service you are looking for when doing your real estate investing deals in and around the Boston area. If you would like to learn more about how self-directed IRAs can build wealth toward retirement, please contact Kevin Collins at AdvantaIRA Trust by calling 617-830-1070 or emailing Kevin@AdvantaIRATrust.com
We are having a blast mentoring Mike Fitzpatrick. He’s working with his partner Jacqui Pietrzak, look for their next blog post. They’ve been driving for dollars, working on their website, putting together their first direct mail marketing campaign and presenting potential deals to Peg and I. Super proud of them! I’m watching a power couple develop! WOHOO!
It’s the LAST day to get eligible for this month’s workshop at 5pm. I will be downloading real estate leads from a few lead sources and giving them to the folks who come to the session. I need to know now who is coming at 5pm. If you don’t qualify by midnight tonight, you won’t be able to join us at 5pm before the monthly meeting! Find out if you are eligible!
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Most of you have said that you are interested in saving money on your electric bill and going green. Some of you have switched to Viridian, many of you have not. All of you raise your hand when I ask if you recycle, most of you agree if you had the ability to make 10 times the carbon impact without it costing you, you would. I know time gets away from you and you forget. I get it. We have invited Reps to help you with the 3 minute process it takes to make the switch on Thursday night – BRING YOUR N-Star or National Grid bills with you. It costs you nothing, takes 3 minutes, can save you money over time and you choose green. All who take action will get a special opportunity during our “forced networking” segment.
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Thursday, March 20, 2014 – Is fear of making an offer holding you back?
***Special opportuniy to for MEMBERS of Boston AREIA, we are shaking up our forced networking section…those who get there early will be rewarded!
Monthly Meeting – The question I get most from investors is, “Ok…so, I find a property…how do I make sure all the bases are covering when making an offer and putting together a P&S?” Well this meeting will dispel the fears that are holding you back from making offers! For all details visit – http://bostonareia.com/
Become a member today – http://bostonareia.com/about-
Good morning Boston Flippers, I’ve been chatting with CPA, Joe Craft, here’s his advice:
One of the biggest hurdles real estate wholesalers, property flippers in Boston and around the country and really any small business owner will face in running your own business is staying on top of your numerous obligations to federal, state, and local tax agencies. Tax codes seem to be in a constant state of flux making the Internal Revenue Code barely understandable to most people. The old legal saying that “ignorance of the law is no excuse” is perhaps most often applied in tax settings and it is safe to assume that a tax auditor presenting an assessment of additional taxes, penalties, and interest will not look kindly on an “I didn’t know I was required to do that” claim. On the flip side, it is surprising how many small businesses actually overpay their taxes, neglecting to take deductions they’re legally entitled to that can help them lower their tax bill.
Preparing your taxes and strategizing as to how to keep more of your hard-earned dollars in your pocket becomes increasingly difficult with each passing year. Your best course of action to save time, frustration, money, and an auditor knocking on your door, is to have a professional accountant handle your taxes. To contact Joe Craft, CPA, who is an expert on real estate taxes for wholesalers, part-time flippers, buy and hold investors and more, email him at Joe@JoeCraftCPA.com, make sure you let him know that Bernadette from Boston AREIA sent you.
Tax professionals have years of experience with tax preparation, religiously attend tax seminars, read scores of journals, magazines, and monthly tax tips, among other things, to correctly interpret the changing tax code. When it comes to tax planning for small businesses, the complexity of tax law generates a lot of folklore and misinformation that also leads to costly mistakes. With that in mind, here is a look at some of the more common small business tax misperceptions.
Business start-up costs refer to expenses incurred before you actually begin operating your business. Business start-up costs include both start up and organizational costs and vary depending on the type of business. Examples of these types of costs include advertising, travel, surveys, and training. These start up and organizational costs are generally called capital expenditures. So, when you are learning to flip properties in Boston or wherever, chances are that expensive course that you just bought isn’t deductible. Sorry.
Costs for a particular asset (such as machinery or office equipment) are recovered through depreciation or Section 179 expensing. When you start a business, you can elect to deduct or amortize certain business start-up costs.
Business start-up and organizational costs are generally capital expenditures. However, you can elect to deduct up to $5,000 of business start-up and $5,000 of organizational costs paid or incurred after October 22, 2004. The $5,000 deduction is reduced (but not below zero) by the amount your total start-up or organizational costs exceed $50,000. Any remaining costs must be amortized.
The IRS doesn’t care if you pay the right amount of taxes or overpay your taxes. They do care if you pay less than you owe and you can’t substantiate your deductions. Even if you overpay in one area, the IRS will still hit you with interest and penalties if you underpay in another. It is never a good idea to knowingly or unknowingly overpay the IRS. The best way to “Audit Proof” yourself is to properly document your expenses and make sure you are getting good advice from your tax accountant.
Self-employed individuals (sole proprietors and S Corps) qualify for many of the same deductions that incorporated businesses do, and for many small businesses, being incorporated is an unnecessary expense and burden. Start-ups can spend thousands of dollars in legal and accounting fees to set up a corporation, only to discover soon thereafter that they need to change their name or move the company in a different direction. In addition, plenty of small business owners who incorporate don’t make money for the first few years and find themselves saddled with minimum corporate tax payments and no income. Make sure when you begin your real estate investing, whether it’s wholesaling or flipping properties, you seek out the advice of a tax professional who can guide you in the right direction. My recommendation is Joe Craft, CPA. Joe@JoeCraftCPA.com, and make sure you let him know Bernadette sent you.
While it used to be a red flag, this is no longer true–as long as you keep excellent records that satisfy IRS requirements. In fact, so many people now have home-based businesses that in 2013, the IRS rolled out the new simplified home office deduction, which makes it even easier to claim the home office deduction (as long as it can be substantiated).
Because of the proliferation of home offices, tax officials cannot possibly audit all tax returns containing the home office deduction. In other words, there is no need to fear an audit just because you take the home office deduction. A high deduction-to-income ratio however, may raise a red flag and lead to an audit. For real estate investors who flip properties part time, owning a separate home based business can actually allow you to take far more deductions than you can by just flipping properties. Home based businesses actually offer over 130 deductions that being a part time flipper does not. Joe Craft believe that everyone, including part time flippers should own a home based business. Click here to learn why and learn the deductions you can take that you can’t take as a wholesaler or flipper. If you are interested in using a home based business to take advantage of those deductions, Viridian Energy, that is a vendor for Boston AREIA is a good option.
You are still eligible to take deductions for business supplies, business-related phone bills, travel expenses, printing, wages paid to employees or contract workers, depreciation of equipment used for your business, and other expenses related to running a home-based business, whether or not you take the home office deduction.
Extensions enable you to extend your filing date only. Penalties and interest begin accruing from the date your taxes are due.
If you start up a company while you have a salaried position complete with a 401K plan, you can still set up a SEP-IRA for your business and take the deduction.
A tax headache is only one mistake away, be it a missed payment or filing deadline, an improperly claimed deduction, or incomplete records and understanding how the tax system works is beneficial to any business owner, whether you run a small to medium sized business or are a sole proprietor.
And, even if you delegate the tax preparation to someone else, you are still liable for the accuracy of your tax returns. If you have any questions, don’t hesitate to contact Joe Craft, CPA. He has numerous years of tax experience, particularly in the field of real estate and home based business ownership. He’s a rock star accountant and is there to help.
DIARY OF A NEWBIE REAL ESTATE INVESTOR
by Boston AREIA/JEM Property Group Mentee Mike Fitzpatrick
Hi Boston REIA!
I am honored to be selected for this mentorship program. I have been tracking the real estate market for the past 3 years and have been an investor for just over a year now. It was not Kiyosaki, but MA real estate investor. David Lindahl’s book, Muli-Family Millions that sparked my interest in real estate investing. Early on in Lindahl’s book he describes the value and importance of being part of your local real estate investment association. It only took me three years, but I finally took action based on Lindahl’s recommendation to join my local REIA about a month ago.
After a quick google search I found Boston REIA and read Bernadette’s blog post about the mentorship contest. I decided to apply because the questions made me define my own investment goals and who wouldn’t want the some help from expert mentors?!
In the past few years I have built relationships with real estate agents, mortgage and insurance agents, home inspectors, contractors, and lawyers, all of which I am thankful had the patience to deal with my line of questioning as I picked their minds to learn more about how the real estate market works and how to invest in it. What excites me most about this mentorship program is the opportunity to learn from Peg and Bernadette who are real estate investing pros, write for this blog, and meet other like-minded investors through the Boston REIA meetings.
Tom O’Brien founder of TFNN, has instilled the following motto in me: “Whatever you think about you bring about and whatever you focus on grows”
In the next year or less I will flip a house for a profit of $50k or more.
Since I started investing in real estate investments I bought a 3 family and a 4 family with a partner. I have A LOT to learn about flipping. Stay tuned to this blog to see what Peg and Bernadette are teaching me and how I am getting closer to my $50k flip goal.
Looking forward to meeting you at the next Boston REIA meeting,
Mike Fitzpatrick, Boston AREIA/JEM Property Group Mentee
Good thing there’s always another deal