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Property Condition one of the six critical factors in Real Estate investing

Financial Planning Dentist

When investing in real estate, the property’s condition and age are important factors to consider. The condition of a property can impact its value, cash flow potential, and the amount of maintenance required. Here are some elements to look for and how much due diligence investors should expect to do.

  1. Structural Condition: The structural condition of a property is one of the most critical elements to consider. This includes the foundation, walls, roof, and other essential components. A property with a sound structure is more likely to appreciate in value and require less maintenance over time.
  2. Mechanical Systems: Mechanical systems such as plumbing, electrical, and HVAC are important to consider when evaluating a property’s condition. These systems can be expensive to repair or replace, so it’s essential to ensure they are in good working condition.
  3. Age of Property: The age of a property can impact its condition and potential value. Older properties may require more maintenance and repairs, but they may also have more character and be located in established neighborhoods.
  4. Upgrades and Renovations: Properties with recent upgrades and renovations can offer a higher potential return on investment. This includes updates to the kitchen, bathrooms, flooring, and other areas of the property.
  5. Location: The property’s location can impact its condition and potential value. Properties in areas with high demand and limited inventory may be in better condition than those in less desirable locations.

Due diligence is an important part of investing in real estate. Investors should expect to conduct a thorough inspection of the property, review any available documentation, and seek professional advice from experts such as real estate agents, home inspectors, and contractors. It’s essential to assess the property’s condition and age to ensure that it meets the investor’s criteria and investment goals.

In conclusion, the condition and age of a property are important factors to consider before investing in real estate. Investors should conduct due diligence to evaluate the property’s structural condition, mechanical systems, age, upgrades, and location. By doing so, investors can make informed decisions about the potential value and cash flow potential of the property. Investing in a property with good condition and age can be a smart strategy to minimize maintenance costs and maximize the return on investment.

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Kevin Taylor

Ways to Identify Financial Abuse in order to Protect Yourself and Family

For many, financial abuse comes long before other forms of domestic violence. It is a sly and gentle form of control that can exist from the very outset of a relationship, over develop as a form of manipulation over time. Helping a person “budget”, managing all the b ills, making all of the investments, are initial forms of control that  might seem innocuous, but can develop the dependency required for financial victimhood. (“How Money Traps Victims of Domestic Violence”) Financial Abuse is really the most damaging form of domestic abuse, but it might be the most enabling for other forms of violence. It usually takes a back seat to physical, verbal, and emotional abuses when being discussed by therapists and counselors. But it is as much a tool of abuse and oppression in a bad relationship as any. The use of financial controls often keeps people in relationships where they are further subject to other forms of abuse. What’s more, financial abuse is often the first sign of dating violence and domestic abuse. Consequently, knowing how to identify financial abuse is critical to your safety and security. Additionally, knowing about the resources available and the professionals who can support your efforts is an early defensive measure available to victims. “Money is among the most powerful weapons of control in a relationship, but little attention is being paid to the financial aspects of domestic abuse.” (Smith) First, let’s Define Financial Abuse In 98% of abusive relationships, the number one reason the victim sites that they stay in the relationship is financial. Yet 78% of rank and file Americans don’t note financial abuse as a form of domestic violence. (“Financial Abuse – PCADV”) At its root, financial abuse involves controlling a victim’s ability to acquire, access, use, and maintain financial resources on their terms. (“How to Identify Financial Abuse in a Relationship”) Those who are victimized financially may be prevented from working outright, forced to take lesser paying jobs that keep them home more, and in many cases aren’t allowed to have their own, “independent” money and accounts. These are all forms of Finacial Abuse. This collection of measures often results in limiting the individual’s ability to generate income in the present and likely in the future. As a result, it limits the inflow portion of the equation in financial abuse. The second layer in financial abuse is limiting any current access to money. A victim may also have their own money restricted or stolen by the abuser. Rarely do victims report having complete access to money and other financial resources (“NNEDV”). When they do have money, they often have to account for their spending. This manifests in a few ways including allowances, reviewing transaction histories on debit and credit cards, and the ever-looming presence of monitoring and controlling the outflow of money. Some of this behavior runs along the lines of proper financial stewardship, which can be the source of the gaslighting. But ultimately, if the power balance in this reviewing of the financial records is not done for planning purposes but rather for control, then the “good” of planning is replaced by the “bad” of financial control and abuse. The results of Financial Abuse Financial Abuse often comes long before other forms of abuse. An early and less identifiable tool of control, financial abuse often prevents victims from seeking help with other forms of abuse later on. Admittedly, financial abuse is less commonly understood and harder to identify than other forms of abuse. Financial abuse is one of the most powerful methods of keeping a victim trapped in an abusive relationship causing further restrictions and harm.  Research shows that victims often become concerned with their ability to provide for themselves financially (“NNEDV”). The presence of children only furthers that concern. Financial insecurity then becomes one of the top reasons victims fail to leave, and/or return to their abusive partners. The continued effects of financial abuse are often devastating. Victims feel inadequate and unsure of themselves due to the emotional abuse that accompanies financial abuse.  Victims often report that their “worth” in the relationship became tied to their financial worth, which was often beyond their control. This forges a vicious cycle of negative self-worth and reinforcement by the inability to provide for themselves. Victims also have to go without food and other necessities because they have no money and limited access to financial support. Financial abuse often delays or makes escape plans impossible, which opens the door to further and more severe forms of domestic abuse. Financial abuse exposes victims to additional forms of abuse and further violence. Without access to money, credit cards, and other financial assets, it’s extremely difficult to do any type of safety planning and escape planning. (OHCHR) For many, the immediate safety plan requires distancing themselves with a discrete location where they can rebuild their lives. When an abuser is particularly violent and the victim needs to leave to stay safe, this is difficult without money or a credit card. This is all according to plan for the abuser. (“How Money Traps Victims of Domestic Violence”) For those who do escape in the short term, financial abuse creates a knock-on effect in the long term. The lack of credit history, permanent place to live, and capacity to earn have been diminished for years. This means the subsequent legal battle becomes harder and tentpoles for developing a financial plan may be non-existent. Upon escape, they often find themselves in a new extreme and find it difficult to obtain long-term housing, safety, and security. Victims often have spotty employment records, ruined credit histories, and mounting legal issues caused by years of financial abuse. Consequently, it’s very difficult for them to establish independence and confidence in their long-term security.  Many victims stay with or return to their abusers due to concerns about financial stability. Tactics Used Isolation is a core tactic of all abusers. So, financial abuse is the goal of isolating victims from money, resources, and people

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March 10, 2022 No Comments
Articles
Kevin Taylor

The Bifercated Landscape of the “Technology” Group: Exciting Investment Trends to Follow

In the realm of technology investments, we can observe a distinct bifurcation between two categories: stable cash-flowing investments and risky, cash-burning companies. This differentiation arises from the varying nature of these investments and their roles in the technology landscape. On the one hand, we have large, stable cash-flowing investments in technology. These are typically established companies that provide essential products, services, or infrastructure to support the operations of enterprises across various industries. These companies have a proven track record, generate consistent revenue streams, and often have a strong market presence. Examples of such investments include established software companies, cloud service providers, telecommunications companies, and hardware manufacturers. These investments are sought after for their stability, predictable cash flows, and potential for long-term growth. They are considered less risky and are often favored by conservative investors looking for reliable returns. On the other hand, we have risky, cash-burning companies that are the future of innovation and ideas. These are typically early-stage startups or emerging companies that are pushing the boundaries of technology and driving disruptive innovations. These companies are characterized by high research and development costs, aggressive market expansion strategies, and a focus on growth rather than profitability in the short term. Examples include companies in emerging fields like artificial intelligence, biotechnology, renewable energy, and e-commerce disruptors. While these companies may not generate substantial cash flows initially, they have the potential to revolutionize industries, capture significant market share, and provide exponential returns to investors who are willing to take on higher risk. The distinction between these two categories of technology investments reflects the different investment strategies and risk appetites of investors. Stable cash-flowing investments provide a sense of security and are suitable for risk-averse investors seeking steady income and capital preservation. On the other hand, risky, cash-burning companies offer the allure of high growth and substantial returns, attracting more adventurous investors who are comfortable with the uncertainty and volatility associated with early-stage ventures. Both categories play an essential role in the technology investment landscape. Stable cash-flowing investments provide the backbone of the industry, supporting day-to-day operations and ensuring the smooth functioning of enterprises. They offer stability and reliability to investors. On the other hand, risky, cash-burning companies are the engines of innovation and drive technological progress. While the risks are higher, the potential rewards can be significant for those who identify and support the next big breakthrough. The technology investment landscape has been bifurcated into stable cash-flowing investments and risky, cash-burning companies. Each category serves a distinct purpose, with stable investments providing reliability and predictable returns, while risky investments fuel innovation and offer the potential for exponential growth. Successful investors navigate this bifurcation by diversifying their portfolios and balancing the need for stability with the appetite for risk. We are seeing a transformation in the way technology companies behave. In the past, rising interest rates were bad (and still are for debt-laden companies) but now that Technology has become a cornerstone to all enterprises, the solution for labor shortages, and addressing inflation the upper half of the group is no longer the interest rate exposure it once was. The world of technology is constantly evolving, and each passing year brings new advancements and innovations that shape our lives in unimaginable ways. As we enter a new era of possibilities, it’s time to explore the exciting trends that will shape the future of technology. From artificial intelligence to quantum computing, let’s dive into the realm of the unknown and uncover the potential that lies ahead. Artificial Intelligence (AI) Revolution: Artificial Intelligence has already made significant strides in various industries, but its potential is yet to be fully realized. In the future, AI will continue to transform the way we live, work, and interact with technology. From self-driving cars and personalized healthcare to virtual assistants and intelligent robots, AI will become an integral part of our daily lives, enhancing efficiency, decision-making, and convenience. Internet of Things (IoT) Connectivity: The Internet of Things has already connected billions of devices worldwide, but its expansion is far from over. In the future, IoT will create a seamless network of interconnected devices, enabling smart homes, smart cities, and even smart industries. From smart appliances and wearables to intelligent transportation systems and environmental monitoring, IoT will enhance efficiency, reduce waste, and improve the quality of life for people around the globe. Augmented Reality (AR) and Virtual Reality (VR): Augmented Reality and Virtual Reality technologies have gained significant traction in recent years, offering immersive experiences across various fields. In the future, AR and VR will blur the lines between the physical and digital worlds, transforming industries such as entertainment, education, and healthcare. Imagine attending virtual meetings, exploring distant locations, or even undergoing virtual medical procedures from the comfort of your own home. AR and VR will revolutionize how we perceive and interact with our environment. Blockchain and Decentralization: Blockchain technology, popularized by cryptocurrencies like Bitcoin, has the potential to disrupt traditional systems and bring about a new era of transparency, security, and decentralization. In the future, blockchain will revolutionize industries such as finance, supply chain management, voting systems, and intellectual property rights. It will enable secure and transparent transactions, eliminate intermediaries, and empower individuals with control over their data and assets. The future of technology is incredibly promising, filled with endless possibilities and transformative innovations. Artificial intelligence, quantum computing, IoT connectivity, augmented and virtual reality, and blockchain are just a few of the trends that will shape our lives in the coming years. As we embrace these advancements, it’s important to keep an open mind and adapt to the changing landscape. The future is here, and it’s up to us to make the most of it, harnessing technology to build a brighter, more connected, and sustainable world. Let’s embark on this exciting journey together and witness the marvels that lie ahead.

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May 8, 2023 No Comments
Tax Free Rental Income 
Articles
Kevin Taylor

How To: Get Tax Free Rental Income 

Let’s paint a picture of what that world might look like if you could successfully put a rental property into a Roth account. With a Roth, growth in the value of the assets is tax free and the income that comes from your rental is tax free. You may have heard of people buying real estate in self-directed IRAs, and while the income and growth is tax deferred, when withdrawn, creates ordinary income. So, imagine if you could get all that growth tax free in a home in Colorado, while also receiving tax free income after the age of 59.5 every month. Seems like a win win to us and our clients love it.  There are four major benefits to this strategy. First, implementing this strategy can lower your effective tax rate by reducing the withdrawal rates from your tax deferred accounts. Since the first dollars you get in retirement can be from your Roth distributions, this will lower your effective tax rate on other incomes like capital gains on taxable assets, distributions from Traditional IRAs, tax deferred annuities, Pensions, 403(b)s, or 401(k). The second additional effect of this strategy is that Roth’s don’t require that you take a Required Minimum Distribution. So there is no need to liquidate the asset at any point during retirement unless you want to. It’s a near permanent way to get rental income throughout the duration of your retirement.  The third less used benefit, is that some income from the property can also be used to buy other income generating assets to help diversify the stream of income and supply you with less income risk in your non-working years.  The fourth benefit is when you pass the assets onto your heirs.  With the Tax Cuts and Jobs Act, inherited IRAs lost a key feature which previously enabled beneficiaries to prolong taking distributions from inherited IRAs over their own life expectancy or the life expectancy of the deceased, and requiring them to take it out over 10 years. This forces beneficiaries that may have an unfavorable tax situation into an even more unfavorable tax liability as they’re forced to take on ordinary income from these accounts. However, with Roth accounts, although there are Required Minimum Distributions for inheriting a Roth, the distributions are tax free which is a huge benefit to the beneficiaries. There are some exceptions to this rule but generally speaking, inheriting Roth Accounts for most people is better than inheriting IRAs.  We think this is a near permanent endowment of tax free income, with the ability to rise with inflation, through the entirety of your retirement. I have a perfect storm of desired qualities for most investors. There are however, a few challenges to accomplishing this task, and it depends on the amount of money available in your Roth currently. Because of income and contribution limits to Roth’s most people will not amass the required liquidity in their Roth to be able to make the down payment on a piece of real estate, fewer still will have the assets to be able to buy the property outright.  There are four techniques that we employ this strategy which you should become familiar with.  Backdoor Roth Contributions, or a Mega Backdoor Roth Self Directed Roth’s Asset Lending in Self Directed Roth’s Non traded REIT’s Backdoor Roth Contributions, or a Mega Backdoor Roth jumpstart Tax Free Rental Income  Getting the requisite assets into a Roth can be a bit of a trick. The income limits keep most affluent earners from being able to contribute at all. Even if your income makes you eligible for such a contribution, the annual limit of $6,000 for those younger than 50, means saving and investing for a lifetime into your Roth would scarcely get to an amount meaningful enough to make a down payment or to buy a meaningful property outright (depending on your local market). So getting the investment assets into the account becomes job one. A few ways to jump start this process is to convert assets from your IRA. Generally investors have far more money in Traditional IRA’s and 401k’s then they do in their Roth. Now a quick off ramp to the “tax free rental income” plan would be simply tax deferred rental income by using the assets in the qualified accounts. But for those who want the full boar strategy they need to get ambitious about getting money into you Roth.  We discuss details of the Backdoor Roth Contributions at length here, and the Mega Backdoor Roth here. Both of these methods can provide ample accelerant to getting money out of the qualified account and into the Roth account expeditiously.  There is also a simple conversion of assets for those who are willing to pay taxes currently, to avoid them in the long run. You should work with your CFP® professional or CPA to determine if this tax strategy is the right fit for you.  Self Directed Roth’s are key to Tax Free Rental Income  Most investors are familiar with IRA’s and Roth’s and many are familiar with Self directed accounts (SDIRA). You can see the definition here if you are not yet familiar with SDRIA’s and Roths. We use these specialty account types to properly custodian the assets and make sure they stay compliant for use as an essential part of the “tax free rental income” strategy. These account types delimit the investment types that can be held and make owning a single real estate property (as opposed to traded REIT’s) possible. They provide the right type of tax treatment for assets we like to use. There are however, several compliance and custodian issues that you should be aware of to prevent the asset from being declassified as either an IRA or Roth asset. Oversight of these rules and administration of the accounts is something best overseen by a CFP® professional who understands your situation and can help you stay compliant at all times.  Asset Borrowing in Self Directed Roth’s There are

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December 14, 2020 No Comments

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