Posted by John/Indiana on March 13, 2001 at 02:30:00:
I truly needed to hear this,you’ve helped reinforce,refresh me.Once again,I can’ thank you enough.John.
In A Quandry… - Posted by John/Indiana
Posted by John/Indiana on March 11, 2001 at 02:36:57:
This is both a blessing and a curse.As those of you following my whiney posts have seen,I’ve been dabbling a bit,researching,etc…I have a problem :
I’m 50(young at heart)kids raised,and retired.As I have found out recently,I have so much time to do this it scares me.I have a Railroad Retirement Disability Annuity .I can make up to $400 extra per month without losing any of my pension.Pension is a disability annuity,as long as I live,lol.How in the world can I LEGALLY do deals & pay the appropriate taxes and make some cash for myself,without losing anything I make over $400 per month?
I’m stuck,I think I’m over my head,I find ways to make Lonnie deals everywhere I go,I have 3 people with down payments in hand.HOW do I get around the $400 limit yet still pay taxes,stay out of trouble with the Gov’t? I’m not trying to cheat the Gov’t,I have no problem with the tax issue,but i feel “why bother making more than $400 a month when it’s just gonna be for nothing”?
Is this where an LLC,or equivalent comes in? I’m married, (I can hear it now),my wife spends every darn bit I’ve ever made,and although she has no major qualms about CRE,I’d finally,after all these years,like something for myself…short of Divorce & getting mean,any advice here? I realize this sounds as if I’m trying to gain control over my life,and thats an understatement…No offense meant to anyone of any gender,creed,color,religion,marital status etc…I do much volunteer work for poor & needy,but I’m needing to do something for me…not Greedy,just want a life…Darn,I have people waiting on me to get them homes,they have down payments…I’m just AFRAID to make more than $400 per month,that limits me to about 2 deals…not fair.My own fault,and I’m not playing on your sympathies.I’m just stymied…am I looking for a loophole?
Thanks,John.
Not a CPA, just my .02… - Posted by Blane (MI)
Posted by Blane (MI) on March 11, 2001 at 18:30:55:
John,
As Chrys said many of us have gone or are going through similar significant life changes who are also doing these deals now. I’m 40, and it finally dawned on me one day, I HATE BEING AN EMPLOYEE!!! So here I am.
Another thing with a corporation is that, generally speaking, your corporation can “lend” you money. You literally borrow money from your corporation, i.e. yourself. So you can get to the profits without actually declaring a salary at that point in time. Then sometime down the road you pay off that loan to the corporation by declaring a salary. Just an example, your mileage may vary.
You definitely need to learn the ins and outs of your pension rules. There are legal ways around them. Discover them and you’ll be on your way. Then a year or two from now you’ll be posting here about how fun the business is just like the rest of us. Good luck.
Blane
Re: In A Quandry…not a problem - Posted by Joe C.
Posted by Joe C. on March 11, 2001 at 14:36:57:
Any kind of corporation you set up will protect you. It can earn all the money it wants and you won’t be penalized. It can buy and sell property, use cars and trucks to do business and write them off. It can send you on vacation/seminar trips and pay all your expenses. It can pay for a phone in your house, you new computer and desk. It can pay your wife, children, grandchildren etc. a salary and not affect your pension. It is a separate entity and until you draw a salary from it you have no income. Check with a lawyer and good tax man. You have all the same options as anyone else, you just have to be “creative” in how you structure your business. That’s what this page is really about…creative ways to do something.
Joe C.
No Quandry… - Posted by Tony-VA
Posted by Tony-VA on March 11, 2001 at 13:42:05:
John you have received some very good, blunt reality responses. I agree with them that we all can find a reason to limit ourselves, a shelf on which to place our fears and use them as the reason to hold ourselves back. No attempts means no failures in that mind set. What we forget is that it means no victories either.
If your $400 per month income increase is your only reason for holdling back. I think you are in the driver’s seat. Right now make certain that this is the only thing holding you back. Write it down as your only restraint. You need find only one key to that handcuff and your off to chase your dreams right? Make it so. Don’t allow yourself to create additional handcuffs after this.
Now to attack the $400 per months additional income ceiling. Well if you form a “C” corporation that does these mobile home deals in its name and creates income, expenses and obtains assets in it’s name (and Federal ID number), you will not have any of the income coming in to you or under your social security number. You can then become an employee of your own company and make certain that you don’t make over $400 per month. Sure your company will eventually make well over $400 per month net, but you are separate from you company. It is quite common for new start up companies initialy to not pay the owners as the owners/employee are working for the first couple of years to get the company off the ground without draining off needed capital.
The beauty of this is that you can allow your business to grow and create larger cashflows while you personally do not receive more than you $400 per month from this new company. Eventaully when your business is making a very large income, the IRS may want you to take a larger income so they can receive larger payroll taxes. Okay but when that occurs, you will have your own company that can afford to pay you a heck of a lot larger income than your pension ever did. Your company can even create a second pension for you as well as pay for health benefits, life insurance, a vehicle etc. You can create your own company with no restrictions on your income, all the while making no more than $400 per month personally until the time is right to cash in on your position as president of that company.
Take a look at some of the articles here by Attorney William Bronchick. I also suggest you contact a CPA and attorney of your own to have my suggestions analyzed and your business entity and strategy created by them.
Just remember, you and your corporation are separate entities. What one makes, does not necessarily affect the others income or taxes.
A little education and time spent with your local advisors will go along way to breaking you away from the pension that has become your albi for succeeding.
Best Wishes For Your Success,
Tony-VA
Dear John - Posted by Chrys
Posted by Chrys on March 11, 2001 at 10:51:53:
I am 42 and in the past year reached a similar place as you are talking about. I empathize totally. It is time to start doing things for John. Sometimes, when we make drastic changes in our lives because we realize we are unhappy, it requires leaving or letting go of some things that we love or think we have to have.
My mother was raised during the depression. If she saw an ad in the paper that said “I’ll give you a dollar for every nickel you bring me”…she’d frown at it and toss the ad in the trash rather than testing it or parting with that nickel. I didn’t realize but some of her mentality/thinking toward money rubbed off on me over the years. There were also other factors in my family relationships that caused mental/emotional struggles so after much soul-searching, crying, anger, frustration, etc. I decided to “walk away” from my mom who was holding me back…that’s the conclusion I finally came to…she was holding me back, everytime I’m around her her fears rub off on me. Fears about everything…she’s miserable but too afraid to change. Now I still love her and talk to her on occasion and will be here for her if she ever needs me but…I’ve moved 4 hours away from her and on with my life and I’ve convinced myself that I don’t NEED her anymore. It was tough but I can’t begin to describe the difference that step has made for me! I’m a totally new person. I love it!
I am not married, never have been, don’t wanna be. I’ve always been self-employed but struggling. I’ve “played a little” in Real Estate before but my mom’s gloom and doom thinking made me give it up. Now I want to get back in and have spent the last 3 days finding deals. I’m expecting a check soon for $3,000 I plan to invest into buying rehab MH’s. I’m so excited!
I guess my point is I understand where you are coming from and I wish you all the best! Email me anytime. I’d also be interested in your methods for finding buyers with down payments in hand. Sounds like you would do very well at this business.
Now, I have no expertise at taxes and all that…but a possibility occurred to me. (Though I think Lonnie is right, forget the pension you can make far more in this business.) Okay, my idea is why not find a partner. If you have the money to get started surely you can find someone willing to venture with you, maybe they could do more of the manual labor. Maybe they have bad credit and you could help them out by partnering deals and for their percentage of the profit they could bring themselves out of debt and restore their credit. You keep just enough to stay under the $400/mo thing, BUT…the rest of the profit that goes to your partner would really be partly yours. He’d make the bigger income, pay the taxes, then let’s say if you wanted a new truck he’d buy you a new truck as a gift. If you want a vacation cabin, he owns it (on paper), you use it. Now, you’d have to keep good records to be sure the money was split like you wanted and you got all the perks from your portion of the profits…and you’d have to choose a partner very carefully…but I think it could be done. Now, I’ll leave it up to the tax-wise people on this board to say whether or not this would have legal ups or downs. I just know I’ve heard it suggested at RE Seminars I’ve attended.
Anyway, good luck John. Drop me a line anytime. If you ever get to TX look me up.
Chrys
Re: In A Quandry… - Posted by Lonnie
Posted by Lonnie on March 11, 2001 at 09:40:38:
Hi John,
I have a simply question for you. Do you want to be shackled to your pension for life, and stay where you are, or do you want to become financially secure and independent and enjoy a better life? If your pension is the answer, no need to read any further. But if you’re really serious, motivated and willing to change your attitude and thinking, I’ll try to offer some suggestions. But a word of warning?you probably won’t like what I’m about to say, so feel free to delete this post at any time it makes you too uncomfortable.
First, let’s analyze your “problem”. You’re 50 years old, with too much time on your hands, the chance to do deals and make unlimited cash flow, and certainly more than what your pension pays. You have people with cash in hand to buy homes, and you’re sitting there just watching it all pass you by. So what’s your real problem? It’s simple John, you’ve become a slave to your pension. That pension has created a guaranteed comfort zone, and you’re not willing to make the necessary effort and commitment to break out of it. So you have a choice?take control of your life, or be a slave to your pension.
I have no idea how much your pension is, but let’s play with some numbers to see if I can get my point across. Let’s suppose your pension is $1,000 per month. And lets suppose you now have the knowledge to earn $2,000, or more per month doing MH deals, RE deals, note deals or whatever. You’re limited only by your own restrictions and motivation (or lack of). So you decide to use some of that idle time you’re now wasting, and start doing deals. Let’s see what a few MH deals could do for your financial position.
Suppose you bought and sold one MH this month, and created a note paying you $200 per month for 3 years. Next month you do the same thing. The next month you do the same. And you keep doing the same thing for as long as you want to generate cash flow. If you simply stopped at the end of 12 months, your monthly cash flow would be over twice what your pension is. And you would still have the knowledge to do the same thing for the rest of your life, instead of being chained to a pension. So stop worrying about what you’ll be losing, and think of what you’re missing. From what I can see, that pension is your real problem.
John, you’re at the age where you should be doing your most productive work and realizing your greatest rewards. Instead, you’re letting your mind tell you not to make more than $400 per month. Stop worrying about taxes and pension loss and start making money.
Your post reminded me of the time I tried to get a good friend to take some money out of their stocks, which were earning 6% at the time, and buy a well secured note that would pay them 16%. But since they would have to pay a penalty for taking it out of that 6% stock, they wouldn’t do it. They still have the same mentality to this day, and still haven’t known the meaning, or feeling, of financial security. And they never will.
I remember another time when I tried to hire a man to do some work for me. He refused because he might lose his welfare check if he was caught earning any money. So I guess your life style is dictated by whatever your comfort zone is.
John, I don’t know any “loopholes” to keep from paying taxes, so can’t offer any help there. But I can tell you how to stay in a zero tax bracket?just stay in a zero income bracket. I think it’s decision making time, John. Do you remain a slave to your pension check, or put your knowledge and effort into becoming financially secure? Your call. And whatever it is, I wish you the best.
Lonnie
Re: In A Quandry… - Posted by BillW.
Posted by BillW. on March 11, 2001 at 09:25:43:
John,
Why don’t you check carefully the terms of your pension annuity to see if income they refer to means active income or passive income or both. If it’s active income, then what they’re saying is that you can’t “work” in another job and make more than the $400 without losing part of the annuity payments. BUT if there’s no restriction on passive income, just set yourself up to make this income as passive income. Do they deduct from your check if your bank should happen to pay you more than $400 a month in interest? Check this real carefully. You may well find that you can make all the passive income you want. As a second thought, you could drive the money you make through the roof and not worry about the annuity. I can’t begin to tell you how many people I’ve met that say they “better not make any money” because it will affect their social security payment. They will scrape along on $200-$300 a week rather than make any real money.
BillW.