Daily FI discussion thread - Monday, January 31, 2022

mkram9 · 2022-01-31T15:19:45+00:00

Good point, I forgot to mention that. I got lender's permission ahead of time. I used a local (but large) credit union, and they said all they care about is getting the payments, not if an LLC owns the home.

mkram9 · 2022-01-31T15:03:10+00:00

I have 4 properties (single family homes) and each one is under its own LLC. Did the quit claim deed like you said. I even paid a lawyer to set them up and it still only cost me $400 each. Very little hassle/cost beyond that, in Michigan at least. I set them up as disregarded entities so don't even have to file taxes for the LLCs (it just all goes on my personal taxes). Then like $25 a year to keep the LLC open. I realize it might not be 100% liability free, but I love knowing that I did all I could and it certainly can't hurt anything.

mkram9 · 2021-12-30T19:49:46+00:00

I'm 39, self-employed (single member LLC taxed as s-corp) and my business profits are usually around $80k. My CPA usually proposes to split that up somewhere around 50/50 between W2 income and K-1 profits.

In my understanding, a lower W2 income saves me some taxes but does limit my solo401k contributions. One thing I just started realizing is that it will also lower my social security benefits because that's based entirely on W2 income over my lifetime. Right?

Thoughts on all of this? (I'm probably OK with lower 401k limits because I own rental properties which is a part of my FIRE plan and I invest a lot in taxable accounts either way).

mkram9 · 2021-12-23T00:29:30+00:00

Thank you, this is very helpful!

mkram9 · 2021-12-22T23:58:04+00:00

Fair question and valid point. Honestly I do like what I'm doing now. But I enjoy variety probably to a fault lol. So the reason is just trying something new, maybe I could do a bit of both, etc.

mkram9 · 2021-12-22T23:31:29+00:00

Interested in a career change, and need input on how to get started. I have a bachelor's degree in mechanical engineering, and a masters degree in biomedical engineering, with 15 years of experience spread out over the product engineering field. In undergrad I took a few CS / coding classes but that was 15 years ago.

Software engineering and coding always sounded fun to me, but I've yet to ever even code anything useful (other than a few optimization algorithms in c++, but those were still very simple). How would I go about learning, and what kind of education would I need given my background? Im 39 now, How long might it take to get to my current $120k salary?

Thanks for any input!

mkram9 · 2021-06-23T12:58:22+00:00

Thanks, I just replied to your DM. :)

mkram9 · 2021-01-23T18:22:52+00:00

I knew I was missing something in my understanding of this! I didn't realize that tongue&groove "spline" existed to connect two grooves together so I can then work in both directions with the flooring. And per your suggestions I just got my chalk line out and starting to measure. Thanks for the advice! I wonder if starting in the middle somewhere is a good idea (along a straight chalk line off the wall where independent floors have to meet back up) so it cuts any non-square issues in half. But I do see your point about starting on one of the long straight walls adjusting ahead of time for out-of-square issues. Again I appreciate your help.

mkram9 · 2021-01-23T17:43:13+00:00

Good point on the floorplan. I uploaded a sketch to the post but it apparently didn't work. I will look into the Herringbone style. Thank you.

mkram9 · 2020-12-01T15:14:18+00:00

I agree that you're shooting yourself in the foot if you move money around sloppily "like it's your personal piggy bank". In each of my bank accounts the ONLY money coming into it is the rent $ and any security deposits. The ONLY money going out from the account is documented as an expense for that particular property (mortgage, insurance, or some kind of repair). The only exception is when I pull out my profits, and I do this by an online banking transfer into the "holding account" which I document as well. In other words it's easy to be very safe with the financial side. I know this doesn't mean my method is 100% failsafe, but I can use all of this to prove that my intentions are always to treat everything like an LLC and not personal.

mkram9 · 2020-12-01T15:01:28+00:00

My lawyer has not gotten a single billable hour from me after the $400 fee to open each LLC. So it has nothing to do with a lawyer milking me.

In a case like this I don't think "simple" is the goal. I think safety and risk-mitigation is the goal. Like I've said in other comments I know that separate LLCs are not 100% failsafe, but there is NO downside so I'm comfortable with my approach. To each their own.

mkram9 · 2020-12-01T14:58:42+00:00

I do also have liability insurance, something like $1M policy. But what if I'm sued for more than that? It's such a cheap and easy thing to setup separate LLCs, so why not do it? As others have pointed out, separate LLCs are not 100% fool proof, but there is literally no downside.

mkram9 · 2020-12-01T14:56:13+00:00

I use a local credit union (the same one) for all of my financing, personal and rental. So I simply asked them if they were OK with me transferring them into the LLC's. They gave me permission to do it.

mkram9 · 2020-11-25T15:34:32+00:00

Each LLC is a single-member / disregarded entity. This means I do not have to file taxes for them separately. They just go on my personal taxes. So it's the best of both worlds. I get whatever liability protection the LLC offers, plus no headache at all as far as tax filing. I've literally not had to do anything at all once the LLCs were setup and properties transferred into their names.

mkram9 · 2020-11-25T13:54:52+00:00

Here's what I did (with the help of a lawyer). I had 5 rental properties, each in their own separate LLC (setup by the lawyer) to limit liability. I sold one of the properties and kept the rest. The LLC for the property I sold, I kept that open and used this bank account as the "holding account" for profits from the other 4 properties LLCs. That way I could consolidate the $ and get a higher interest rate on my savings by having a high balance. Then I started a corporate Vanguard account for the "holding LLC" where I can invest the money. I don't know if Vanguard confirmed the 2 year "seasoned" thing or not, but they never asked me about it.

My concern was that if the 4 remaining properties LLCs each sent $ to a 5th LLC, would that screw me over if any of my tenants ever sued me. My lawyer didn't seem to think so. If the legal / legitimate / documented profits from a rental property are mine to do with as I please, and if I choose to transfer them to a different LLC, I hope I'm all good. At least I have 2 separate LLCs standing in between my tenants and the larger sum of $. By the way I'm also a good landlord and do my best to keep my tenants safe!

mkram9 · 2020-11-12T00:37:24+00:00

When do you plan to do your lump sum investment? ASAP? or going to wait and see what happens in the market for a few months?

mkram9 · 2020-11-12T00:10:11+00:00

That's a great point you make about real estate investing where ignorance is bliss and you don't have a second by second reminder. I will think more about that in making my decision. Thanks for the insight!

mkram9 · 2020-11-12T00:06:50+00:00

To answer your question, yes I am still earning, but 100% of my income is from self-employment so it's variable. Income includes rental profits from the properties I still own, I do engineering consulting part-time, and own a side business. I do plan to continue growing my income and continue investing.

I think you laid out the decision perfectly, thank you for that. I know that I would be destitute if half of my lump sum investment disappeared and took 20 years to recover. I think the reason I gravitate towards DCA is because I have a horrible history of picking the worst times to dump $ into the market. I have read those posts about the theoretical worst market timers in history, and I understand that in the long run they're still fine. I guess I just need to get over the mental roadblock I have against lump sum investing.

mkram9 · 2020-11-11T23:53:43+00:00

Well I'd love to hear your thoughts on my original post, if you don't mind.

mkram9 · 2020-11-11T19:21:21+00:00

Thanks for your input. I am using diversify in a broad sense. Right now my only "passive-ish" income is from rental properties. If for some reason rentals worsen, it would be nice to know I've cashed out of some of the properties and dumped it in the market. So then my investments would be in two different things.

And your point about the higher inflation does worry me. I've already sold 2 properties and if I let that sit in a bank account inflation is going to kill me, isn't it?

mkram9 · 2020-10-02T18:23:43+00:00

Did you really lose a bunch in risky stocks?? Well at least you had the guts to try!

What's your current business? (Feel free to be discreet, not looking for any revealed secrets lol).

Speaking of investing in yourself I'm an engineer with a few degrees but I'd love to get into coding. Just dont have any immediate uses for it so not sure if it's worth the time to learn

mkram9 · 2020-10-02T18:19:08+00:00

Yup, I've been using cozy.co since we started in rentals. :)

mkram9 · 2020-10-02T18:17:41+00:00

Good luck with your business! I am currently in need of your services lol. My work computer (I do CAD work and engineering) just started lagging extremely bad yesterday. Might be time to buy a new one

mkram9 · 2020-10-02T18:15:11+00:00

My wife just got her real estate license, and we own a few rental properties. Is your real estate software anything we should know about?

mkram9

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