How to Win in Real Estate: Tips from the Pros to Lower Taxes and More
Looking to grow your real estate portfolio wisely, reduce taxes, and increase your financial control? Then you won’t want to miss these tips from husband and wife real estate team Bill Slaughter and Laurie Goettl Slaughter.
Meet Bill and Laurie
Bill and Laurie Slaughter started growing their real estate portfolio 40 years ago when Bill purchased their first rental property. Over time they expanded their portfolio to as many as 49 rental houses and learned the ins and outs of real estate and property management. Today they run Clients First Realty, a team of nearly 150 seasoned real estate agents, most of whom have been in the business for over 18 years.
Bill is an active real estate broker who understands the market from the ground up. Before specializing in real estate Bill spent several years in banking and the auto industry. Never one to sit still, Bill was retired from the auto industry exactly 28 days when boredom kicked in and he dove head-first into real estate. He secured his real estate license in 2002, spent 3 years with HomeSmart, then got his broker’s license and launched Clients First Realty . Along the way he picked up several additional credentials and affiliations including Montclair Publishing’s prestigious Who’s Who in Real Estate Platinum Lifetime Member.
Laurie brings an equally impressive resume to the Clients First Realty team, including 30 years experience in bookkeeping, commercial and residential property management and lease accounting. A graduate of Hennepin Technical College in Minnesota with a degree in Management Accounting, Laurie obtained her real estate license 5 years ago and now serves as Vice President and Associate Broker at Clients First Realty. She handles all property management details for the family’s real estate portfolio along with her corporate responsibilities. Laurie also assists her own clientele in buying and selling real estate.
Tips from the Pros
With their team at Clients First Realty, Bill and Laurie have bought, sold, and managed over $1 billion in real estate, handled over 10,000 transactions and never had any negative claims. They proudly run a simple, clean operation and Bill still personally reviews every contract to ensure his clients receive the very best.
“Real estate is a patient investment gig,” says Bill. “People looking to make a quick buck and thousands of dollars in the first 30, 60, or 90 days are in for some disappointment. There are too many variables outside of your control—the business climate, political changes, buyers versus sellers markets, and more.” Real estate is not a get rich quick strategy, and you need to “be in the middle of it” to understand what’s happening.
Bill recommends the same success strategy he and Laurie have used to grow their portfolio. Buy properties and “glean a little income” for a minimum of 5 years per property. Then you can typically sell each property for a profit. The properties pay for themselves via the rental income generated, and your portfolio continues to grow at the right pace, with low risk.
Save on Taxes
One of the inside real estate tips Bill and Laurie use is leveraging a self-directed solo 401K. Many real estate investors are familiar with self-directed IRAs which allow you to add real estate to a retirement portfolio, but few have heard of the enhanced options available through self-directed solo 401Ks.
Self-directed solo 401Ks offer higher contribution limits, greater flexibility, lower costs, and better creditor protection than self-directed IRAs. Bill and Laurie use and recommend Broad Financial in New York for their solo 401K services, and they also opened a C-corp to get everything properly established. “It’s not that hard,” says Bill, “Just a matter of knowing how to do it.”
Speak to your tax and legal advisors to determine what’s right for your specific situation, but benefits of self-directed solo 401Ks include:
1. Higher annual contribution limits. Solo 401K plans allow for both employee and company contributions. For 2017 you can contribute up to $54,000 and up to $60,000 if you’re 50 years or older. Compare that to a self-directed IRA, which caps out at $5,500 this year, $6,500 if you’re over 50.
2. Choose a pre-tax or after-tax (Roth) format. Traditional self-directed IRA contributions can only be made in pre-tax formats. Solo 401Ks offer much more flexibility and can be established as a pre-tax or post-tax vehicle.
3. Tax-free loan option. You can borrow up to $50,000 or 50% of your 401K account value, whichever is less. The loan can be for any purpose. IRAs do not allow loans of any kind.
4. Use nonrecourse leverage and pay no tax. According to the IRA Financial Group, which was founded by tax attorneys, “With a solo 401K plan you can make a real estate investment using nonrecourse funds without triggering the Unrelated Debt Financed Income Rules and the Unrelated Business Taxable Income (UBTI or UBIT) tax (IRC 514). However, the nonrecourse leverage exception found in IRC 514 is only applicable to 401K qualified retirement plans and does not apply to IRAs.” Translation? Using nonrecourse financing legally avoids taxes when used by a solo 401K.
5. No custodian needed. IRAs require custodians, especially for real estate, and the fees can rack up. A solo 401K is a trust account, and you are the trustee. You open your affiliated bank account at any participating bank, like Wells Fargo or Washington Federal, and you control the funds.
6. No need to spend on an LLC. A solo 401K plan can make real estate purchases and other investments without the need of an LLC. The trustee (owner) of the solo 401K trust can take title to a real estate asset without an LLC. LLC fees can get expensive, so this saves both time and money.
7. Better creditor protection. The 2005 Bankruptcy Act protects all 401K plan assets from creditors during bankruptcy proceedings. Most states offer greater creditor protection for 401ks versus IRAs outside of bankruptcy as well.
Bill and Laurie leverage their solo 401K plans for these benefits, and they also say “it allows us to control [our retirement assets] in an area we know best.” They enjoy the tax benefits of borrowing money against their property portfolio through their 401K, and the tax-free earnings features offered by the Roth option.
Treat Business Relationships like Partnerships
Though their solo 401K is a good way to borrow up to $50,000, Bill and Laurie certainly know the benefits of finding the right partner for the majority of their real estate lending needs. For that, they have been working with Level 4 Funding for the past 2 years, and completed 4 real estate lending transactions with them so far.
Bill heard about Level 4 Funding through an online ad, and was “lucky enough to get connected with Matt.” Bill shares these thoughts:
“Matt is really a great asset—he’s quick, knowledgeable, efficient, and we’ve had nothing but good experiences with him and the Level 4 Funding team. They have made it real easy to go to closings—the money is there as expected with no problems. Professionalism is real important. I’m old-school and don’t change horses in mid-stream. So I don’t go anywhere else. Their servicing company Evergreen is easy to deal with and I can always find someone there to get questions answered.”
“It’s a good relationship and that’s what you look at in any business scenario. Business relationships should be treated like a partnership because we need them and they need us and it’s worked out really well. If you need something done, Level 4 Funding is the place to get it done.”
Bill and Laurie experience great success in real estate by practicing smart buy and hold strategies and looking for business and tax advantages like self-directed solo 401Ks. They are also adamant about finding and keeping the right business partners. “We really enjoy the relationships we have” says Bill, “including Level 4 Funding.” Connect with Bill and Laurie’s team at Clients First Realty for your next property purchase, and benefit from their experience and expertise.
Dennis Dahlberg Broker/RI/CEO/MLO
Level 4 Funding LLC Private Hard Money Lender
Arizona Tel: (623) 582-4444
Texas Tel: (512) 516-1177
Dennis@level4funding.com NMLS 1057378 | AZMB 0923961 | MLO 1057378
22601 N 19th Ave Suite 112 | Phoenix | AZ | 85027
111 Congress Ave |Austin | Texas | 78701
About the Author: Dennis has been working in the real estate industry in some capacity for the last 40 years. He purchased his first property when he was just 18 years old. He quickly learned about the amazing investment opportunities provided by trust deed investing and hard money loans. His desire to help others make money in real estate investing led him to specialize in alternative funding for real estate investors who may have trouble getting a traditional bank loan. Dennis is passionate about alternative funding sources and sharing his knowledge with others to help make their dreams come true. Dennis has been married to his wonderful wife for 42 years. They have 2 beautiful daughters 5 amazing grandchildren. Dennis has been an Arizona resident for the past 40 years.