EasyAnswers TIPS FROM AN ATTORNEY TO PROTECT YOURSELF — AND YOUR INVESTMENTS
When it comes to your real estate investing business, asking questions is part of the job. Often, the answers are simple but not necessarily definitive YES or NO. Think Realty Resident Expert, financial advisor, and attorney Clint Coons offers his advice to questions he hears from clients every day. Here are some questions that result in YES, NO and MAYBE.
Q: AS A REAL ESTATE INVESTOR DO I QUALIFY FOR ANY RELIEF UNDER THE CARES ACT?
A: Yes, you should consider applying for an Economic Injury Disaster Loan or look at the new IRA/QRP distribution rules that allow you to withdraw up to $100k for three years tax-free, or borrow up to $100k from your 401k.
A: No. To qualify for the Paycheck Protection Plan Loan you must have active income. Rental real estate produces passive income and does not qualify.
Q: IF I OWN RENTAL REAL ESTATE CAN I QUALIFY FOR THE PAYCHECK PROTECTION PLAN LOAN?
Q: DOES HOLDING RENTAL REAL ESTATE IN AN IRA CREATE ADDITIONAL TAXES?
A: Possibly. If the real estate is leveraged (i.e.,has a mortgage) then your IRA will be subject to Unrelated Debt Financed Income Tax. Holding leveraged investments is not a great idea for an IRA. You should consider using a solo 401k for these investments. A solo 401k is not subject to this tax.
Have a legal question that might affect your REI? Send questions to Think Realty’s editor at firstname.lastname@example.org.
30 | think realty magazine :: june 2020
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