How to Buy Real Estate with Pre-Tax Dollars


41 thoughts on “How to Buy Real Estate with Pre-Tax Dollars

  • Sorry but don't understand. (1) Even if Clayton Morris, the dude, a sole proprietor owner (assuming he is an idiot for not running his business under an LLC) of the business called Doggy Tails, pays $3,000- per month rent to Herbert the landlord, isn't the rent automatically tax deductible as business expense under IRS rules? (2) Of course, it would be wonderful to own a property with multiple store fronts, but aren't we assuming that we have the required down payment which may not be true?

  • Its a coincidence that I was just thinking about this topic in light of the new "tax cuts" and the elimination of SALT deductions. I kept looking for a wink, wink, nudge, nudge from you guys… So how about this, I buy rental real estate, how about if I buy a home with my properly structured LLC and rent it to myself? Now I can not only depreciate it but also continue to write off the interest and property taxes. Of course the rent I pay would be post tax dollars but hey, I get the writeoffs back and I would still take the personal deduction!

  • Great topic you guys but I would I think you’re at the point where you need to start doing visuals and actually show the numbers do some examples so that it really becomes tangible

  • Thank you guys for sharing this , I have a question on this one though
    When doggy tails pays the holdings company the rent with pre-tax dollars , as I know , the holding company will be taxed on that rent , because for the holdings company only the interest on a loan is an expense !!
    Therefor it's just the same as taking the loan with doggy tails LLC .
    Please correct me if I'm wrong
    Thanks.

  • Hey guys great show. So your not real buying it with pretax dollars, but your paying it off with pretax dollars? Which is basically the same at the end.

  • Love this idea, even though I don't have a business store front. However, could you use this same strategy against your own home? Sell your home to your LLC, then rent it to yourself?

  • This is what I want to do. Thank you so much for just giving the knowledge away and explaining it in such detail. I am changing the path my family is on to secure the future of it when the kids and nephew's are of age to learn to buy and hold for themselves and pass the knowledge down. Thank you again for your time and knowledge.

  • This was absolutely perfect, my wife owns a dog grooming business that is renting currently and I just proposed that we do this very strategy to start investing in real estate. It’s pretty ironic that you guys used Doggy Tails as the business. I’m looking forward to your next videos. Thank you!

  • I like the girl – aside from being pretty she also has very precise, exact, direct, understandable way of explaining what she wants to say. I like Clayton as well.

  • I'd like to know how exactly is LLC taxed. What is difference between taxing person vs. LLC. In my country LLC is taxed 2 times (1. company taxation 19% + 2. person taxation (dividend) 15%).

  • Could doggy tails buy and hold rental Realistate such as single family homes? Basically allowing the business to provide the down payments pre tax instead of paying yourself out of the business and then going and buying the Realistate in your own name or another LLC. I’m trying to skip the self employment tax on the money if possible.

  • Great video. I talked to my husband about this. We currently lease our store front for $7000/mon. I hate that we pay all of this money to the landlord.

  • Can you do the same thing with space in your home? I have a friend who is a personal trainer and one whole floor of her home (lower level with separate entrance, bathroom, parking, etc), is her studio. Free weights, machines, treadmills, you name it. Total of about 1,000 sq ft all on one level and she lives upstairs. I am sure the home is in her name but the business is a separate entity. Can she charge the business rent and then take the deductions and so on? Will this qualify for the 20% passive income deduction in the new tax laws? Thanks and keep up the great work.

  • I own a bicycle shop. Bought our building about 15 years ago. 2 commercial units in addition to ours plus 3 apartments upstairs.

  • Great Vid. Question. I am in Toronto Canada. I have a personal owned pre-con assignment ending this year and I have capital in my small business account. Do you suggest me to sell the assignment to my small business? In terms of the benefit of the taxation. Also, I will need to get the business loan for half of what I owe the builder. Will you have any insight or tips? Thanks appreciated.

  • So Doggie Tails is still writing off the rent expense, but now the holding company pays tax on those dollars (income). It (the rent) is not pretax money, it is non taxed money, regardless of who it is paid to, simply by reason that it is a business expense. In the end you are shuffling money around but do you come out ahead, other than using the rent to build equity in your own building? You are now paying income tax on money you previously used (and still do) to avoid tax.

  • Awesome advice, and a really great idea. Love how you're always watching out for us viewers to make sure we stay compliant, too. Thank you so much!

  • You can buy and rent houses or flip houses as well using pre-tax dollars through a Roth IRA. You can also earn a fee to manage that business.

  • I guess I’m just confused why doggy tails couldn’t purchase the property on its own and just write off the depreciation, taxes, and interest it’s paying. Also, wouldn’t the holding company still pay taxes on the rent income received in excess of all property tax, depreciation, and interest?

  • I really like that your wife is helping you in the business. Same goes for us. We’re a small family owned jewelry store and my wife is my back bone and supporter. It’s got its ups and downs of course, and I’m sure you’re aware of it, but having someone you trust to work with you is priceless 😊

  • NOTES:

    The idea here is that you would buy using money that isn’t already reduced by taxes. The key here is understanding what you can do because of the tax code. Remember that corporate entities are taxed at a different rate than individuals. When you are corporate, you put as much of your expenses into the business, making the income not taxable. For example, if you pay your cell phone bill with your personal account; you are using taxed money. Each of the dollars in your personal account cost you more money. If you use your business, you are using pre-tax money. In residential real estate terms, this means for example buying a duplex and living in one side. The renter pays the entire mortgage, meaning you have no tax dollars working for it. For real estate investment, this means, for example, buying a commercial property and having your business rent that location.

    My thoughts:

    Think of this sort of like a 401k. You put money in before it is taxed and when you take the money out, you’re taxed. This allows you to maximize the use of your money now for a greater effect and a more effective way to spend and use the money. The best practical consideration for you would be to buy a commercial property under an LLC (Let’s call it Bert’s Property Holdings, LLC, for the sake of argument) and then you move Levi Family Jewelers there, and Levi Family Jewelers pays Bert’s Property Holdings the rent. Pre-tax dollars pay the mortgage.

  • Please make an episode using the duplex house hacking idea ? I would’ve been able to actually follow for new investors

  • WOW, this really brings back an old memory. I used to work for a manufacturing company whose owner owned the business and the 2 buildings on the street that they were in. When no one got raises for several years due to the owner saying profits were down, the plant manager (having a degree in accounting) asked to see the books. He was denied repeatedly and eventually fired. The owner was overcharging rent on his manufacturing business to create a loss and pocketing the cash instead of showing a nice profit and giving employees raises/bonuses.

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