Hey Folks,
New to the forum but have been immersing myself in the content of MMM and like minded sites for some time now.
My wife and I are both 30 years old and currently W2 employees. Being a teacher, she has a pension and 403b plan that she can contribute to which is great, but I work for a small business without any retirement plan options. We do have an HSA plan which I max out and do not plan on tapping into (planning on paying for medical expenses out of pocket to maximize the benefit of the HSA as an investment vehicle). I have also been maxing out my traditional IRA and then socking away any additional funds into a taxable brokerage account. As I have gotten deeper into these FI resources I have been becoming more and more obsessed with finding ways to save additional dollars pretax.
We purchased a multifamily home 5 years ago which we have just finished renovating. We have been renting out two units and living in the 3rd since owning it. At some point in the next year or so we plan on purchasing a single family home and building an accessory dwelling unit for a second income generating property. Once we move out of our current property and rent the 3rd unit, we should have a positive cashflow of $1800 per month after setting aside a retainer for vacancy/repairs. The plan has been to put this towards our new mortgage. The accessory dwelling unit will be built using a HELOC leveraging the equity we have in our current multifamily. The HELOC should be paid down in 5-7 years using the income from the ADU and then that income can be diverted to cover the remaining portion of the mortgage on the single family allowing us to live without housing expense.
From a tax perspective, I see a lot of inefficiencies in the above plan. One work around that I was considering is setting up a property management LLC with the concept of paying myself a management fee (equivalent to the proceeds from one or both rental properties). Then using this active income to establish a SEP for myself and invest as much as I am allowed on a pre-tax basis. I can then use my W2 income to pay for my housing expenses instead of investing in a brokerage. Since we are trying to save a significant portion of our income anyways, I am basically trying to maximize the amounts that are saved on a pre-tax basis.
Does anyone have any experience with this or a similar concept for optimizing my situation?
Thanks in advance for any insight you are able to share!
-Tim