BiggerPockets

Self Directed IRA's

Thursday, October 15

SDIRA's are going to be the wave of the future from a lending perspective.  At least that is, until the banks step in and have the government change the laws to their benefit again.  Those that can take advantage of SDIRA's and the lending power they represent will be well positioned to capitalize on just about every real estate opportunity that may come up so it is in just about every investor's interest to learn the ropes and set up a network.   

There are a few limitations however.  You can not use the IRA of anyone that is linearly related to you.  That means no grandparents, parents, children, or grandchildren may let their IRA participate in a transaction that you will benefit from.  You can also not use your IRA to fund a property that you later sell to yourself or vice versa, which is known as self dealing.  The same holds true for living in a property your IRA (or that of a prohibited individual, see above) owns as well.  There are several other limitations and as always get good financial advice from a qualified CPA.  

Beyond the limitations, you can get fairly creative with how you borrow money from an IRA to fund your real estate.  It is the perfect strategy for beginners because if you go to someone you know, while being smart about your purchase, you can generally get much more favorable terms.  What's even better is that when you are successful, you will attract  more capital from others.  

 This subject has been discussed plenty in threads and written about both here and in articles but to me it is so important it is worth repeating because there are literally trillions of untapped dollars you could be using.  The question is, what are you waiting for?

The benefits of non conventional financing

Tuesday, October 13

This is a subject I find particularly interesting because it can both help a beginning investor who would otherwise not qualify for conventional financing  and serve a niche as well.  Before going any further, I should clarify that this post deals primarily with private money.  It has also become a goal of mine to purchase all future investment properties using non conventional financing.  First I would like to discuss what I see as the cons to conventional financing in the current market.

• Limits: You are currently capped at a maximum of ten conforming loans per person.  In addition, it gets more difficult the more homes you have.
• Skin in the game: Banks for the most part are lending on purchase price rather than FMV (fair market value). This means that even if you find a great deal, well below market, you still need to come up with some money to get a loan.  
• HVCC guidelines: These are the new(er) appraisal guidelines that all banks must use.  In short, given the state of housing in many markets, it can be difficult to even get a great deal to appraise which makes getting a loan all the more difficult.  
• Credit/Cash position:  These are obvious barriers that can and do discourage people from investing.  I am not advocating buying real estate though without having the proper reserves in place to carry both PITI payments and maintenance.  I am also of the opinion that you shouldn't be buying real estate if you can't manage your own finances but I know full well that people get into tight positions outside their control that affects their credit.