Purchasing a 2 flat in Chicago, but challenges with investor's SD IRA
Hi Everyone,
Apologies if this is the wrong forum, this is my first post. I am looking for some advice/help on financing a 2 Unit building in Chicago. The general outline of the issue is this:
My business partner on a previous real estate deal and I are working to purchase a 2 flat in Chicago. It is in excellent shape and was very recently updated with new kitchens, bathrooms, etc.Purchase price is 600K and current rents are 4400/month.I've already created an LLC that will be used to own this property. Closing is coming up fast, but I will likely ask to push it out due to working through the financing.
I was planning on putting down 25% of the price through money that I have in cash accounts and through money from his Self Directed IRA (150K down, plus closing costs). Because it is a self directed IRA, he is limited in how he can invest and he cannot be a full partner on this deal. Instead he (or rather his Self Directed IRA) would be an investor. This has created a challenge, because:
1.He cannot be on the note for the building as a rule for the self directed IRA (may be an exception if the note is non-recourse, but I can ask his plan administrator for the specifics around this).
2.Conventional mortgages require evidence of the down payment for the person on the note and I don’t currently have that much in my account (although I could show enough submitted invoices to have that much in my account and might be able to get the full amount in time).
Given this, I am thinking that we only have a couple of options:
1.A non-conventional loan. The banker we’ve worked with in the past does these loans, but they are currently only loaning for redevelopment loans and not portfolio loaning 2 flats. So if I went in this direction I would have to find a different bank/lender.
2.A conventional loan where I submit the entire amount of the downpayment using my invoices (that would be here by closing) and then sell part of the LLC to my friend's SD IRA as an investment.
Does anyone have any thoughts on this? Anyone know a local bank in Chicago that would be willing to work on a non-conventional loan for this purchase?
thanks in advance.
Alan