All Forum Posts by: Ben A

Thanks Brandon Turner! That certainly clarifies things. I'm planning to use my LLC as a partner in the transaction but I don't think we can form an LLC together since the financing will be in his name. In any case, we'll be talking to a lawyer.

Thanks Karen Margrave. I just noticed it too.

I found a rental house with great cash flow (even after 50% rule!), and need a partner to purchase it. A friend is willing to do the partnership. What is the *typical* arrangement or agreement in this case?

a) Partner will provide the purchase resources - cash for down payment + financing.
- His money used for down payment will always be his, correct?
- Is any down payment suitable acceptable? ie, say 10% down is possible, is that OK, or should a larger DP (20%) be enforced since it affects "our" monthly loan payment, and ultimately our cash flow to split?
- Should he be allowed to "cash out" his money during the partnership? Same reason as previous -- if he cash out refi, loan is increased, cash flow decreased.

b) If I do the management, is it OK for me to take a management fee as part of expenses? Or is my "free" work on it usually part of the deal being the "no money" guy in the transaction?

c) How to best hold the property (in CA) so that it reflects both us owners? Land trust?

Thank you folks!

Typically you can borrow 50% (up to $50K max) of your vested balance. You are also required to pay the loan in full when you terminate your employment -or- pay the penalty for early withdrawal. This is very likely the case, but verify with your plan provider.

And the San Diego Investment Club (.com) meeting is tomorrow, 4/5 at 6p in del mar. Topic this month is SDIRA. Great way to network.

Greg, go to SDCIA (.com) meeting this coming Tuesday. You'll meet plenty of folks who know what they are doing and you will learn a lot.

James,
We've got similar situation except I don't have (3) and I do have another Trad IRA that I use as money partner for rehab.
My plan for (1) is to sell or get non-recourse loan, and use cash to fund more rehabs to get quick returns for now.
For (2), I might get loan from it to use on my own flips.

Thanks Will and Jon.

I actually fund the whole deal he finds, and we split the profit 50/50 (sorry, this wasn't too clear). He gave me a promissory note that states he owes and promises to return the larger of 5% or half of proceeds made by using my fund. In any case we did 3 so far (2 for calendar year of 2011), so from what I've read, I'm under the ">3 flips and your in business" rule(?).

"Buy and hold for cash -> no UBIT (or, more correctly, UDFI)
Fix and flip -> UBIT even if no debt is involved."

Sorry, just a quick segway: @Jon Holdman. how about for a money partner (equity, 50%) with a flipper? Does that belong to the second category above?

And back to ETC, the free bill pay feature lets you pay pretty much everything (as it seems) and everyone. So perhaps it would be OK to pay for someone else's account, like your contractor's CC or HD card.

Thank you both for your response. I will try to settle with the lender first as Dion DePaoli suggested and will talk with the CPA for the rental treatment.

What do I do if I want to rent out my second home with a rider? Is refinancing only the option?
If I leave as is, will I be able to claim the property as rental on tax return or is it a violation? (i.e., do banks and IRS go hand in hand on this?)

Thanks.