All Forum Posts by: Daniel Dietz

Some good conversation here! 
I wondered if one of you Pros could chime in as to the "percentage use" rules when moving into a rental to use it as a primary and what happens if you keep that as your primary until the time you eventually pass away?

Assuming that 'stepped up basis' is still around, would that eliminate the need to pro-rate usage or recapture the depreciation taken when it was a rental.

Thanks, Dan Dietz

This one https://www.mortgagecalculator... is the closest I have found. Not sure if it would tell you what you are looking for or not. 
Dan Dietz

NASB will do a regular non-recourse loan on that.

The way that we have done more of a "HELOC" type loan for properties in our SOLO401Ks (very similar to SDIRA) is to use a "Private Lender" (a family friend who has lent to us short term on non retirement properties also) who was happy to do a 'First Position Mortgage' on properties that we owned free and clear.

It was very simple, we just used a local lawyer that drafted the mortgage with the proper 'non-recourse' language in it. The last one we did was a 5 year Note @ 5% and 75% LTV. We used those funds as a down payment on another property.

We are using ALL of the cash flow from BOTH properties to pay the Note back in that short time frame, after which we will once again be 'free and clear' on the 1st property, and have none of our own funds into the second one.

Dan Dietz

@Mark S. I would have to agree with @Dmitriy Fomichenko is asking what is so funny? I trust his opinion a LOT more than your considering he (an others who have chimed in here) have dealt with thousands of these type of accounts, including mine and my partners. 

You say "It is not worth the hassle", which I also see others express who have not holistically looked at a persons overall financial situation.

The way I look at it is IF I already have a lot of funds in my retirement accounts, should I NOT invest it in what will make me the best return with the lowest risk? Why settle for 10% returns in a volatile stock market when I can make 15-20% all day long with real estate along with a LOT less risk inside of my Self Directed Accounts?

There is also huge advantages if you qualify for a SOLO401K. Have you ever ran the numbers on what 50k PER YEAR of contributions can turn into over time?

I believe @Lee Ripma has some real world experience and hopefully chimes in here.

Dan Dietz

@Bill Exeter & @Dave Foster thank you both for your explanations. There are definitely a lot of options from the sounds of it!

Dan Dietz

@Dave Foster, thanks for the great info as always.

I have seen you say many times about the 'replace' the Note with cash'.

In actual practice, are there any restrictions on that? What I am wondering is say I 'carried a note for 100K', if *I* did not have the 100K on hand, could I sell it to another investor/friend say for 100K, and then AFTER all is said and done with the exchange 'buy it back' from them for say 105K so they have incentive to do that? If so, is there any time limit to how soon that can happen?

Thanks, Dan Dietz

I am actually working on the same kind of deal right now. He is someone I know from my work in the building trades, is just tired after 30 years of land-lording and wants to 'retire' from it.

Some of the reasons he mentioned are; skip realtor fees, spread out taxes over time (he would have been in the 20% CG tax rate if just sold outright) and mostly having a  20 year stream of 5% income stream which he sees as the 'safe' part of his portfolio as he already has a lot in stocks.

For us it is extremely appealing as we would do it with our SOLO401K which usually requires 40% or more down, and he is willing to do 10-15% just to cover his first years taxes

Dan Dietz

We have mostly used NASB off of @Dmitriy Fomichenko's list. Great service and fair rates.

We have also used a local Private Lender (who we have also used for non-retirement account properties) who was willing to do a non-recourse loan. These type of people ARE hard to find, but if you can, it works great.

Dan Dietz

@Julian S. I know some of the more experienced will chime in here but I share our experience.

I own properties in an LLC with 2 partners. Being an LLC it is very hard to find 'conventional loans' so 'commercial loans' like you are describing are generally the way to go.

Our local lender that we use likes to see a DSCR of 1.2 or better, 20% down, 4% amortized over 25 years.

It seems like in our area, if you can find a '1% rule' property the 1.2 DSCR is no problem. An example would be a 200K duplex, with 40K down and 160K loan @ 4% amortized 25 years. This puts our payment with taxes and insurance at $1460 per month. Income would be $2000 per month. That gives a DSCR of 1.36 or so, meaning our income is 1.36 times as much as our PITI.

Not sure if that helps or not.

Dan Diet