All Forum Posts by: Daniel Dietz

@Tom Keith, how long are you finding portfolio lenders willing to lock rates for using a 30 year amortization? What kind of rates are you seeing in your area? 

So far I have been pursuing the Private Lending method since I have been looking for non-recourse loans since my investing has been with my Self Directed IRA, which are hard to find. But I have also been thinking of doing some outside my SDIRA too.

Dan Dietz

@Tom Keith I am JUST starting to think about MF properties myself - currently I have only SF and Duplex. So take what I say with a HUGE grain of salt!

At first glance, I am wondering about your down payment amount? Have you been able to find a lender that will loan on MF with under 20% down? I have not, but part of my strategy is looking for MF that are paid off and older owners might be looking to ease out of things and do a lower down in exchange for a higher owner financed interest rate for a few years until I can refinance.

The expenses seem low to me. 2% Vacancy? Maybe some years but I doubt on average over the long haul. Repairs and CapEx seem a little low too, at least from my experience. Do you need to figure in mowing/landscaping etc... too?

In my area, when these come up for sale, they are typically price at about 240K per 4 plex, but also take in a bit more at about 700-800 per unit.

I am patiently looking for that 'great buy' out there, so am willing to wait for one that makes sense to match what I am looking for. 

I might look at your from the stand point of if you could bump rents to $575 and figure expenses at about $2200 month (not including P&I) and get it for 360K all in which would put your P&I about $1600, that would give you $100 per door, and more importantly for how I look at things a LOT higher return on investment percentage wise.

Good Luck, Dan Dietz

@Rhonda Shrum you are getting some pretty good info here so far. 

One of the ways I look at it, half jokingly but seriously at the same time, is it depends whether you are doing the lending or the borrowing ;-)

In all seriousness.... my first deal which was going to be a flip but turned into a rental worked like this; I am a contractor in my 'day job' and I do a lot of work with a guy that I would call a professional flipper. Things were booming but he ended up with too many houses to work on at once. He bought a house that was assessed at about 140K or so for about 80K, sold it to me for 90K with nothing down and 6% interest only with a balloon in 6 months. HE borrowed the money for all of his projects from retired family members who were mostly retired farmers who thought the 3% rate he paid them was a heck of a lot better than those 1% CDs they had! He made a 3% spread and a quick 10K profit.

My contribution was the fix up labor and dollars. My dad & I were working on this together and we were going use some of my dad's IRA funds (he is over 60 years old). We realized how much of a tax hit dad would take before we started, so I approached a retired friend of my own that I knew had a lot of dollars in CDs too and offered him a 6% rate on 25K needed to fix things up. He would only take 3% from me! He too was happy with that, and knew my personal situation of having lots of dollars in home equity and retirement accounts so would make things right if needed.

These are some of the lower rates I have heard of out there, BUT these are not people actively out there looking to lend - they are people I found who knew me well enough to trust me in this case.

I am now looking for individuals to loan for buy and holds for anywhere from 3 years to 15 years and am hoping to pay rates of 4% - 6%. One avenue I am approaching is looking for existing owners of rentals that have them paid off and would be willing to owner finance for 3+ years, which is long enough to build up the rental history, build some equity and get ready to refinance more traditionally.

Good Luck, Dan Dietz

@Octavius Henderson depending on your life situation what worked good for me when I was a similar age was getting a second part time job. Yes, there were times it sucked working so much, but I had a goal in mind of buying a house, fixing it up, etc.... 

EVERY dollar I made extra went into savings towards that goal (other than the taxes of course). I drove an older but decnt truck, ate well but cheaply etc.....

Not sure what the labor market is in your area, but around here, small town WI but touristy and industrial, employers are BEGGING for more workers at $10-15 hour plus. Pick up and 15-18 hours a week and that is almost an extra grand a month! 

The other advice you are getting is excellent too, I guess when I was that age I could not really 'reduce my expenses' any more, so the next best thing was 'increasing my income' I was able to save up about 7K per year that way, and that was 30 years ago when minimum wage was around $3 hour or so I am guessing.

Good Luck, Dan Dietz

I have not sued them as we have been buying with our Self Directed IRAs, but I have been asking around and have heard good things about Oregon Community Bank in Oregon WI. My understanding is that they do a lot of investment property lending through their 'business banking' side of things. 

Good Luck, Dan Dietz

@Kenneth Shultz,

I *think*, but will let the experts chime in here, that you CAN roll over funds from a regular IRA into a Solo 401K. For example if your self employment business only made say 1K due to you reinvesting to grow etc... but you contributed 5K to your regular IRA that could then be rolled into the Solo401K.

In my situation I already have a sizeable IRA and am not really concerned with getting the yearly contributions in as much as a one time larger transfer of funds.

Just food for thought, but Ill let the Pros confirm or deny :-)

Dan Dietz

@Mark Nolan thanks for that great explanation and link. It still does not make 'sense' to me though (as so many government rules dont) as it seems like by allowing that there would nothing for the IRS to 'lose' by allowing it, and there would be the possible benefit of having the Required Distributions in the 401K ROTH, and therefor more money floating around in the economy to be taxed.

Either way, thanks for your input!

Dan Dietz

@Joshua Leaf I dont have an answer for you but have been wondering about something very similar.

There is an older investor in my area that is getting to the point he might be interested in getting rid of some of his 20+ units, mostly 2 & 4 units. All paid for, great income from SSI, State Pension and the RE Income.

He might be interested in doing Seller Financing at least on a short term basis (3-5 years) and maybe up to 15 years. Lets assume a 4 Plex for discussion. What would be the advantage for either of us under the following "sale price vs interest rate" scenarios.

• Selling price of 180K at interest rate of 4% @ 15 years 
  • vs
• Selling price of 170K at interest rate of 5% @ 15 years
  • vs
• Selling price 160K at interest rate of 6% @ 15 years

All of those scenarios would offer roughly the same income of 240K over the life of the loans. It 'seems' to me that for the possible benefits to the seller would be;

• Less depreciation recapture tax (if that is the right term)
• The same amount of income either way over the life of the loan

Benefits to the buyer might be;

• Less after tax income due to higher yearly interest paid
• A little easier time refinancing sooner by build up equity faster due to paying 10K or 20K under the appraised value.

I would think there could be a clause, if the seller wanted it, that it could not be refinanced for X number of years to make sure they made up for the lower sale price by having the yearly higher interest payments.

Dan Dietz 

@Mark Nolan, great info there - thanks a ton for that.

Do you have any insight as to why, at least to my understanding, a Self Directed ROTH IRA (which I transferred over from my regular ROTH, Is not able to be 'Rolled Over' to a Solo401K ROTH? It seems like that is about the ONLY type of transfer that in not allowed, and it interests me a lot due to the possible benefits of leveraging my funds by using the Solo 401 vs just a SDIRA.

Thanks, Dan Dietz

Bump........