All Forum Posts by: Daniel Dietz

Hello,

I am looking for ideas of how to set up either a 'loan method' or a partnership with an individual private investor who has as a couple of his main objectives to 1) reduce his current tax liability, and 2) make a return as good or better than stocks/mutual funds while diversifying, and 3) possibly turn these loans/investments in a good 'income stream' in about 10 or so years when he is ready to retire.

Our scenario is this;

I have almost all of my liquid assets in my IRA, SDIRA, which I would not mind using if needed, but obviously more restricted as far as doing the work myself etc... and my own house equity, which I would rather not tap into at this point. I have rentals and think I do a good job of buying them right to get a good return, and enjoy managing them. I have a fairly humble income, so not a lot of 'yearly cash' to put into things.

He has the a healthy does of funds in his 401K at work, but is not planning on leaving that job for at least 3 years, and smaller amount in a ROTH IRA. But what he is mostly concerned with is somehow 'deferring taxes' on some of his current income. It sounds like he could have up at least 50K per year that he would have available to invest. He could also likely qualify for loan(s) for buy-n-hold properties if they would be a good strategy. His income (with spouse) is in the 200K+ range, and they only have a mortgage of about 200K with no other major debt.

Most of my research has been on investing from within my SDIRA, so I am not as familiar with strategies outside of that. Also, I have more knowledge of buy-n-hold rentals and the potential tax advantages compared to fix-n-flips, which seem to me (again no experience here) to not really have advantages from a tax standpoint. 

The returns we can get in our market with 75% LTV @ 5% rates and figure 50% expenses are about 12-15% without any appreciation, and 18-30% figuring appreciation of 2.5% (our historic is about 3.5% over the last 50 years).

Thoughts or questions?

Thanks for any help, 

Dan Dietz

Hello,

I am looking for ideas of how to set up either a 'loan method' or a partnership with an individual private investor who has as a couple of his main objectives to 1) reduce his current tax liability, and 2) make a return as good or better than stocks/mutual funds while diversifying, and 3) possibly turn these loans/investments in a good 'income stream' in about 10 or so years when he is ready to retire.

Our scenario is this;

I have almost all of my liquid assets in my IRA, SDIRA, which I would not mind using if needed, but obviously more restricted as far as doing the work myself etc... and my own house equity, which I would rather not tap into at this point. I have rentals and think I do a good job of buying them right to get a good return, and enjoy managing them. I have a fairly humble income, so not a lot of 'yearly cash' to put into things.

He has the a healthy does of funds in his 401K at work, but is not planning on leaving that job for at least 3 years, and smaller amount in a ROTH IRA. But what he is mostly concerned with is somehow 'deferring taxes' on some of his current income. It sounds like he could have up at least 50K per year that he would have available to invest. He could also likely qualify for loan(s) for buy-n-hold properties if they would be a good strategy. His income (with spouse) is in the 200K+ range, and they only have a mortgage of about 200K with no other major debt.

Most of my research has been on investing from within my SDIRA, so I am not as familiar with strategies outside of that. Also, I have more knowledge of buy-n-hold rentals and the potential tax advantages compared to fix-n-flips, which seem to me (again no experience here) to not really have advantages from a tax standpoint.

The returns we can get in our market with 75% LTV @ 5% rates and figure 50% expenses are about 12-15% without any appreciation, and 18-30% figuring appreciation of 2.5% (our historic is about 3.5% over the last 50 years).

Thoughts or questions?

Thanks for any help,

Dan Dietz

Tim,

I have not yet used this lender, but plan to in the near future. They are a national lender, but if remember our conversation right, there are some states they dont lend in. Make sure to do your due dilignece on any lender you use. It took me a while to find them, so thought I would help others out who are looking for non-recourse loans.

JASON ZOOK| IRA Loan Officer (NMLS ID#: 415110)
NORTH AMERICAN SAVINGS BANK, F.S.B.(NMLS ID#: 400039)P: 855.211.3340 F: 816.508.2797
903 E. 104th Street, Suite 400 | Kansas City, MO 64131 |www.nasb.comOnline Application:www.iralending.comRead our new book:www.leverageyourira.com

Dan Dietz

Thanks for the clarification.... I will change my way of doing things ASAP.

Dan Dietz

@Dmitriy Fomichenko  & @Jon Holdman ,

Thanks for the advice. I do see what you guys are saying about the personal card being considered a 'temporary personal guarantee' to paraphrase your thoughts.

Am I understand right that the *debit* card is fine since it is *only* secured by the funds in the LLC's account and not in any *personal* way?

Thanks, Dan Dietz

It will be interesting to hear what those with more knowledge than me have to say on this one. I DONT have a credit card, as all the ones I looked at wanted me to *personal* sign, meaning guarantee it. I THINK this would be prohibited as *I* and my SDIRA cannot 'benefit' each other. 

Did you need to personally sign? I have a debit card set up, as I did not need to sign on that, it is secured by the funds in the LLC checking account.

Most things I charge (supplies) on my normal account at say Home Depot, and when the bill comes, I simply separate the amounts for personal and SDIRA and use a check for that portion of the bill.

Dan Dietz

Good conversation going here with a lot of good points, but I am going to be contrary to what seems to be the 'popular opinion' :)

I do have a buy-n-hold in a SDIRA, that is in a three-way LLC with my brother and father, and we intend to add more to our portfolio..... yes, this would normally be a no-no, but we were VERY careful about setting it up with professional advice.

Why did we do it this way? 1) Our IRA's are where we all hold the vast majority of our invest-able assets, probably 90-95%+, so that is 'where the money is' so to speak. 2) With what we are investing for at this time, we are looking for long term gains to use upon retirement..... a long time down the road so immediate use of cash flow is of no concern. 3) I am planning/hoping to use leverage in the near future, BUT from what I have been able to learn so far, the UBIT should not be too much of an issue. My understanding on this is IF you are using leverage, you can (must) also figure depreciation. Just as with many rentals OUTSIDE of SDIRAs, after figuring the depreciation, there is not much 'taxable profit' left, so not much UBIT either.

There is also a great comment earlier in this thread I believe point out not to think of 'where to hold my real estate' but rather 'what is the best investment (of ANY kind) that my IRA can make?'. My estimates show that we could achieve about a 16-18% returns long range with NOT being leveraged at all. Can I do that with stocks? Not sure, but not as likely long term with as little risk I would bet.

A great link for those who missed it about UBIT is here

http://www.biggerpockets.com/blogs/5105/blog_posts...

Dan Dietz

@Dmitriy Fomichenko  or @Steven Hamilton II do either of you have thoughts on this one? You have given me some pretty good advice in the past!

I am wondering (based on nothing more than my experience of learning that things that dont 'seem' like they should be prohibited often are) if there would be any 'self dealing' problem since it could be (possibly) construed that Brandon's Solo401 Account would be 'benefiting' from Brandon having sold his 'personal' property? 

Just a thought, not really sure about it. Better to ask first than cry latter ;-)

Dan Dietz

@Dmitriy Fomichenko so if I am understanding you correctly, even thought there is a "ROTH Solo401k" option when setting up a new account, my existing ROTH IRA cannot be rolled into that type of plan?

IF that is correct, do you or any others here see a problem with this potential course of action; 

Say I have 50K of original contributions in my ROTH that I can withdraw without penalty (leaving the earning in there) at a rate of 10K per year. From what I understand this would be tax free since it was taxed before going into the ROTH. If I have 40K of self employed income this year, put not enough 'cash flow' from that income to contribute to the Solo401k, I could use the 10K withdrawal from the ROTH that I took to fund the Solo401K. It 'seems' like it would work, but maybe I am missing something?

Dan Dietz

Great discussion all of you.

A few questions and maybe a comment too.

 @Brian Gibbons 1) Thanks for the book recommendation - I ordered it this morning both for myself to read and a couple of people I have been talking too about being Private Lenders/Investors.

 2) In your scenario above (great breakdown of things) do you see that as the 'active partner' doing the labor themselves, or hiring out things and just coordinating? I am asking because I am mostly interested in buy-n-hold rentals, but one investor is interested in doing almost exactly what you outlined above - him and I need to talk details yet.

@Dmitriy Fomichenko  I need to read up  more on the Solo40s still. I think you might have commented on this in another tread, but I can't find it. I am self employed right now. I have a SIMPLE from a previous employer, and I have been doing ROTHs currently for myself. 

1) If I remember correctly, there is NOT a version of solo401 that I can roll my existing ROTHs into, correct? 

2) If I understand correctly, I cannot contribute more than I make as 'earned income' into the Solo401 - Is that also correct?My thought is when I have a slow year in business, say I make 10K that year, that I might sell an asset I have been thinking about and have 'extra dollars' above my earned income that year to contribute. 

3) If my assumption above is correct that I cant roll my current ROTHs over, would there be any logic to withdrawing some of my contributions to those ROTHs and putting them into the Solo401? I am particularly interested in this as I am working on locating Private Lenders to do Non-recourse Loans to my SDIRA for buy-n-holds so would be 'leveraged' there.

Thanks, Dan Dietz