All Forum Posts by: Daniel Dietz

I have 6 LLCs I have an interest in between my 'day job business' and rental properties - ALL multi-member. I would 110% agree with what @Sean Morrison says above. It is some of the best money you will spend.

My summary is think of all the ways it could go bad, or what the disagreements might be and address them upfront in the Operating Agreement.

Dan Dietz

@Dave Foster & @Paul Moore,thanks to both of you for the excellent thorough explanations. Definitely some downsides to it with the 'debt load' of a whole deal. 

What I have in mind would only be 2-3 owners, but I still get the point. The whole reasoning would be so one partner could 'sell out' and 1031 into something else if desired.

As a side questions, I have been working on putting together a few seller financed deals. I am guessing that IF we could get the seller to give each of us a mortgage/notes INDIVIDUALLY for 50% of the deal, then 'being on the hook for the whole thing' would not apply to our debt capacity load?

Thanks, Dan Dietz

Great advice from @Derek Dombeck above.

I find almost all of our deals off market from referals or cold calling, so get to talk directly to the seller. Almost all of ours are from investors and 2-4 units also.

I frame the conversation after getting a little info as "Would you be at all interested doing seller financing  so that YOU could reap the benefits of no realtor fees, spread out taxes and a steady income stream, or are you looking to get your equity up front?"

Most of them are not interested, mostly because they have plans for the lump sum, or do not own free and clear yet. But the  ones that ARE interested it gets the conversation going as a benefit to THEM and me.

So you need to find out THEIR goals. One I am working on right now told me right up front that was the ONLY way he wanted to do it, precisely for those reasons mentioned. What I REALLY like about this one is that if all goes through, we will be doing it with our SOLO401K which normally needs 40% down non-recourse, but in this case only 15-20% down to cover their first year taxes.

Dan Dietz

@Dave Foster or anyone else that wants to chime in....

Any tips or things to be aware of when seeking financing as Tenants in Common? This is on my list to talk to my lender about for future reference. It *seems* odd in that if I was say 50-50 on a deal, I assume we each borrow (if needed) on our 'own half' only. IF that is the case, wouldn't it be extremely complex if one TIC member defaulted on his loan and the other didn't? Am I missing something?
Thanks, Dan Dietz

@Vincent M. that sounds right, for a TOTAL price, but confirm with them. We have 29 units and I think that is right around what we pay. We may be grandfathers in at a little lower rate per unit since we have been with them for a few years.

Dan Dietz

We do not use the Balance Sheet, we have our tax guy keep track of all of that. I do beleivethey have improved it though. Give them a call, they are usually very helpful in explaining things.

We have just this year started doing our accounting in Rentec. Before that we used our 'day job' system which is Sage, but it is way overkill for rentals and doesn't give us a lot of property specific reports either.

Dan Dietz

One thing I think is not being talked about NEARLY enough is that, to *my understanding*, taxes ARE due on these funds, BUT *can be refunded* IF you return the money before 3 years and 1 day.

What this means is that say you take out 90K before the end of 2020. You would have the *option* to pay that tax in increments of 30K in 2020, 2021, 2022. So you might own say 6K in tax each year, and really only have 72K to work with.

Then when you finally DO 'put it back' before the 3 years and 1 day, you can file AMENDED returns to 'get back' those taxes you paid over those years.

So yes, it DOES work, but a bit more complicated than what some make it out to be. 

I will let some pros chime in, but I DONT think that going over the "$15,000 per year exclusive" automatically puts you into a situation where there is tax due (this would be paid by the giver, not the recipient BTW). 

My *understanding* is that up to the Estate Tax Limit of about 11 million per year for a couple you DO need to fill out forms and file them, BUT no taxes are do. In essence you could 'use up' that 11M limit and THEN get into a taxable situation. My parents gifted several of us over that 15K exclusion a few years ago, and NO taxes were due.

BUT TALK TO A PROFESSIONAL

I am wondering if anyone who HAS done a TIC purchase can share how the funding from lenders works? It seems that a bank would be leery to lend 'on half a building' as it would obviously be much harder to foreclose if needed.

Were your rates higher? What other hurdles?

Thanks, Dan Dietz

Thanks for the feedback @George Blower. I was afraid that is what you were going to say.

Do you, or anyone else, know the 'why' behind what seems like a VERY specific limit on rolling funds ROTH IRA (I assume the same would apply to SEP, SIMPLE, etc... too?) into a SOLO401K ROTH account? It just seems to odd to a novice that this one singular method would be singled out.

Thanks, Dan Dietz