All Forum Posts by: Daniel Dietz

As others have said, 'it all depends'. ;-)

In my case I do some of each. When I started with rentals I did not have a lot of liquid cash for downpayments, but I *did* have a lot in retirement accounts, as did my partners. So our first one we pooled SDRIRAs and 'paid cash'. As well as the second one. Since it is a bit harder to finance, and there *might* be UDFI Tax, and it is a ROTH so liquidity will be nice when I retire that seemed like a simple chunk to leave UN-leveraged.

We then all scrapped up cash for down payments and did conventional purchases for a handful of down-payments. These throw off some cash flow, but our real play is long term returns.

We then went back to retirement accounts, but this time with SOLO401Ks so we *could* leverage and *not* have to worry about UDFI Tax at all.

So, there is not right or wrong way. We have leverage ratios of 0% up to about 75%, and I like having that mix. One thing we do in all LLCs, and in particular the 75% leveraged ones is to keep at LEAST 6 months PITI on hand in case things go south somehow. That is enough to give us peace of mind.

And talking about "peace", that is where DR comes in.... His course is called Financial PEACE University. So if PEACE is more important to *you* than maximizing returns (which is what leverage usually does) then DR is the way for you :-)

We dont invest out of state, but a few people I know who do have used KKOS Lawyers, I believe out of Utah. Google Mark Kohler or Matt Sorenson and you will find LOTS of good info. I used them to form all 4 of my LLCs including for SDIRAs and 401Ks, they know their Real Estate stuff top to bottom.
Dan Dietz

We just did this in one of our LLCs that owns several properties. We did it through the same local lender who holds the first position portfolio note on them. They had no problem doing that (but did say they would not do it IF they did not hold the first lien).

We could do up to 80% LTV, and they let us use the appraisal that was about 3 years old at that time since they felt property values had only gone up from that time. We did have the option of paying for a new appraisal, but we were fine with it where it was for our needs.

@David Weymouth my *understanding*, which very well might be completely off as I have not sold any of my properties yet to have a capital gain, will not work how you are thinking.

I *think* that is he has say 35K in taxable income BEFORE the sale, and then the sale give him say another 34K of capital gains, only the FIRST 4K up to that 39Kish limit would be exempt from CG tax. Everything ABOVE that limit, so in this example 30K, WOULD be taxed at capital gains rate, which IS still very low once you get into that first bracket.

Maybe one of the pros on her can confirm or deny that for us :-)

Dan Dietz

We work with a local lender who offers 20% down (willing to do less if the DSCR stays about 1.1, and also willing to let seller carry a second for the downpayment if the DSCR stays above 1.1).

Terms on our last one about a year ago were a 25 year amortization, 10 year rate lock at 5.125%. After the 10 years the rate can rise a max of 2% the first year, and 1% each year after that up to a max of +6% over the original rate, or 11.25% going into 15th year.

We like those terms as we feel that IF rates were to go that high the increased rents by that time will more than make up for the higher payments.

Dan Dietz

@Anthony Wick do you know if your lender does loans in WI?

Thanks, Dan Dietz

@Dominique Pradel-Lewis I would agree with what the others are telling you here so far, and that is from a User perspective.

When I set up my SDIRA and SOLO401K, I talked to quite a few providers. Both the larger ones you mentioned and several here on BP including @Carl Fischer, @Brian Eastman & @Dmitriy Fomichenko.

Ultimately I choose Dmitriy, but I can say that ALL of the ones I talked to from here on BP seemed MUCH more responsive and helpful than the larger companies I talked with. So to me, it was easy to weed out quite a few right away, and then be able to pick from 'several good choices'.

I would also encourage you to look into the 'checkbook model' of doing things. I can't imagine doing buy-n-hold rentals without that, which is 95%+ of what we do.

Dan Dietz

@Michael Needle, we have about 10 doors on commercial loans out of our 30 units. Our lender would 'let us' go as low as 1.1 DSCR, but *we* choose to try not to dip below 1.20 DSCR.

Unlike you, we (2 partners and I) do NOT have any extra W2 income to put towards it if things go bad. We could have to dip into our assets to cover things, which is not in the plan ;-)

What our lender has us count is PITI - principal, interest, taxes and insurance - the 'have tos'. So the first 1.0 counts those, and the extra 20% is for maintenance, cap ex, and vacancy.

My personal thought if you have that much *extra* W2 income or partners willing to pitch in why not just save up until you have enough to 'stay in the positive'?

Dan Dietz

So I am reading what @Account Closed posted and IF I am understanding correctly, when I start taking SSI and say I had 30K of rental income that showed as a 'tax loss' due to depreciation etc... and I took another 30K from my ROTH IRA, NEITHER of those sources of income would count towards making SSI partially taxable?

Would that change if the IRA income was taxable withdraws from a Traditional IRA?

Thanks, Dan Dietz

@Chris Seveney thanks for the reply. Their Sales People are telling me that I will say way more 'dollars' worth of time that the $250 or so per month that it would cost. It sounds like their automation part works good for you.

There are just 4 of us, and none are overly techy, so I want to pick the right App and only do it once!

Thanks again, Dan Dietz