All Forum Posts by: Daniel Dietz

We are working on a deal right now to but a 4 plex and a couple duplexes all from the same seller with him carrying the financing. We are almost all settled with doing a 5% interest rate, 15-20% down and a 25 or 30 year amortization with a balloon at 15 years, with an option to extend that IF both parties agree.

The seller threw out a 4-5% rate and 15 year loan. The cash flow is REALLY tight at that 15 year payback, so I countered with "let's do the 5% and extend the term".

We have known each other a little bit for years as we are both in the construction trades with great decades long reputations. The feeling I get is that these are all paid off or almost paid off, and he is looking for; to save realtor fees, to have a reliable income stream to compliment his other investments, spread out taxes. I think another concern of his is finding a buyer that he knows keep things in good shape in case he ever needs to 'foreclose' on it. 

Thanks @Steven Hamilton II, that makes sense. I usually like to over complicate things ;-)

Dan Dietz

Hello All,

I know there is a lot of talk about "The Home Office Tax Write Off". This is similar but different ;-)

I am planning on building an addition on my home that would be a great room on the main floor, and ALSO have a finished space in the walk out lower level for an office for both my rental business but MORE so an office/showroom for my 'day job' of construction/remodeling. I will be both doing office work for both businesses and ALSO meeting with clients, subcontractors etc...

I am wondering if these are both possibilities and which might be better, so IF I need to keep track of building costs that are specific to that area I know that going in and getting bids etc...

• 1) Use the 'square foot method' - this square footage will be approximately 17% of the overall area of the home. Can I take 17% of interest, taxes, utilities, maintenance etc... and use that? I think my total costs are about 18K per year.
  
• 2) Could I keep track of what THIS part of the addition project costs, and somehow write that off? I am estimating that this portion (compared to leaving it unfinished basement) will be about 40-50K.
  

Thanks, Dan Dietz

@BJ Gibbs,

My portfolio lender only lends in WI. What I would recommend is talking to smaller local or regional credit unions and banks and ask for their commerical loan officer (if you are interested in LLC loans) to see what they have. The conventional home owner type lenders at the same place won't have much of a clue usually.

As far as rates go, I am just getting done refinancing my own house at80% LTV @ 3.625 for 30 years. When that is done a duplex that I am buying, not owner occupied is going to be 75% LTV @ 4% for 30 years. The LLC that I am part of is also working on a new duplex using our Portfolio Lender will be 5.375%, 80% LTV and a 25 year amortization with a 10 year lock.

I would think the 'spreads' would be similar in your area. It did take a LOT of calls to find a great portfolio lender, but well worth the time in the end.

Hope that helps. 

We do both. The advantage of getting it in your own name is that if you qualify that way, you can usually get a better rate, and longer amortization. I am working on one right now and looking at 25% down, 4% for 30 years fixed.

With that said, I do most of my investing in a LLCs with partners. LLCs cant get regular fixed rate 30 year loans. One we area working on right now we are looking at 20% down, 5.3% and amortized for 25 years with a 10 year fix on the rate. After that, it can go up 1% a year to a max of 11.3%. Also a LOT less paperwork and lower fees. These are referred to as Portfolio or Commercial loans.

Also, although it is rare, once you have an established relationship with a Portfolio Lender you can *sometimes* do them for nothing down. My example is that one of my partners wants to sell a property that he owns individually right now TO our joint LLC (he is getting older, wants to travel and have less responsibility). The lender is willing to do the 80% LTV as normal and let the seller, my partner, carry a 20% note for the 'down payment' portion.

I did a deal similar to this when I started out with SDIRAs, but instead of myself another disqulified party. I was warned not too, but others said it could be done.

Things went OK, but there is a LOT of paperwork to keep straight. The one thing that was not pointed out is that once you go into a deal say 50-50, that ratio can essentially never change, nor can each 'partner' make additional contributions into the same partnership in the future.

My understanding is that it kind of becomes a 'one and done' type of thing.

In a couple of years my 'disqulified partner' found someone to sell his interest too who is NOT disqulified to me. That makes it SO much simpler to grow over the years.

The guys who have answered, although differing in their opinions are all very experienced in this arena. I would proceed with EXTREME caution. There is a lawyer/accountant named Mark Kohler who has some great videos on youtube covering this and other similar topics.

Dan Dietz

This frustrates me too! @Account Closed can you help us here?

Thanks, Dan Dietz

@Randy Rodenhouse & @Bryan Hancock I agree with you guys about JVs often being done poorly or  at least not with all possible situations in mind.

When you say a document needed for something like this should be a lot cheaper than a PPM deal, what type of range would we be looking at on something like Susan mentioned?

Thanks, Dan Dietz

@Natalie Kolodij let me know if I am following what you are saying correctly please.

In @Mickey Bauer's case, if the inlaws are are both still living (sounds like it) and they paid say 100K for it back in the day, and when they gave it to Mickey it was worth 400K, the capital gain would be 300K for that time frame. If they then live in it two or more years as their primary and it goes up to 500k, THAT 100K would NOT be counted as capital gains?

For others out there in similar situations;

1) Would that change if one of the gifting couple pass on BEFORE the gifting? I am wondering if say 'mom' passed away recently when the property was worth 400K, would 'dad' get stepped up basis at that point and Mickey now no longer has a capital gain from the in-laws original basis?

2) If the inlaws waited until they both passed to pass on the property, would all of the gain be 'stepped up' at that point? Although this would not help with the potential lien for long term care costs.

3) IF #2 is true, would it help to for the inlaws to place it in a non-revocable trust and have it pass at time of death to cover both protecting if from a lien AND getting the stepped up basis? Or is that outside of an Accountant's area of expertise? :-)

Thanks, Dan Dietz

For time tracking we use Toggl. There are 4 partners plus 2 others that do maintainence and lawn & snow. We have 30 properties across 4 entities and also 3 people that own some in their own name.

We are able to keep track down to the minute by property and task. This automatically also assigns the proper entity. I REALLY like it, but it was a bit hard to set up at that level. That is where my 18 year old nephew, who is also our lawn & snow guy, come in to help :-)