All Forum Posts by: Daniel Dietz

I dont have any experience with the combination of FAFSA and Syndications, but do have a lot with FAFSA in general and how assets affect it. 

The article @Ronak Shah link coverd things very well. Another good site even though it has not been updates in a few years is Finaid.org.

In general there are VERY few things that do NOT count as assets. The ones I am aware of are Retirement Accounts (although some Private Schools that go beyond FAFAS count them), Cash Value Life Insurance, Family Farms and Small Businesses. I have also heard that certain kinds of Trust are not counted - I think when set up for disabled/handicaped family members or something similar to that.

We have only one Sect. 8 tenant in our 30 units in a medium sized town in the Midwest, with no problems what so ever. We have never been told that 'we have to open all our properties up to Section 8 if we do one'.... I would ask whoever told you that to show you that in writing.

What we HAVE been told is that we CAN use our own CONSISTENT screening criteria and if the potential Section * tenant we CAN deny them on THAT basis, not JUST 'because they have a Section 8 Voucher'. Meaning we can still screen by credit score, no felonies, good references, etc.... We also set our prices, but in our market the Section 8 'allowences' for rent rates are actually ABOVE what is charged in most of our market.

We have a 3 way LLC, and from the get go had language in it where were are ALL 'managing members' with a clause that makes it possible for ANY one of us to sign on behalf of the others. We did have to have specific language for this, and the banks have us send them a copy of this language with a signed release type of form so it all goes smoothly at closing.

Seems a LOT simpler than multiple LLCs, unless you wanted those strictly for potential asset protection. 

Can you clarity a bit. I have a LOT of experience with college apps and the "EFC", expected family contribution.

Are you saying you would be selling to someone else and THEIR kid is going into college? If so, what are they planning on doing with it with purchase, sale  price, rents, etc.....

In our market anytime we try to do a 15 year note there is very little cash flow too.

I would find out what their goals are, meaning do they need all of the principal back in the 15 years, or are they more looking for a safe return on their equity?

One thought would be to see what they think of a 30 year amortization with a 15 year balloon. That would bring your payment down almost $200 per month and they would get a lump sum of about 50K at the 15 year point. You also need to consider what interest rates might be at that time and how that could affect things.

It all depends on what their goals are and how that timeline coincides with other things in their life like kids college, retirement, etc... One advantage to doing it at almost no cash flow and having the other properties that could 'offset' the mortgage payment in vacant months is that at the 15 year point your cash flow all of a sudden jump about $600 per month, and how that would fit into YOUR timeline, such as kids college, retirement, paying off other debts etc....

For me, it would be almost enough to buy the truck and 5th wheel I hope to get in about 15 years at retirement ;-)

Dan Dietz

@Allen Tong,

What we did was set up an LLC, where out *existing* LLC was a 50% owner and the PMP (so far individuals, but could be a different LLC etc...) was the other 50% owner. We meet quarterly to go over books etc... and we do a distribution of cash flow once a year.

The equity growth, meaning the loan paydown and appreciation, will not be realized until we either sell some point in the future, or do a cash out refi at some point. From our projections, we should have enough equity built up be around year 10-12 so that we *could* 'cash out' refi and pay back the original 20% downpayment to the PMP and we would be the sole owners of the LLC at that point.

The other things built into the LLC are predetermined values if a partner wants out, and provisions for the partners heirs to either stay in the partnership or be cashed out, their choice.

The one thing that sounds like it would be different in your case is that it sounds like you would NOT be doing the day to day PM on the properties being that far away? In our LLC, *we* are responsible for the day to day PM. *If* we are unable to, or decide to hire it out for other reasons, that cost would come out of *our* 50% of the cash flow. The thought being that great PM is a big part of what *we* are doing to 'earn' our share. Think of it this way... if you are not planning on doing PM, the investors you might find could ask 'what is Allen doing to 'earn' his half of the profits? They might prefer to just pay you a finders fee (think wholesale it to them) if that was the case.

What @Taylor L. is saying is exactly what we have done on our last deal, and a few upcoming deals also.

After getting to 26 units we were tapped out of capital to buy more. Thinking of what @Brandon Turner is always saying "50% of a good deal is better than 0% of no deal" we came up with a way to make a win-win situation by partnering with a Private Money Partner.

Our Private Money Partner brings ALL of the 20% down payment, we do ALL of the finding, purchasing, managing rehab if need, finding and placing tenants, and ALL ongoing PM and Business Management. We all sign on the loan, split cash flow and equity growth 50-50.

We plan on at LEAST a 10 year hold, and over that time we should EACH be able to make 9-12% returns on the original investment each year.

We get to 'make assets out of just our time/management skills', and the PMP gets a great steady safe return without having to do any physical or management work.

People seem interested in this type of partnership.... we have more interest than we can find properties in our market at this point.

Dan Dietz

My tip I read somewhere that helps me remember of who is disqualified or not is to think of your 'family tree' as a 'cross' with you at the center.

Meaning whoever is 'up or down' (before or after you) like parents, grand parents, kids, grandkids etc... IS disqualified. Whoever it 'to the sides of you' meaning brothers, sisters, etc... is NOT disqualified. Then think of things like cousins, aunts, uncles, etc... would all be 'off to the side' of someone else on the family tree.

It makes sense in my head anyways :-)

Dan Dietz

What @Nicole Heasley Beitenman said times 100!

Also, tell EVERYone what you are wanting to do. You never know who knows someone that might be beneficial to you. An example might be a co-worker talked to a relative at Thanksgiving dinner who is a house flipper short of time and they could use some help, and you could learn the ropes.

Good Luck, Dan Dietz

You might want to look into what I think is called 'implied interest. I only know it from reading on here, but I think the seller will at least have to count some of that as interest income even if that is not how you two agree to it.

I believe the rate is in the 2% range or so. You could still negotiate from say 100K @ 5% to say 103K @ 2%.

One other thing that I don't *think*  will come into play is depreciation recapture tax.... I *think*  that all gets erased when things are stepped up also, but the seller should make sure to check on that. Dan Dietz