All Forum Posts by: Daniel Dietz

@Lee Ripma could you share what company you are using for this? If you prefer you can PM me.

Thanks, Dan Dietz

@Chris Mason as a Lender, do you see an advantage to #1) above instead of #2)?

#1 seems to be the simplest if I am understanding it correctly. Just not sure if it is a simple as it sounds from a Lenders perspective?

The only downside I see is that it 'needs to be planned ahead of time' whereas a lot of people find the deal and *then* try to figure out how to finance it.

Thanks, Dan Dietz

There has been talk on here that IF it is a Fannie loan, NOT a Freddie, VA, FHA that there are new options to transfer. Do a little seaching here and you might be surpirsed

Hello All,

I have been doing a LOT of reading on what would be the best way to using long term Conventional Loans for buy and hold rentals with a partner where you BOTH are planning on staying in the deal for the long run. They have the down payment funds and I have the time/expertise to do all of the finding, acquiring, rehab management if needed, on going PM and business management.

Right now I am a partner in 30 units, some of them with this same potential partner. We both have the same long term goals. So far we have used LLCs and all Commercial Loans. We now have an opportunity to purchase some great units in great locations that would make ideal lonngggg, low maintenance holds and would like to take advantage of the great terms on conventional loans as we plan to keep these at least 20+ years if not indefinitely.

Let's assume for round numbers that we there are 5 200K duplexes available to purchase and timing from the sellers perspective is flexible over the next year or two if needed. I also have enough of MY own cash to buy the first one if that would be advantageous (see below). After that it would be all the partners funds for down payment

It sounds like some of the options could be

1) To have a joint bank account at least 2 months ahead of time to be able to ' season the funds'. My understanding is that either one of us could then use those funds and be the sole person on a loan, although we could both be on title.

1.1) If we went this route, and had a separate 'business agreement' spelling out responsibilities, profit splits, dissolution in the future etc... is there a 'preferred format' for that? JV Agreement, LLC, Partnership Agreement etc.....?

2) To have the partner give me a second mortgage on my house or other property to make the funds 'secured which having read several of @Chris Mason's posts can be a good way to do it. This would likely only work for one duplex purchase as that is all the equity I have in my house.

2.2) Can this 'second mortgage' add up to greater than 100% of equity in my home or other property? If yes is there a limit? Mean if I had a 200K house with a 160K mortgage, can the partner give me say a second of 50K, and then a 3rd, 4th, etc... is they are comfortable with that? That could mean a 4th mortgage of say 200% LTV of my primary home.

3) My other though that I have not seen explained is this - I would buy the first one with my own cash funds of 50K and a conventional loan of 150K. Then immediately (if possible) they would give me a second mortgage (or buy an interest in it in a different way if needed) for the 50K I originally but in which I could then 'recycle' into the next one. Repeat as needed :-).

Thanks, Dan Dietz

Any thoughts from those of you doing your rentals with Conventional Loans and long term partners on the business structure to use for these types of deals?

Thanks, Dan Dietz

@Dave Foster (or others),

This is the part that is confusing to me..........

"3. A stalling game to take advantage of tax free sales in the post
retirement years when taxable income drops below the thresh hold for the
0% capital gain rate (note this is taxable income not adjusted gross
income. It's possible to have an agi of over 100K and still qualify for
tax free capital sales)"

I still dont quite understand that difference. I am at least a decade or two from retirement, but want to understand ahead of time to plan properly. Let's say I had 20K in SSI, and took 10K out of my Traditional IRA. I also took 10K from my ROTH IRA. My rentals are showing a break even due to depreciation.

So it looks like to me I am under the 40K or so limit to stay in the 0% capital gains column.

Now I also sell a rental that I will have 30K of recapture and 50K of capital gains. How much of that can be taxed at the 0% rate?

Also, if I did a cash out refi of a rental, I *think* that the 'cash out' part is NOT taxable, but the interest is also NOT deduct able if I use it for 'personal use'?

Thanks, Dan Dietz

We have been using Rentec Direct for a little over a year and really like it. We have 30 units in 7 different entities if including personal name ownership.
We are still learning a lot of the features. We are working on getting our finances set up in it so we can switch over completely in 2020. We currently use Sage Accounting as that is what we use for our 'day job'.

@Chris Mason,

Thanks again for your clarifications. I read the '6 loan post', very interesting!

Thinking of your explanation of Persons A & B and Property C above, could either of these ideas work?

1) If I used my own cash on had to put say 25K down on a 100K property using a 75K Conventional Loan, AFTER purchase could I have Person A give me a Second Position private loan in essence 'exchanging out' my 25K down payment so I can 'recyle it into the next one'? If yes, how soon after closing?

2) If I had Person A do a Second Position private loan on my personal home could that loan be 'moved over to' or 'ported' to the newly acquired investment property after closing? If yes, I am thinking that could be a repeatable method, just like the first.

Hope that makes sense. Thanks, Dan Dietz

To those of you who are on the 'consumer side', the ones GETTING these loans, and only one partner is on the loan, how are you structuring the 'partnership'? A simple JV agreement? I am used to more complex LLC docs for my other properties which I REALLY like the 'clarity' of who does what, etc....

What do you see as the downfalls of using a partnering structure when using conventional loans? Partnering where one person brings ALL of the down payment and the other (me/us) does ALL of the other work has been working REALLY well. Not sure if there are reasons/areas that it would not work as well with Conventional Loans as well as it does with Portfolio/Commercial Loans?

Thanks, Dan Dietz

Thanks for the response @Chris Mason.

I clarify what you mean about doing the down-payment as a loan on another property, you mean it can NOT be in ANY position (meaning second, third, etc...) on the property currently being purchased I assume?

Am I also correct in thinking that said 'loan' could be on ANY piece of property that the non-contributing partner has an interest in - meaning own in their own name, and LLC they own, etc....?

Thanks again, Dan Dietz