All Forum Posts by: Daniel Dietz

Hello All,

My partners and I have grown to 30 rental units in our local area and things are going very well, thanks in a large part to what we have learned here on BP. So far we have used almost all Portfolio Loans due to having a 3 way LLC or non-recourse loans for ones that we own in our SDIRAs and SOLO401Ks, so VERY little experience with Conventional 30 year loans.

We are wanting to switch to 30 year Conventional Loans for some we are going to be purchasing shortly to take advantage of historically low rates on top quality properties that we plan to hold for at least 20 years or most likely indefinitely.

We would likely be doing the deals where one of us brings 100% of the down payment and the other does all of the PM over the years, and split both cash flow and equity growth 50-50.

Some of my questions are;

1. 1) Do we both need to 'be on the loan'? I am wondering this in relation to 'not wanting to use up our 10 loan limits'.
2. 2) Does Title have to have both of us on it exactly the same way as the Loan does?
3. 3)If down the road one of us wants to sell out to the others, can title just change and the remaining partner just keep paying on the loan?
4. 4)If we get one/some of these deals before the end of the year (think November) and have it on our taxes would that 'short year' count as a 'tax year' for that property?
5. 5) My understanding is that a common way for banks to do the projections when we dont yet have 2 years of taxes is to take (Rental Income * .75) - PITI = 'cash flow' that is added to your income for DTI purposes. Is that accurate?
   

Thanks, Dan Dietz

@Chris Mason when you say "You have to go all the way to commercial financing that's entirely in a business entity to get around it" could you clarify please?

In my case, I have some properties in a 3 way LLC where all of the members are signers on the loan and the property is title to the LLC, but we all also had to signer personal gaurantee on them. I also have others in my SDIRA and SOLO401K but they each have their EIN # and of course there is no personal gaurantee on those, so I assume those are not an issue then?

Thanks, Dan Dietz

@Dave Mason I would absolutely second what @Brian Eastman says, but I am on the client side of things. 

My partners and I have 3 SDIRAs and 3 SOLO401Ks, all with 'checkbook control'. Having rentals with lots of little bills I would not dream on doing it any different way.

I would recommend calling a few like the providers on here such as @Dmitriy Fomichenko (who I use) Brian Eastman, @Carl Fischer or others who contribute here and see who is the best fit for you.

We work with a regional (only WI) Portfolio Lender that is VERY flexible. They hold these in-house so don't have to conform to Fannie/Freddie or what not.

On our existing one, we have 6 units all on one loan. 20% down and 4.5% interest locked for 10 years and amortized over 25 years. I think closing was about $1500 plus appraisal fees. After the 1 years the most it can adjust is 1% per year for a max adjust of 6%. These rates were about 2 years ago. The rate on the same product now is 5.375 with the same terms.

We were just able to set up a line of credit on them with out having to re-appraise them (they used the figures from 2 years ago) at 80% LTV between the remaining loan and line of credit put together.

The advantage of having them al together is just the case we just did.... the unit together had about 50K of usable equity, whereas each one on their own would not have been much and had extra cost to set up multiple lines of credit. We are able to sell of a unit as long as the LTV on the remaining ones stays at 80% or better.

My advice is to find a small lender where both the loan officers and board members are ALSO real estate investors... it has made it SO smooth.

Hi @Ariel Deleon,

I am in a couple of LLCs for buy-n-holds where a partner brought 100% of the down payments.

The way we have things set up is that 'whenever' we dissolve things or do a refinance, the capital partner gets 100% of their contribution back before any other equity growth gets split. If there is a 'shortage' of say 10K, we would owe them half of that or 5K.

@Chris Mason I should have been more clear on my original post I guess :-)

This person is strictly an investing partner, not a domestic one. We have known each other for years and invested together for the last 5 or so using LLCs and commercial loans with great results.

We are now looking at how to lock in great rates for a longer time frame as we are comfortable with our business plan working as planned and expect a very high probability that we would hold these for at least 15-20 years if not indefinitely.

Thanks, Dan Dietz

In our case it was a family friend with a lot of liquid funds. I know in my local REI some of the people have done similar things. I think it all just comes down to networking.

We have solved this problem by taking on a Private Investor Partner, not a Private Lender. They bring 100% of the down payment (20-25% depending on the deal and lender) in exchange for 50%. We do ALL the work from finding , purchasing, manage rehab, place tenants and ongoing PM for our 50%.

Cash flow is split 50-50 and equity growth will be split 50-50 when we refinance or sell out down the road. They will get their original capital they put in back before the equity split. We do this all in an LLC to keep things documented and easy to understand.

@Alejandro Alcantara there are a lot f ways to look at how to use those funds. Most people would agree with the advice about of leaving it in the ROTH and using in IN there to invest somehow in real estate.

We do own some that way (paid in full in our SDRIAs). We also own some in SOLO401Ks that we use leverage in. Those are 40% down. We also own some in 'cash' outside of our retirement accounts. Those are typically 20% down.

So with that said, the DIS-advantage of keeping it in the ROTH (or Traditional SDIRA) is that you can only leverage to a limited degree, AND the fact that there are a lot of 'rules'  that go along with the non-recourse loans such as 50K minimum loan size, no pre 1940 homes, no houses converted into duplexes etc.... That is the reason we bought our first ones outright in our SDIRAs; they were only in the 70K range, 100 years old, and houses converted into duplexes :-)

The argument for taking the money out of the ROTH are that you could leverage it twice as much in a cash purchase needing only 20% down instead of 40% down. So how much will you benefit if say you buy two houses instead of one but have it be taxable at some point? Also,if you are not yet retirement age you can use the cash flow whereas IN the ROTH you cant.

I was/am on the verge of doing just that, and I am hoping I found the prefect solution! I found a seller that WANTS to sell using Seller Financing and is OK with doing it 'non recourse' as required in retirement accounts. and with potentially only 15-20% down! This would be the best of both worlds..... Keep it in the ROTH AND only need 20% down, so I can 'buy twice as much' so to speak. 

One advantage that I have being self employed is that IF I do take it our of my ROTH, and can always make fairly large contributions of about 25K each year to replenish it if I want to. 

Hope that all make sense.

@Matt Everling I use @Dmitriy Fomichenko at Sense Financial and have had great service. I would give him and maybe a couple of the others that contribute on here like @Brian Eastman, @Carl Fischer etc... and see who would be the best fit. When I talked to them I got the feeling that ANY/ALL of them would give better service than 'the big boys' in the industry.

One of the books that helped me also is https://www.amazon.com/Keep-Ad...