All Forum Posts by: Daniel Dietz

@Matt Everling I think what you are asking is if there is 'left over' in the account (cash flow) can you take that our tax free.

For me no because I am not 59.5 years old yet, so mine grows until I can afford another unit :-) IF you are over 59.5 then yes, I think that is a true statement that the cash flow generated would be tax free each year.

One thing to keep in mind is to make sure to keep enough reserves for repairs and cap ex, as there would be limits to how much contribution you could make in a given year if a big expense came up.

@Matt Everling I have found that they want more like 40-50% down depending on type, age, etc....

I am working on what I hope to be a great deal on 8-10 units. There is a seller who WANTS to do Seller Financing, and is looking for just enough down to cover his Depreciation Recapture Tax, so likely from 10-20% or so. That is one way around the low LTV rules, but these deals are few and far between.

I hear what you are all saying, but thought I would explain what we are working on that has somewhat to do with this topic. 

We have 30 units, hopefully to be about 50 in the next 1-2 years, in a small but prosperous Midwest  town of 10,000 and a couple surrounding smaller towns. We aim to have the best units for their types, and take great care of the units and tenant needs. We are also working our pricing up towards the top of the going rates. In other words great units for great tenants at a price that is fair for both of us.

Part of how we plan to do that by coming up with marketing materials for when we have prospective tenants. Part of that includes references FROM our existing tenants of how we are to rent from etc.... Basically so when a potential renter asks 'why are you $100 higher than option X' we can say 'well, we have the best units and the best service..... see what our existing tenants have to say and decide if it is worth the price'.

Part of this marketing is finalizing a recognizable logo that we will use in a lot of different ways including on our for rent signs AND 'yard signs' we are planning on starting to use. Our thought is to have small but recognizable permanent signs saying something like "Red Stage Properties" with our number.

We are getting enough of a reputation of having quality rentals that people are asking if they can be on 'our waiting list' for when we have an opening. We feel the signs would give a good representation of the types of properties we have, and when we DO advertise a place for rent it will be easily recognizable to at least SOME people, and still look professional to those who are not familiar with the name. We are also planning on adding the logo to our work trailer for our kitchen, bath and construction business to get more exposure of the name/brand.

I do think this method is probably more applicable to a smaller town compared to a larger metor area.

I am working on what I think will be my first Seller Financed purchase right now. The owner ONLY want to sell using Seller Financing for several reasons.

His goals it sounds like are: no realtor fees, spread out capital gains (will likely keep him in a lower bracket) and a steady safe income stream for the next 15+ years.

Some of the benefits to me would be; smaller down payment, being able to buy property with my Self Directed Accounts with only 10-20% down instead of the normal 40-50%, a good locked interest rate, a LOT less paperwork.

Any thoughts our there? @Chris Mason do you have time to chime in?

Thanks, Dan Dietz

Good Discussion going on here. Although I dont really like his 'attitude' - he is not the type of personality, at least on air, that I would be drawn to talk to at a dinner party I DO get something out of his system and teachings.

Even though I am part owner of 30 rentals I still struggle a bit to get my consumer debt paid down. about 4-5 years ago I got divorce and had to kids get married all in a year. Lots of expenses put on 0% cards that I am still working on paying off, and his method is helping me with that.

I completely agree that he is misleading people, or at best doing them a disservice talking about 12% yearly returns.

He IS doing good talking about ememgency funds, putting money aside for retirement etc....

Perosnally, and I think for a LOT of people, the ideas of not buying rentals until you can pay cash is crazy.

I think of his method as a 'recipe' and, and they are made to be 'tweaked' to your tastes :-)

@Robin C. I hold a lot of my rentals in my SDIRAs and SOLO401Ks too. In my case my DTI ratio is a bit on the high side as my reportable taxable income is not reall high, so I have trouble getting traditional loans too.

What my partners and I have done is to go the way of Commercial Portfolio Loans from smallish local/regional banks. They keep these in house and do not resell them so they are MUCH more flexible. As long as you have a decent credit score and responsible financial history it is pretty simple.

Our last one was 20% down 5.25% locked in for 10 years and amortized over 25 years. You don't get a 30 year rate lock is the biggest disadvantage of them.

@Paul Defngin thanks for the reply.

One thing I did not mention is even though my partners and I are at 30 units right now, they are all held in various LLCs in both cash positions and in our SDIRAs and SOLO401Ks. So the world of 'conventional loans' is new to us other than for our own homes. 

A couple of other things that came to mind as I drifted off to sleep last night;

1) I assume it does not matter if ALL of the down payment comes from one partner or the other?

2) One property in particular that we are looking at is a duplex where each has their own garage that ALSO has an additional 4 car garage. It would NOT need the income from the garage to qualify, but is there would that make things 'non conforming' in any way? I am actually thinking of using it for my 'day job' business for storage.

3) Fast forward 10 years down the road..... I one partner wants out, does the property need to be refinanced at that point, or can one partner somehow 'take over' or in some way become the only one left on the loan?

Thanks again, Dan Dietz

Hello, 
I am looking for some advice/clarification on how conventional (meaning 30 year fixed) loans work for rentals when using a partner/co-borrower.

A couple specific things are;

1) How does joint DTI work? Meaning if I have say 1500 in monthly debts and 3000 of income mine would be 50%. If me partner has 1000 of debt and 5000 of income theirs would be 20%. I assume our joint would be 2500/9000 or 28%?

2) Does it matter how long our joint account has been open as long as the funds can be traced back to one or the others individual bank accounts?

3) If we have a rental property where 75% of rents cover PITI, does that mean that neither of our DTIs would be negatively affected as I understand it?

Thanks, Dan Dietz

@Krystle Stephens @Taylor L. summed it up very nicely.

My 3 partners and I use both SDIRAs and SOLO401Ks (need to have self employment income for this) to invest in buy and hold rentals.

We rolled the vast majority of the funds from our existing IRAs that we had and have added a little bit since. One of the main reasons we did this is that we were tapped out of 'cash on hand' to buy more rentals, and the IRAs are where probably 90% of our assets were.

I agree that educating yourself is HUGE to make sure you do things right. I perosnally would not even think about doing rentals without a 'checkbook control' type of set up.

I assume you know that you would very likely need to leave your job where the 401K is at to be able to roll it over?