All Forum Posts by: Daniel Dietz

@Camille Johnson, I would encourage you to 'network until you wear yourself out'! 

I would listen to every pocast and read every blog hear on BP that deals with private lenders or private money partners. 

When we first looked into this a few years back I took the advice that @Brandon Turner gives over and over.... Tell EVERYONE what you do. And figure out a way that does not sound like you are 'trying to sell them'. It helps that you ALREADY have a track record. 

What I did when we started searching is to 

1. 1) Come up with a 'sample deal' of how our existing self owned rentals were doing using the BP Rental Calculator. 
2. 2) Gather 'referral letters' FROM our existing tenants of how well we take care of our properties and them also topresent to potential partners/lenders.
3. 3) Make a list of EVERYONE I could think of that *might* have funds to invest. Obviously this takes some guesswork but some of my ideas were; relatives, friends, neighbors, former customers ( I am a housing contractor for day job) and the like. Some 'criteria' I considered were; high paying jobs, recent job changes so 401Ks to reinvest, enough net worth to afford a second or third home, retirees who seemed to be living well, people who talk about being fed up with the stock market, etc..... 
4. 4) On that list of about 50-60 names I ranked them from 1- 4 of 'who I would like to work with' that had to do with personality mostly and level of assumed financial knowledge. That narrowed it down to about 10 with the best score of 1 (meaning first choice). 
5. Of the first 5 I called or talked to 3 were interested in hearing more. One has made 2 loans to us and brought the downpayment for a 4 plex we jointly own. The second is going to be bringing the down payment on about 8-10 units we are working on purchasing right now. The problem is more finding enough deals to fit the money available :-)
6. One tip on talking to people when letting them know what you do is phrasing it non directly. What I mean is something like "The rentals are going GREAT. We are actually looking to add more units right now while interest rates are low and demand is high. If you know of anyone (even if it is THEM that you are hoping to attract) let them know we are looking or investing partners right now". If they ask more.... '"it is a great chance to get a completely passive return that should at least equal the stock market over time without the worry of a crash."

I will slightly take the 'alternate view' here. :-)

When I was getting divorced it took a while mainly because we were waiting to sell our primary home which she was living in and was free and clear. I wanted to use some of my half of the equity to 'buy out' some of our her share of our IRAs. She had a very nice government pension headed her way and would rather have a little more cash from the house in exchange for some of her IRA. I was all for that as I am self employed and dont have anything other than the IRAs and rentals.

I used 30K of our joint funds and we had a lawyer draw up a document stating that amount would 'come out of' my share of the house proceeds when it sold and she would have no right to ii etc.... I was actually investing it into an LLC which owned rentals, not sure if that makes any difference or not.

Obviously this depends a LOT on how well the two of you are getting along and agreeing on things.

Dan Dietz

This https://www.biggerpockets.com/... article from about a year ago has some great insight also. I am very 'visual' so the charts in it are GREAT to get what @Scott Trench was saying.

Dan Dietz

I/We (4 different but overlapping partners) have properties in 7 different entities and I also have my full time day job LLC that is a family business.

Why 7?! 3 of the 4 of us hold them on our own, and 4 LLCs for SOLO401Ks, SDIRAs, "cash held LLC" all of which are 3 way LLCs, and a forth cash held LLC with a Private Money Partner. 

Each of those LLCs has there own checking account, credit card and record keeping. My two partners run their self owned properties out of their personal checking (but use quickbooks for accounting personal and business) and I run mine as a completely separate account.

I cant imagine if we ran those in 'mixed accounts'. To each there own, but I prefer clarity. It is SO simple at tax time :-)
Dan Dietz

Good Morning All,

I am working on a deal to buy 10-12 units from a seller that only wants to do it with Seller Financing, and most likely with a full amortization instead of a balloon in a few years. This will be a first for both of us.

I have heard there are companies that will 'take care of the servicing  for this. I assume that means I would pay the company, they would do the 'book work' and forward payment to the seller.

Who do you all use for this, and are they state specific in nature? Is there any DIS-advantage to this method compared to other methods out there. It seems like the logical easiest method for all parties involved.

Thanks, Dan Dietz

Hello,

@Ashish Acharya I was just googling on this topic and low and behold it took me back to BiggerPockets Forums :-)

Am understanding correctly?

If a property owner did NOT sell and those properties passed to their heirs at the time of death, they WOULD get 'stepped up basis'?

But IF they sold and 'carried a mortgage via Seller Financing, the principal that remained on that Note at time of death does NOT get stepped up in the same way?

Thanks, Dan Dietz

@Account Closed, you might want to put this tread over on 

Tax, Legal Issues, Contracts, Self-Directed IRA forum

I *think* if buy if from them that recapture tax would to due in year one, to my understanding. I am working on buying some unit from a NON related seller right now using Seller Financing and that is my understanding from him and other things I have read here on BP.

You also want to talk to your accountant lawyer about 'imputed tax rate' I beleive it is called. There is a talk of if here and in one of my posts there is a link to the IRS minimum tax rates..... I think it is around 2.5%, which would only be about 1K per month on 500K. 

Thanks @Carl Fischer that helps with a few of the components I have not considered. I appreciate the feedback.

Dan Dietz

@Carl Fischer could you elaborate on what a 'typical deal' might look like that you have done using these methods?

I am working on a deal of 10-12  units where the seller ONLY want to sell direct with seller financing. Sounds like his goals are to save realtor fees, spread out taxes owed over time (the deal would be around 1M and he has owned them a long time and free and clear) and have an income stream without the work.

He presented 10-15% down to cover recapture tax in year 1 and then 5% and 15 year term. I need longer than 15 years to make cash flow work. He is open to ideas and need to talk to his estate planning attorney. He is in his early 60s and I dont think really needs the money, it will just go into the family coffers so to speak.

A side note is that I am hoping to do this with my SOLO401K, and likely convert over to ROTH also. I plan to hold for at least 15 years and probably for life.

What creativity would any of you put on this? My understanding is that there is a family trust set up, so I assume that even if he were to pass that the income stream of payments could just go to the trust until the note was paid in full?

Thanks, Dan Dietz

Here is a chart https://apps.irs.gov/app/pickl... that I posted in the other discussion that was mentioned above of 'the lowest legal rates', to paraphrase it.