All Forum Posts by: Daniel Dietz

One advantage of the TIC is that an owner can sell, or a potential buyer can buy in, using a 1031 exchange on just part of the property. That can not to my knowledge be done in an LLC.

Hi @Greg Neuman, We use Paper City Savings in the Wausau / Stevens Point area and they have been great to work with. Dave Cooper is the Lender their we use. Tell him I sent you.

Dan Dietz

@Trevor Scheiderer some of that has to do with the age of the building too. 

On most of ours they are less than 25 years old, and we figure 15% of rents for repairs and a capital expenses fund. We also figure 8% vacancy even though we run under 2% (you never know when economics might severely shift) and 8% for PM even though we self manage in case something changes in our ability or desire to self manage. Essentially that extra 6% in vacancies and 8% PM goes straight to 'profit'. We think of it more as a 'wage' for our work than a ROI since it IS our work that is creating it, NOT the property if we were hiring outside PM.

On the few older ones we have we bump that repairs and cap ex up to 20%.

When purchasing a NEW properties most have been in good shape with no deferred maintenance. There is one that we are looking at right now where we can tell the roof, water heater furnace and AC all have less than a few years left in them. We are factoring replacing those upfront into our potential offer price to be able to get things up to date before we ever place a tenant.

We have 29 units right now and I would just caution you that I have yet to ever see the 'listed expenses' cover everything that is going on. One thing that is almost always left out is how much you should be budgeting for longer term expenses and capital improvements that might/will be needed. How much do you need to set aside for 6 roofs, landscape updates, exterior rehab if/when needed etc.... 

My theory is to use my own conservative figures and go from there. 

My 2 partners and I own properties in 7 different way! We each own some personally in our own names, we have two different entities for our retirement accounts - one for those we hold with our SDIRAs and a separate one for those we hold with our SOLO401Ks. In the cash world, meaning non-retirement but in an LLC, we have two different entities - one that we'll call RSP is the 3 of us each being 33.3% owners and the other our LLC, RSP, being a 50% owner and a Private Investor being the other 50%.

We keep a separate checkbook for each of these, and each of those has a debit card for that account so all supplies can be billed to the properer account and we dont have to deal with one account reimbursing the other. 

One potential disadvantage would be *if* you are looked in for that entire time with no chance to prepay it off is what will interest rates be at that time? For example if you could lock it in now for say 5-6%, might the rates be in 7 years? If they go up to say 9-10% would it still be a good deal with that refinance in mind?

My two partners and I do buy-n-hold rentals in both our SDIRAs and SOLO401Ks and love it. We went this route as that is where a large percentage of each of our assets were/are.

The ones we have in the SDIRA we pooled our 3 SDIRAs and just purchased outright (no loans). Those earn about 8%-10% cash on cash and probably will do about 12-15% with appreciation when/if we sell some day. 

The ones in the SOLO401Ks we have loans on at 50%-60% LTV. Those have a higher return with the leverage. There is also less tax implications/paper work if borrowing in the SOLO401Ks.

We also own properties outside our retirement funds 'the normal way' :-) On those we have started using Private Money Partners to bring the down payments and we do all the work from start to finish. 

For providers we use @Dmitriy Fomichenko and couldn't be happier with his knowledge and service. My advice would be to call several  of the providers here on BP like him, @Brian Eastman, @Carl Fischer or others that chime in and see who is the best fit. I can almost guarantee that you will benefit from personal service level compared to 'the big buys' in this space. 

@Account Closed what I have found is that with an LLC involved (I own property in 4 different ones and my own anime) that the only option is portfolio or private lenders.

Our portfolio lender is great, but they only lend locally. They do not care how long funds have been in the account, we are able to get current terms of 5.375% amortized over 25 years and lock for 10 year with a max increase of 1% per year after that and a cap of 6% increase. That is with 20% down, and an owner can carry a second as long as the DSCR remains at 1.1 or better. Our personal goal is to keep the DSCR at 1.2 or better.

To us, the security of it being in all partners names (through the LLC) and the ease of a partner getting out if desired is easier too, as shares of the LLC can just be sold with no refinancing needed.

@Justin Windham with the method you mention above of having 'two different accounts within the SOLO401K, I assume that ideally you mean two separate checking accounts both 'owned' by the same SOLO401K? 

If so, can those two checking accounts both be partial owners of the same asset, say a rental house? Meaning one puts in 50K and the other 50K on a rental house? My understanding is that my SDIRAs, which one is Traditional and one a ROTH, can NOT do that, at least not easily.

If it is possible to have those two different accounts 'co-own' property, does it make a difference if it is bought that way from the original purchase, or can we convert part (or all) of it be converted over to a ROTH as I go?

Thanks, Dan Dietz

@Jorden Glasco obviously there are a ton of things to think through before you go into this endeavor. Some good advice that I got way back when I started in business is 'plan that something IS going to go wrong'..... meaning going broke, death, divorce, difference of opinion etc....

How my partners and I set up our buy-n-hold rental business on a VERY basic level is this........ We each contributed 33.33% of the capital. We keep track of hours worked using the app Toggl. All hours get paid out at $24 hour. After those hours are paid THEN all profits are split according to percent ownership. This way, if on a given project one partner puts in 10% of hours, another 20% of hours, and the final one 70% of hours, each are compensated accordingly.

Dan Dietz