All Forum Posts by: Daniel Dietz

@Chris Mason I think I got the FHA and FNMA things mixed up in my writing, thanks for clarifying.

My thought with 'using up' the FNMA 10 loan limit before I do any more commercial loans is that I do not want to 'take up' the '10 property limit' with all commercial loans, that even thought they are easier to get are at way less favorable terms than the FNMA ones are. 

They are a number of off market very well maintained properties (2 & 4 unit places) that I have been negotiating on in great neighborhoods. They would fit better cash flow wise on a 30 year lower interest note. So, if I am following right, I would be better off if I want those on a 30 year fixed rate I should do that BEFORE I do any more commercial note purchases of residential properties? 

Thanks, Dan Dietz

@Albert Bui thanks for the fast reply. 

So if I am thinking right, a person would be best off, if this is allowed, to 10 FNAM loans FIRST, before they have done ANY 'commercial' type loans for residential rentals?

My thought is that if you do the 10 FNMA loans first BEFORE you have any more 'countable' loans, you could THEN still do a commercial loan, assuming they do not use 'the 10 limit'? Am I way off base here?

Thanks, Dan Dietz

Hello All, 

Some good discussion going on here. 

So far I have all of my loans as 'commercial' of some sort, as I own everything in LLCs WITH persona gaurantees, or SDIRA with non-course loans. The loans I have in the LLCs are two loans (differnt LLCs) that each hold 3 or 4 properties under each of those loans. 

Am I correct in hearing that you Pros are saying that each of those will 'count against me' as 1 of the 10 'allowable' loan under FHA? I had never been aware of that before.

As far as having multiple properties under a SINGLE loan to my LLC with a personal guarantee, is there any benefit to that to 'have it count as less loans', or is it counted once for each property (vs once for each loan, no matter how many properties?

Thanks, Dan Dietz

Thanks for the replies so far. 

We have a lot of the details mentioned worked out. One of the things in particular I am wondering about is ideas for 'early out provision' if either parter wants out before the agreed to investment timeline.

Dan Dietz

@Kyle Perry I am in the midst of setting up a very similar thing, both with family members and other 'silent investors'. 

My current partners and I have 25 doors and are out of cash so to speak for more. So how do we get more units? Private, Silent Partners! 

The basic structure is for the partner to bring the down payment of 20-25%, and we do ALL of the 'work', meaning finding properties, rehab management, finding and placing tenants, ongoing PM, and all financial planning too. 

With this structure in our market we should EACH be able to make about an 8-12% compounded return over 5-10 years. For them it is probably safer than the stock market and they can use 'cash' or Self Directed Retirement funds. We make a better return than we would as just being a PM for them and participate in the equity growth. A  true 'win-win'

Dan Dietz

@Bruce Gardner, just an FYI for you or others.... if this is residential properties.

We are fortunate to have found a lender in our regional market, a smallish bank that holds things in house, that gives GREAT terms. Our last one, about a year ago, we got 4.75%, 20% down, 25 year amortization, and locked for 10 years. After that, the most it can raise is 1% per year and a max of 6% (10.75%) increase.

Just good to know what is possible out there. I checked with both my normal business and personal credit unions and they could not come close to that. 

Dan Dietz

@Bob E. I am in Wisconsin, but not the Milwaukee market. I am an hour north of Madison. The best portfolio lender I have found is Paper City Saving in the Stevens Point / Plover area. The loan officer we use is David Cooper. I have his contact info at work but not with me right now. If you cant find him doing a google search send me a PM and I'll get it for you. 

The last loan we did was a little over a year ago and terms for duplexes was 80% LTV, 4.75% amortized for 25 years and locked for 10. That was by far the best commercial loan we could find.

Dan Dietz

Hello All, 

I am looking for feedback or examples of things to cover in a '50-50' partnership that will be investing in buy-n-hold rentals. One partner will 'silent' and be bringing the down payments of aproxiamtely 20-25%, and the other partner (me) will be doing all of the aquisition, rehab management, finding tenants, ongoing PM, etc.....

I am currently involved in 3 other partnerships that own buy-n-hold rentals, but all of them are 3 people, so '33-33-33'. Majority vote rules for most things (unanomous vote is needed for some). This simplfies things in some ways as there is never a 'tie vote' ;-) 

I am primarily look for ideas of how to deal with; what if one partner wants out before the target investment timeline (10 years +) , what to do in case of the death or incapacitation of a partner, and things along those lines. 

In my other partnerships, we have written ways of valueing properties if a partner wants out, so I think I have that covered. 

These would most likely be set up as LLCs, as my others are also if that makes any difference.

Thanks, Dan Dietz

Thanks for all the feedback from everyone. I have only bought properties so far, so the taxes upon selling are new to me, and probaby a few year off, but I want to plan ahead. 

So I can understand fully, in a simplfied scenario, if I have 30K of ordinary income, and I sell a property or stock or what ever and have say a 40K gain (let's leave recapture out of it for now) . So my 30K of ordinary income is taxed at 12%, and so far I am in the 0% capital gains group. Once I add the 40K in capital gains, is the first 8K taxed at 0% UP TO the next bracket (about 38K I think), and then the other 32K of capital gains would be taxed at the 15% capital gains rate? 

Thanks, Dan Dietz

Hello All, 

Very interesting discussion, although  a bit complex for us relative newbies ;-)

One thing I have read else where and also kind of mentioned above is about the tax rate on the 'depreciation recapture tax'. I usually see it referred to as being a 25% rate, with no reference to what tax bracket the taxpayer is in. Above, and a few times elsewhere I have seen it referred to as 'taxed at ordinary income tax rate', which I tax as meaning if I am in the 12% bracket, it would be at that rate. 

Am I misunderstanding something here?

Related to this tax and capital gains, in what order are they applied? Meaning if I have say 30K of ordinary income and in the 12% bracket, and I then sell a property where I have say 10K of recapture and 10K of capital gains for a total of 50K. 1) Does my ordinary income tax rate stay at the 12% 2) Is recapture taxed at 12%, or added to #1 and then 22% (rate for single @ 40K), or the 25% we hear so much about 3) Does capital gains tax stay at 0% since my regular ordinary income, not counting the recapture amount, is in the 12% bracket?

Thanks to all of you who so willingly share your knowledge here, 

Dan Dietz