All Forum Posts by: Steve P.

I did not see your prior post. My experience says that if you buy a single family home to rent out in an SDIRA the best you can do for a low down payment on a non-recourse loan is 35% down. Therefor, your $25,000 figure for your cost to get a home purchased and rehabbed, and I don't know if this is a single family home, is $25,000/.35 or $71,428 value of the home that the lender is financing, a loan of $46,428. You will have to put down a higher percentage on a condo or multifamily.

You should educate yourself on the Unrelated Business Income Tax (UBIT) for situations where you finance more than 50% of the value of the property in an SDIRA. I think I recall that is how it works anyway.

You have the tenant write the rent checks to "_______ Trust Company FBO _________________", where the first blank is the custodian of your SDIRA funds and the second blank is your name. "FBO" stands for "For the Benefit Of".

Since my rental condo in the SDIRA has an HOA and I purchased it 6 yrs ago brand new there is not a lot of maintenance needed. I do not pay myself for maintenance and management. I understand that if I were to do so it would create a problem with the IRS. For any large jobs I hire help and I charge it to the IRA which has an account at a bank in the area.

Rates on non-recourse loans are much higher by the way.

I'm sorry I left a lot unsaid. The tenant was on month-to-month so after the two sewer backups and even 4 days before this his claim the refridgerator quit and ruined $1000 worth of food and wanted reimbursement (The fridge was working and some packaged food in the back was frozen solid, it appeared unfrozen food was purposely stocked before I got there), I asked him to leave at the end of the month. I hadn't yet found the purposeful plugging of the sewer until after he left although I suspected it.

The reason I didn't discover the plug in the beginning was because the rooter company went through the cleanout which is down the drain from the floor drain by 8 feet. The rooter man pulled back spidery roots 90 feet out at the tap and it was assumed that caused the backup and he said material from the back up can flow back to the drain and plug it.

The reason we didn't open the floor drain iron grate was because our efforts to do so did not work. The screws became stripped and wouldn't budge. And the thought was I would deal with that later.

This laundry room is in the basement and the carpet and total space that had to have water restoration twice was all in the basement.

I'm pretty sure the tenant glued the screws in place and eventually I had my contractor drill the screws out after the tenant had vacated.

After the second back up I was very suspicious, of course, and after he had moved out I spent $108 again to have the rooter man destroy the grate and go in the relief hole that joins the main drain line behind the trap with a smaller rooter and vibrate the heck out of whatever he gets his rooter in behind. Lo and behold something starts coming closer and closer to the opening, we pull it out and it is expanding foam insulation.

I don't have any smoking gun answers as to why he did this. He had been a tenant for 5.5 yrs. and I had a few smaller problems but nothing like this onslaught all of a sudden. There is more to the onslaught than what I have said but you can see how lengthy this gets and I am trying to be brief believe it or not.

My best guess as to "why?" is that he is trying to come out money ahead. That is the best I can do without actually knowing.

I am meeting with a collections attorney this morning and I met with a collection agency yesterday. I am not sure whether to spend the money or let it go as it may end up costing twice as much to pursue an individual that can't pay the damages anyway. I can keep the deposit and leave it at that although he has made it clear he will pursue legal action if he doesn't get a substantial part of the deposit back. (remember he doesn't know I found the foam plug).

Did you know there are tons of websites devoted to "how to screw your landlord"?

I spent some time looking over these sites and if my tenant was on the sites, and I believe he was, that explains a lot. He would get a lot of encouragement online. Our Community Development is owner-landlord unfriendly and enables tenants. The council meeting this last Monday was inundated with angry realtors, insurance agents, property managers, rental owners, etc. that spoke their minds about the even tougher new codes that will be implemented Jan. 1. I am getting out of this business as soon as I can untangle myself from it.

I am the owner landlord of a duplex in which my tenant (he doesn't know I found his malice) took a can of expanding foam insulation with a long tiny tube and squirted it into the trap below the laundry room floor drain. Then he filled the room with water causing two replacements of the rec room carpet and pad and thousands in water restoration twice in a space of two weeks.

Has anybody else run up against a tenant that has been malicious, especially in this specific manner and what was the resolution?

I am going through something similar but we are not that far into it yet. It disturbs me that the tenants won. Did you have a lease that was clear about damages?

This is a good solution. They would also miss out on the lowest interest rate in 50 years but those are the breaks.

The son-in-law has joint custody and is paid up on all requirements.

That's a great rundown Jon. I always expected to be on the deed and follow up on payments. If they did not pay on time or did not pay that would trigger the next step which would be to sell the property and recover the equity.

But your discussion about affecting my credit score and my ability to borrow I know but had not really thought out how important that is to me and could change my mind about pursuing this house.

I understand what you are saying about the 70% rule but also factor in that the home is in the right location at the right time(low interest rates), and they can live in it with no great fix up expense for years if they want. It is in pretty good condition. Most foreclosures I have viewed are pretty rough and need immediate repair. And factor in FHA and then do you still go by the 70% rule? Got to consider the other points which are in fact as important as your points. The criteria is a little different for determining a great deal.

Bill, I don't think this is cosigning exactly as I have an equity interest and a co-borrower would get an equity interest. If my daughter didn't follow through there would be consequences and I would still make out well. At least that is my plan at this point. Whether it is executable remains to be seen.

Yes I will try to buy it outright and have them rent but I was at first trying to preserve their ability to get started on their own with low down payment, low interest rate, and create equity for them.

If I buy it myself the interest rates for investors are higher and I will have to pay a 20% down payment along with put out some money for minor fix up. That's ok but I wanted them to get started on the responsibility of homeownership. I think they are ready.

I think it is time for me to go after it on my own as you say. The forum has been helpful with lots of useful discussion. Thanks to everyone who participated.

ecycletrike

These are great answers. I would think the loan officer would have asked me if one of my properties could be used as collateral if that was allowed under FHA first time home buyer.

Since I first posted I have found out that the co-borrower has to be related to us to help us qualify for FHA first time home buyer.

So that means coming up with 20% down payment and I assume going conventional.

I would make this arrangement an investment for a co-borrower. We should be able to create $70,000 to $80,000 equity on this rehab. At a specified date we would buy the co-borrower out. Just thinking out loud.
That's why we didn't want to wait although waiting is an excellent answer.

Again, I don't think assigning rents is a method FHA accepts but maybe so. Again, I think the loan officer would have brought it up.

Again, Jon has helped out with a great answer and again I wasn't explicit enough. It is the creation of equity along with right house in the right location at the right price for a very good deal that makes us think that another deal quite like this won't appear again at the time we are ready. I would not have continued to pursue this if I didn't think it was the only chance we will get at a deal quite like this.

Thanks for posting

The loan officer said we need another "stong co-borrower". Her words. The daughter and son-in-law will not be strong enough borrowers.

The loan officer considered me a strong borrower, loosly speaking I'm sure, as I have rentals, notes, and guaranteed income. A substantial note I made recently involved some borrowing on my part. Unfortunately, the note will not begin paying off for a little while. Hence, higher debt-to-income ratio. It is going to pay well but was before this deal arose. Maybe just the fact that my debt-to-income ratio is temporarily high defines me as a weak borrower, well then I will just have to live with that. You answered with a question Steve B. so I am not absolutely sure what you are intending to say. Again it is a matter of word definition I suppose.

The lender has its debt-to-income requirements that I can't meet at this time but my credit is flawless otherwise. I realize I did a poor job of giving you the proper perspective and I apologize. I suspect you are saying I must be a weak borrower but it is a little hard to read between the lines.

As to who is going to be stuck making payments, could you fill me in on that, if you know how that works? I haven't co-borrowed with anyone before so I don't know the answer. If the bank goes after the borrower with the most first then that would likely be me as I have 5 income producing leases, income producing notes as well as guaranteed income. In 3 months this would not be a rejection but the deal we want is now and not in 3 months from now although we probably will find something good in the future as well. It is not the end of the world for me but it is a lot of disappointment for my daughter.

Should I read into your statement Steve B. that l am asking too much of someone to invest in this deal?

I do appreciate your reply as it gives me some perspective that is much needed. Thanks.

Great foreclosure deal in grandkids school area that my daughter & new son-in-law would make very good use of. But they can't use their credit as they both have child custody cases on going. My daughter's ex is tens of thousands of dollars behind and will never make it up. I have good credit and am in on the deal as a co-borrower. I have good credit but the debt-to-income ratio is high. Just need another strong borrower but can anyone give me some ideas how to structure a win-win for a co-borrower co-investor. How do we find this investor?

Need to keep it FHA so we have 3.5% down pmt. only. Home is worth $90,000 more than we buy it for if it is put into top notch condition which would cost about $15,000. Payment with mortgage insurance is same as they are paying in rent where they are at now.

If I make lots of offers I have to put up lots of earnest money I would assume. Maybe you don't mean to make simultaneous offers...or do you? You may end up with multiple properties. Can a prospective buyer make multiple offers and then drop all but the one that is accepted?You can tell I am not very knowledgeable about this. Your knowledge is valuable to me. Thanks for the last reply.