All Forum Posts by: Herb Dorn

@Bill Exeter totally agree, it's worth watching HWM bill! I know you are very tuned into this topic, and I'm curious where you see potential for IRA/LLC concerns?

I defiantly see changes to higher than $10MM combined retirement balances (with painful RMD requirements for the $20MM + account owner), the "closing" of the "back door" Roth (Sec 138311), prohibition of IRA account holder "qualifying" the IRA for accredited investments.

Sec. 138314 ratchets down investments in businesses where the IRA owner owns/controls (from 50% to 10%)

Angel, we are very happy with Directed IRA.  The company is owned by two of our advisors/tax attorneys (Mark Kohler and Mat Sorensen-author of The Self Directed IRA Handbook). Directed IRA setup and fee structure is a bit different than most SDIRA custodians in that they charge a fee, based on owning and "IRA/LLC" which is entirely self directed through a bank account that is owned by the IRA, for which the IRA beneficiary is typically the manager. This structure obviously places the manager in the position to ensure compliance with IRS guidelines (which is fairly easy, and important in my opinion to fully understand regardless of "typical custodian oversight"). This structure has the benefit of not requiring custodian "direction of investment" or similar hurdles prior to making an investment. If you have intention of using your IRA or IRA/LLC for multiple investments throughout the year, or any concern that a "deal" may need to be funded in a "compressed time frame" this is one of the best structures from both an efficiency as well as a cost perspective in my opinion.

You also have the option to aggregate multiple Self Directed Accounts (Coverdell/HSA/ROTH/spouse's IRA/etc.) into one IRA/LLC. This is not without issues (the biggest of which is getting more funds into the IRA/LLC after future contributions), but it is worth exploring if it might be a good fit for you.

On the other hand, if you are not looking for as much control, I have a great deal of respect for Quest Trust Company and it's owner Quincy Long.  

Finally, if you are seeking something closer to home I have great trust (as an educator and someone who has been in this space for a very long time) in Chris Tanner at New Direction Trust Company; they seem to offer many of the above options and we have investors who are very happy there.

I'm happy to share our atty/CPA experiences.

We continue to have a good experience with Loftium and Ed.  For us, the key is that they have placed an excellent tenant in the property.  We are currently extending their lease, it's a very good fit for us at this point in our business/life.  Happy to answer specific questions about our experience.

Riley,  a couple of thoughts as there are some potential conflicting interests in your plan.  What most of us think of as a conventional loan (one with the lowest interest rate and down payment) usually requires that you will be owner occupying the property, and occupying the property is prohibited for "hard money" loans which are typically only for business/commercial purposes (due to CFPB regulations).  Additionally, many hard money lenders will not lend in a jr. position.

BRRRR is usually (though certainly not always) performed with a "private" or "hard money" loan for the purchase (and sometimes the rehab) of the property, then a "take out" loan (long term and at a lower interest rate) is used to "recapitalize" your investment based on the value that you have added through improvements on the property.

We like BRRRR and make loans to borrowers with this exact strategy, but we ALWAYS recommend meeting with a "take out" lender (the one who will finance the long term loan) prior to making any offer on a property. This will give you a good understanding of what the end loan will look like based on your personal qualifications as well as that of the property with your proposed improvements. Most importantly you will have a good indication as to the financial feasibility of your plan.

It is also very important that you speak with a loan officer who has completed similar transactions.  This is not a typical loan.  There are many examples where lenders have assured an investor that there would be no issues with the "take out" loan yet they subsequently failed to get the loan through underwriting... becoming a huge problem for the investor.  While we have no affiliation, we refer our borrowers to a lender who has successfully completed many (I believe 100's) of "take out" loans.  I'm happy to share his info if would be helpful.

Again, remember you can't mix a conventional loan with a hard money loan in most situations.  Maybe someone else can chime in if they know of a lender who will originate a loan with consideration being given to the income from renting one of the rooms/house hacking.

Kudos to you for doing the research up front, it's defiantly something that needs to be well planned for the best execution.

Larry,

Couple of recommendations, let them know we sent you their way and any feedback if you contact them please:

• Ridge Construction Inc
• Vern Robinson-
• We have not used them personally, but they are good people, sponsors of ICOR (Investment Group), and they specialize in ADU work, worth talking to.

• Altitude Construction and Remodeling
• Armando Delgado
• Trustworthy, fair priced, lots of work with investors.

BP will not let me post phone numbers and email addresses, so please reach out to me if you are interested in contact info for either.

Best,

Herb Dorn

@Nancy Wallace Yes on both, CBIZ for STR insurance.

Josh, 

I'm only answering based on my landlord experience and not as an appraisal expert, nor offering legal advice on building code.

I would, without a doubt, install egress windows if renting the property, but only in the bedrooms, unless you think there is a high chance that the "living room" will be used as a bedroom (based on layout primarily).  $10K seems high for 3 egress windows, I would expect 3k (or less)/window, and quite a bit less for 3 windows at one site, but this does depend on the existing window width and probably other factors...either way, I'd get more bids on this (I can possibly give referral-though it's been a while).  

I would get one or more electrician opinion's on the panel/s (I do have a good referral here) as to both safety and code compliance.  My guess is you will not see significant value add with an appraisal (I am not confident honestly).

I would not replace the fence (repair it if you are going to allow dogs), but don't replace until you sell (or you are embarrassed when you look at it).  

Finally, don't forget smoke detectors in every bedroom and CO detectors on every floor.

We did sign a lease with Loftium (two months ago, worked with Ed Dugan).  I have zero complaints thus far.  They have performed exactly as represented.  Make sure to read their agreements, and as you said, if it's a good fit for you (which it was for us), I don't see any downside.  They were willing to add a couple of items to their lease which we requested (lawn maintenance and snow removal I believe).  Ed was really easy to work with, and so far so good.