All Forum Posts by: Kathy Braschler

Usually a "subject-to" deal is buying the property subject to the current financing...the current owner would still keep the mortgage in his name, which your seller wants to be free of, so it would not be a subject to deal in the usual sense. My understanding is that ARM loans are assumable if you qualify for the loan otherwise. The lender would have to approve you taking over the loan. The subject to part I am talking about is the purchase price you would agree to give the seller. Is he concerned about losing any potential appreciation over the next three years? Are you looking to get the best deal possible? And Sekelle brings up a lot of good questions. What are your plans for this property? Will you keep it as a rental for just the next 3 years since the tenants could exercise their option at that point? Will you try to get a super deal and try to wholesale it to someone else to get some quick cash?

Since he has an ARM, you should be able to assume his loan, assuming you would qualify to do that. The tenant buyer would have $18,000 credit towards the purchase price after five years bringing the balance owed to $164,000, so I would not offer the seller much more than that. Or you could write a subject to type deal and offer some of the future appreciation, should that occur.

I am a little surprised that the taxes and insurance are not escrowed. How much do those amount to every month? It would nice to have positive cash flow on a monthly basis.

Hi Brian,

I can feel for you. I had tenants who finally informed me they had bedbugs that they had tried to deal with on their own and were not successful doing so. Since it was a duplex also and I didn't want the problem spreading to the upstairs unit, I told them I would pay for it (since they couldn't afford to) and they would have to pay me back. I had them sign a promissory note stating they would pay me $100/month till they had it paid off. I used one of those credit card convenience checks and the interest rate was only 2%.

I ended up using the thermal method to get rid of them. The provider offered a 90 day guarantee...if the bugs came back so would he. It was not cheap. $2000 for the 2 units. I didn't want to take a chance that those little critters would decide to move in upstairs. And I paid for the upstairs unit since I figured it was not fair to make the lady upstairs pay for it.

Some might ask why I didn't just spray. Well, I have a brother who lives in a group home who told me about the bedbug problem they had at his place. He said they came and sprayed and sprayed and could not get rid of the bugs. So the owner of the place broke down and got the thermal guys to come. And I think they still had to come and do some spraying but they did get rid of them. So I didn't want to mess around. You can get multiple generations of bugs in a short period of time "trying" to get rid of them. I was lucky. The first treatment did the trick. And the 90 day guarantee was another selling point. Another reason I chose the heat treatment was that the downstairs tenant was pregnant and I didn't think it was a good idea for her to be around a bunch of bug spray.

And then my sister's 6 flat in Chicago had bedbugs and she ultimately used the heat treatment too after the spraying did not work. Be sure to get them to give you some kind of guarantee. If the bugs are going to come back, they will notice them within a couple of weeks. So even just a 30 day guarantee, shoot for at least 60. Good luck to you.

I ran into some good information on solo 401ks and the UBIT:

http://www.irafinancialgroup.com/the-solo-401k-and-the-ubit-rules.php

A couple more things I am wondering now,

1) Do these custodians/trust companies have their financials audited by an independent CPA firm and

2) Do they have boards of directors?

Well, I have been doing more research on sdira and solo 401k and have found out that New Direction IRA is actually a subsidiary of Entrust (I got that wrong, I thought it was Intrust). I ran into the following:

http://www.courthousenews.com/2012/08/01/48884.htm

I'll tell ya, it makes you want to put your money into a CD at the bank!

Next I will look at IRS form 990 and instructions & any related publications and see what that may indicate for the UBIT. I am afraid I may find that it is not worth the hassle. Has anyone partnered with their sdira? What type of taxes resulted from that?

@David Beard I would assume that the IRS deems rental property income to be a passive activity, and expects you to report it this way.

Since rental income IS passive activity that is why I would set up a separate management company and pay myself a salary to be able to have earned income and contribute to a retirement plan. The rest of what you say is interesting though and maybe should be considered if it will help you pay less in taxes. I am just a poor person and don't have to worry about the upper limits on SS. My taxable rentals are held in an LLC. I am fairly certain I would be allowed to do this. A lot of S corporations "rent" facilities from their owner and that is legit. Maybe Steve could weigh in on this?

Thanks for your input Steve. I was aware of the taxes on "earned income". I too am an accountant and tax preparer. And sadly I don't have any other earned income. My main concern is how the UBIT applies to the i401k because I know that money can be taxed at up to 35%. I may have to find and read some IRS publication. And I'm sure you know those are such a joy to read! And to throw one more option into the ring, I am looking at New Direction IRA located in Louisville, CO. I already have a small IRA account set up with Equity Trust but I just read somewhere that they are involved with some kind of lawsuit ala Bernie Madoff and Intrust is also involved? It's all just kind of scary.

I am looking into this sdira stuff too. I believe if you want a solo 401k you have to have a business? I know the 401k allows for larger contributions than an ira. So, what I was thinking was to set up an S corporation and pay myself a salary for managing my rental properties that I own outside of my ira. May as well make the cash flows of my taxable rentals even more useful. And then I would have "earned income" to be able to set up and contribute to an i401k. But I am still wondering about the UBIT. What kind of situations/events would trigger that?

The folks that do goldmine are the same ones who have the myhousedeals*com site and I did sign up there because I thought they did offer a lot of value even though they don't have any deals in Denver. They have a "credibility package" that you can use to approach their private lenders that they also have on that site...so I will let you know how it goes. Have to finish up on a rental vacancy and then will see about getting financing for some more properties!