All Forum Posts by: Marc M.

Thank you all for the replies! @Mark Nolan I read through the rules you linked to and it seems like the IRS keeps things a little vague with this:

Gains and losses from disposition of property. Also excluded from unrelated business taxable income are gains or losses from the sale, exchange, or other disposition of property other than:

1. Stock in trade or other property of a kind that would properly be includable in inventory if on hand at the close of the tax year,
2. Property held primarily for sale to customers in the ordinary course of a trade or business, 

The last part feels like interpretive case-by-case basis. It would seem that holding a property for at least two years would be passive enough.....

Best,

Marc

@Jennifer Wiggins I read through a number of forum posts on this subject a couple weeks ago before renting a SFH that I am managing for another investor. Many people on BP suggested MySmartMove.com and I tried them out. It was very easy to set up and I had the tenant pay their own screening fee through the website (which also helps weed people out who aren't very serious). Other's mentioned Experian.com, but I had trouble registering on that site for some reason.

I also have potential renters fill out an online rental application prior to viewing the property that asks standard questions about income, employment, evictions, etc. I just make google form and email them the link after they inquire about my craigslist ad. Again, this is a barrier for some people the moment they have to disclose their income and how long they've been at their current job. For this particular property, I had it listed for 1.5 weeks and had about 7 inquires and 2 people filled out the google docs application and 1 person followed through with the background check...and that was all I needed! I qualified a great tenant and signed a year lease.

Good luck! I'm sure it will work out great.

Hello BP,

I have a small (<$50K) Roth IRA that is currently 'self-directed' with Etrade to purchase stocks. I have read many posts on here about buying Real Estate with an IRA or Solo 401k (which I qualify for, but don't have any self-employed funds to contribute right now...and unfortunately cannot roll my ROTH IRA into it). So, I have a few questions about SDIRA LLC's I'm hoping some BP members can answer:

1) Can I move part of my Roth IRA funds to a different Self-Directed Custodian and continue using Etrade to make security investments?

2) Because my IRA is small and I'll be purchasing cheap properties through tax-auctions, I want to avoid the transaction fees of companies like Equity Trust, uDirect, Pensco, etc. by making my SDIRA the owner of an LLC and me as the managing member....that being said, is there another custodian besides the big names that would better for this arrangement?

3) Is there a hold period for acquiring and selling assets that avoids UBIT (similarly to holding a property for 2 years to consider it a longterm capital gain)? In other words, at what point does wholesaling cease being active and considered passive based on how long the asset is held in the SDIRA?...I'm considering purchasing vacant lots as well as rental properties outright and having PM mow the lots and deal with rentals. 

Best,

Marc

@Kevin McDonald When I have an out-of-town tenant wanting to sign a lease, I have them do electronic signatures on a pdf lease I send via email (and the I sign it electronically afterward and email them the completed agreement). I've always felt pretty comfortable with that. The notary idea would be the most rigorous method, but I don't think it's necessary, and it will take at least a week round-trip via snail mail. But ultimately it is what will give you the most peace of mind as the landlord. 

@Curtis Bidwell and @Chadd Naugle, thank you for the thoughtful replies. I completely agree with both of your points....especially that the realtor fee can be avoided (either hold forever or fsbo) and there is value in being the guy who keeps the property with future appreciation....not to mention that this property is happily cash-flowing with leases signed for the next year! 

For now, I'm just staying put with the way things are since the number I have been offered for my interest is so low....keeping the property with an unruly business partner is more appealing than seeking a judicial dissolution. And for anyone else reading this thread....learn from my mistakes! If you don't have an operating agreement for LLC....even the most basic one, you'll likely default to the state's LLC statutes, which are fairly restrictive and pretty much force you to sue your business partner if you want out. My attorney said this would cost between $30-40K. Unless you have a ton of equity in the deal winding up in court is a losing game.

oooh...that excel chart didn't post well....let me try again:

Principal: $148K

Appraisal: $200K

Bank Account: $20,500

Total Equity: $72,500

Equity Split / 3: $24,166

I did what most people warn against....getting into business with a family member, and starting an LLC without an operating agreement. Long story short, we need to end our business ties, but there is disagreement about what the buyout price should be for each partner's equity stake. There are three of us in the LLC, and one of the partners will not consider any option other than keeping the property (SFH) for himself....he also has the most conservative calculations when determining the price he'll buy at (no surprise!), which includes realtor fees. Here is the state of things:

The Question: If one of the partners will end up with the property....ie: there is no realtor sale, no closing costs, no vacancies etc. is it still standard practice to value a property with those costs factored in? I say no, but the partner doing the buying is of course adamant that these should be figured in because he will eventually have to sell the properties in the future, which makes his buyout number close to $17K. I have offered to buy him out at the $24K number, but he won't sell to me. 

What do you think BP members? What is a fair, by-the-books method for valuing a single-family rental to dissolve a partnership without selling the house on the market at "market price"?

Thanks for all the great responses!

I agree with you @K. marie P., that I do not want to have to interrogate someone's debt picture. I recognize that I'm not qualifying someone for a mortgage! 

The person's take home pay is $3200/mo. (although they said on their rental application that it was $4200 after taxes...which may be the alimony or child support @Randy E.

 mentioned). The monthly rent for the property is $1550, so the they're a little low on the 2.5 - 3 x rent range, but not far off either. I feel like I could go off of credit score alone here, and if it was my own property I probably would, but I'm trying to be "by-the-books" as the third-party manager for this one....so thank you for all the second opinions here!

-marc

Hi Folks...I need some BP advice:

I am managing a rental property for a family member. I found a person who wants to rent the place (and thanks to BP forums, I used MySmartMove as many people recommended)....they have a 752 credit score, but are carrying a lot of debt, which includes a mortgage although their house is under contract and will close in a week or so. This person has a good, long-time job, but when I subtract their after-tax salary from their monthly debt payments (including the cost of renting the house I am advertising), it's in the red by $900. When I factor in the sale of their own house (assuming their mortgage payment will disappear), it's still in the red by $100. If they pay off some of their other debts with the proceeds of their house sale it might help out....there is currently $37K in equity in the house.

What do you think? How much should I scrutinize someone's financial picture. They've sent me pay stubs, banks statements, paid for their own credit and background check. I can't really call a previous landlord since they already own, but their credit score is solid...no history of late payments or anything. 

Looking forward to your responses.

Best,

Marc

@Ron S., I think you can advise on this particular case: The property I am interested in has an outstanding mortgage of $176K and went into foreclosure. The owner had tried to sell it for $270K and then dropped the price to $245K. Yesterday the bank put it up for auction at the weekly foreclosure sale at the courthouse for $76K and no one bid on it....so I assume they ended up with the property as an REO from their credit bid, right? And now the 6-month redemption period begins.

So what are my options as the investor? From your previous comment, you warn against trying to get the owner to quitclaim the deed because I'd be on the hook for the original $176k? Or can I get the deed and then pay off the bank the $76K from their credit bid? 

Thanks,

marc