All Forum Posts by: Marty Sprong

I'm a huge fan of using your SDIRA to invest. The important thing is that you follow the rules so you do not "blow it up" as we say, by doing a prohibitive transaction. Most people use their SDIRA or SD SoloK to lend and JV as the "money person". I would be careful with owning real estate in your SDIRA just for liability reasons. It can be done, but you will need to make sure you are are not involved in running it, managing it, and swinging the hammer. You definitely cannot live in it if owned by your IRA. I suggest you educate yourself on SDIRAs. A lot of free info is produced by custodians like directedIRA and Equity Trust for example. Good books can be found produced by Matt Sorenson (matsorensen dot com ) and Dyches Boddiford (assets101 dot com).

First of all, don't be surprised if the CPAs (if not experienced in RE investing) tell you you can't self direct, or that you shouldn't because it's too risky. You don't want that person as your CPA. 

Questions for you:

1. What will your role be in these flips? You have to be careful in what services YOU are performing. You can't be physically doing the work. You can manage it, but you can't be swinging the hammer. You will be subbing out the work. 

2. Are you self employed? Can you set up a side hustle so you can set up a Self Directed SoloK? Safer to have the funds in the solok vs IRA and you can contribute more per year.

3. You mentioned UBIT in the subject so I assume you are aware of it and that you probably  will be subject to it if you do a number of flips year.

4. My suggestion is that your IRA/solok be the LENDER in the flips. Even better, use an equity participation note where you charge for example 5% interest plus a percentage of the profits. Some states may see that as a partnership, others will not. Having it drafted as a note is smart because interest is by rule, not subject to UBIT.

5.Why would you want to invest in a syndication where you have zero control? Be careful. What rate of return are you happy with?

6. Why would you you want to put money in the stock market where again, you have no control. Diversification? Okay fine, but this is Bigger Pockets, not MotleyFool.com, so I am going to cheer for RE instead.

7. Where have you learned about SDIRAs/soloks? I suggest these two books:

https://assets101.com/shop/solo-401k/

https://a.co/d/8DSEYgu

Best, 

Marty

I have read of people getting HELOCs on their rental property, but I don't know how they are able to do it. I called around was was unsuccessful. What is the rate you are paying on the Hard Money? My HELOC on my personal residence is at 8.5%. How much can the house afford to pay in terms of rate? Maybe you can find a private money lender who is okay with 9 or 10% long term if that still works for you. Or have you discussed extending the loan for another year in hopes rates go down. Don't sell it unless you plan to do a 1031 into something better.

Much better return on your money! However if/when this tenant leaves, how easy will it be find another tenant? If you do eventually upgrade to an ADU, you will want a separate meter, so if you could put it in now, would that be something you would do? How much would you need and would you be open to private money to help you get there?

You either need get a loan or you could bring on a JV partner to cover your credit card debt and whatever else you need to get it done/ready to rent/flip.

If you need a loan, you could get private money until your credit is good enough to refi. If you plan to flip, then you just need short term private money/JV money.

Marty

Most likely it's not assumable. Get details on the ARM. When does it adjust? 5 to 6% isn't that great of a rate to subto with, but if it saves you the hassle and fees, then it makes sense. Not enough info but I'm assuming you have done your number crunching and paying retail still makes sense? I would ask more questions to the seller and find out what his motivation is to sell and what is he going to do with the money. From those responses you can start thinking more creatively. Instead of asking for free advice on BP that may or may not be sound, I highly suggest you get involved with your local REIA and network with experienced investors who you can JV with. Giving up profits in exchange for an education that will last you a lifetime is priceless.

You need to the offer that makes sense for you. Don't worry about what the owner's all in is. At the end of the day, the numbers have to work based on the offer you make. I know of a very smart investor not too far from Atlanta. I'll PM you with his info. He may want to JV with you, or structure the deal for you for a small appreciation fee, or profit sharing.

Or Bring in a JV Partner with the cash you need. Or Is it a flip? Someone would love to use the equity in your current investment property and the one being purchased as collateral to make it happen. PM me.

Offer an investor/private lender 8 to 10% bridge loan, not interest payment option (interest accrues while you wait to sell home) and a percentage of the gross when home sold. Play with the numbers to see what makes sense. Most short term private lenders want a minimum interest amount (ie. 6 months) and might be happy with that. The small profit could be a sweetener to help get the lender. Note: If this loan is on a primary residence, you more than likely will have to find someone who is licensed.

Josh Bowser's post is spot on. You could offer 0 down, 85% (or some percentage that makes sense for both of you) of net cash flow each month. In the event of vacancies, you don't owe him anything that month.