All Forum Posts by: Jeff Rabinowitz

If you pay mortgage interest on rental property it is a deductible business expense whether you operate one unit, a thousand or more.

There is definite value to having cash on hand if you are planning on making more offers. Not only can you move quickly but a cash offer should allow you to demand some discount to market price. Only you can assess what that is worth in your market.

There may be an asset protection benefit to encumbering properties with mortgages. An unencumbered property may look like a nice prize in a lawsuit--a property with a large loan encumbering it may not look so attractive.

You can ask for anything you would like. Some wholesalers will demand money up front others will wait until the closing. I have never been required to pay up front (the wholesaler I work with knows that I make good on my commitments) but if a deal was strong enough for me to want it I would not be too concerned with an up front fee. I would insist that fee be held in escrow until the closing in case a cloud surfaced on the title which prevented the sale. The amount that I am willing to pay depends on the value of the property to me. I have never paid a fee as low as $1,000

Yes, to all who talk about interest rates and returns on investment. I have partners who pay me 18% to borrow money for 6 months. Why would they do that? Because they are astute buyers who consistently purchase at favorable prices, rehab the houses efficiently, and earn considerably more than that when they sell. It is not a good idea for an inexperienced person to do that but it will also be difficult for an inexperienced person to find a lender to back them.

If you think you have a good chance of earning considerably more than the interest rate on your student loans it makes sense to invest the money. If you are not fairly certain that you can find a good deal or are not prepared to do the work necessary to make the deal a success you may be better off paying down the student loans.

Would you want a lockbox hanging on your residence? Anyone with bad intentions who recognizes what a lockbox is will know that with a decent size hammer they can break it open and get a key. If someone breaks in that way I could see that a tenant might have good grounds for holding you responsible for allowing such easy access.

Fannie Mae allows a lender to consider assets in an IRA when analyzing a personal loan application. If a borrower lists assets in a self directed IRA on a loan application to obtain a personal loan that they would not have qualified for without consideration of the SD IRA assets they are receiving a personal benefit from the IRA. Can the IRS consider that self dealing and use that to force distribution of the SD IRA? Since the penalties for self dealing are draconian is it worth the risk?

@Chris Martin, a cynical person might think this is a ploy by the government to seize our assets. Fannie is encouraging us to use our self directed IRA assets to qualify for a loan we would not qualify for if we didn't use them (sure looks like self dealing to me) and the IRS may use that as an excuse to break our self directed IRAs and collect the draconian penalties associated with self dealing in a SD-IRA. What a Country.

@Matt Devincenzo, thank you for the clarification. If the borrower is pledging assets in a self directed IRA to potentially repay a loan he is using the IRA to benefit personally. Isn't that self dealing? The borrower might risk the IRS coming in and forcing him to distribute his IRA and hit him with the taxes and penalties that come with the distribution. It doesn't seem like a prudent risk.

Was he able to use the IRA assets to qualify for the loan? Why would the bank consider assets they would not be able to reach without great difficulty, if at all?

It seems to me that the borrower triggered this himself by attempting to use his IRA assets to influence a favorable decision on a loan. The lender should not consider IRA assets when making a decision on a loan outside the IRA.

A borrower attempting to secure a non-recourse loan within their IRA should not submit any details of assets held outside the IRA. If they secure a loan which requires any kind of a personal guarantee they have probably made a prohibited transaction and they could lose a significant portion of their IRA.

I have been lending from my IRA for several years. I use my account number and my name never appears in either the mortgage, which is recorded, nor the promissory note, which is not.

Drew Sygit at Royal Rose manages some of my properties including a couple in Oak Park. I am pleased with his performance. Feel free to contact me if you have questions.