All Forum Posts by: Daria B.

Thanks @Marian Smith.

Do you have a picture of what you did to your fireplace?  

This rental is also a 1980's (property built in 1983) and I've seen other surrounding properties with the same fireplace. Only one was painted all white with the book cases same color. I can't recall what they did to the wood mantel. 

I thought of tile and stone but that is more cost to bare and I'm not on that kind of budget.

Someone else mentioned going ahead and painting the book shelves and fireplace pure white and either leaving the mantle wood or painting it black to match the fireplace.

 Thanks I will keep that in mind.

I actually went with an non-refundable fee and a monthly fee. 

@Dmitriy Fomichenko ?

What has your custodian said of their rules as they follow the IRS rules but they may also have a layer of their own.

You are acting as a lender via your self-directed to someone that does not appear to fall into the prohibited transaction. 

I found this from the IRS and it's a long list of examples that are prohibited use. Most of the examples were between husband and wife or parent and child. 

These are all pretty straight forward and if you don't place yourself in a position of personal gain, then I appears you would be ok.

Categories of Prohibited Transactions

In general, the type of transactions that could fall under the prohibited transaction rules pursuant to Code Section 4975 can be viewed in the context of three unofficial categories:

Direct Prohibited Transactions

4975(c)(1)(A): The direct or indirect Sale, exchange, or leasing of property between an IRA and a “disqualified person”

• Ben leases an interest in a piece of property owned by his Self Directed IRA to his son
• Jen sells real estate owned by her Self-Directed IRA to her father
• Todd sells real estate he owns personally to his Self-Directed IRA
• Carl transfers property he owns personally to his Self-Directed IRA
• Mary Purchases real estate with her IRA funds and leases it to her mother
• Kevin uses his Self-Directed IRA funds to purchase an interest in an entity owned by his wife
• Peter Transfers property he owns personally subject to a mortgage to his Self-Directed IRA.
• Tracy uses personal funds to pay expenses related to her Self Directed IRA real estate investment
• Lara uses personal funds to pay taxes and expenses related to her Self-Directed IRA real estate investment

4975(c)(1)(B): The direct or indirect lending of money or other extension of credit between an IRA and a “disqualified person”

• Keith lends his son $4,000 from his IRA
• Joe Uses the assets of his Self-Directed IRA as security for a loan
• Mr. Peek and Mr. Fleck personally guarantee a business loan owned by their self-directed IRA
• Tammy personally guarantees a bank loan to her Self-Directed IRA
• Bill uses his personal assets as security for an Self-Directed IRA investment
• Allan uses Self-Directed IRA funds to lend an entity owned and controlled by his father $25,000
• Terry acquires a credit card for his Self-Directed IRA LLCbank account

4975(c)(1)(C): The direct or indirect furnishing of goods, services, or facilities between an IRA and a “disqualified person”

• Dan purchases real estate with his Self-Directed IRA funds and personally makes repairs on the property
• Larry purchases a condo with his Self-Directed IRA funds and paints the walls without receiving a fee
• Kris buys a piece of property with his Self-Directed IRA funds and hires his son to work on the property
• Karen buys a home with her Self-Directed IRA funds and her son makes repairs for free
• Lisa owns an office building with her Self-Directed IRA and hires her son to manage the property for a fee
• Shari owns an apartment building with her Self-Directed IRA funds and has her father manage the property for free
• Joe receives compensation from his Self-Directed IRA for investment advice
• Troy acts as the real estate agent for his Self Directed IRA

4975(c)(1)(D): The direct or indirect transfer to a “disqualified person” of income or assets of an IRA

• Steve uses a house owned by his Self Directed IRA for personal uses
• Tim deposits Self-Directed IRA funds in to his personal bank account
• Pat is in a financial jam and takes $12,000 from his Self-Directed IRA to pay a personal debt
• Mark buys precious metals using his Self-Directed IRA funds and uses them for personal gain
• Jack purchases a vacation home with his Self-Directed Self Directed IRA funds and stays in the home on occasion
• Amy buys a cottage on the lake using her Self Directed IRA and rents it out to her daughter and son-in-law
• Sylvia purchases a condo on the beach with her Self Directed IRA funds and lets her son use it for free
• Richard uses his Self-Directed IRA to purchase a rental property and hires his friend to manage the property. The friend then enters into a contract with Richard and transfers those funds back to Richard
• Pam invests her Self-Directed IRA funds in an investment fund and then receives a salary for managing the fund.
• Charles uses his Self-Directed IRA funds to purchase real estate and earns a commission as the real estate agent on the sale
• Keith uses his Self-Directed IRA funds to lend money to a company he owns and controls
• John invests his Self-Directed IRA funds into a business he owns 75% of and manages

Self-Dealing Prohibited Transactions

4975(c)(1)(E): The direct or indirect act by a “Disqualified Person” who is a fiduciary whereby he/she deals with income or assets of the IRA in his/her own interest or for his/her own account

• Sara makes an investment using her Self-Directed IRA funds into a company she controls which will benefit her personally
• Jason uses his Self-Directed IRA funds to invest in a partnership with himself personally in which he and his family will own greater than 50% of the partnership
• Helen uses her Self-Directed IRA funds to invest in a business she and her husband own and operates and her and her husband earns compensation from the business
• Steve uses his Self-Directed IRA funds to lend money to a business in which he controls and manages
• Victor invests his Self-Directed IRA funds in a trust in which Victor and his wife would gain a personal benefit
• Brenda uses her Self-Directed IRA funds to invest in a real estate fund managed by her Son. Brenda's son receives a bonus for securing her investment.
• Frank invests his Self-Directed IRA funds into a real estate project that his development company will be involved in order to secure the contract
• Ryan uses his Self-Directed IRA funds to invest in his son's business that is in financial trouble
• David uses his Self-Directed IRA funds to buy a note on a piece of property for which he is the debtor personally

Conflict of Interest Prohibited Transactions

Subject to the exemptions under Internal Revenue Code Section 4975(d), a “Conflict of Interest Prohibited Transaction” generally involves one of the following:

4975(c)(i)(F): Receipt of any consideration by a “Disqualified Person” who is a fiduciary for his/her own account from any party dealing with the IRA in connection with a transaction involving income or assets of the IRA

• Jay invests his Self-Directed IRA funds into a corporation in which he manages and controls but owns a small interest in
• Betty uses her Self-Directed IRA funds to loan money to a company she owns a small interest in but manages and controls the daily operations of the company
• Sally uses her Self-Directed IRA to lend money to a business that she works for in order to secure a promotion
• Lance uses his Self-Directed IRA funds to invest in a real estate fund that he manages and where his management fee is based on the total value of the fund's assets.

@Luis Cruz

I've never heard of a lender basing their decision to grant the HELOC on the warranty-type. The criteria when I applied and received mine was some of the same factors as though I was applying for a regular mortgage, DTI, credit score/report, W2, paychecks etc. Because I was looking to get it on an investment property, the lender had to be willing to allow for that although most only use the primary resident.

Most I think get to know those with liquidity that have become lenders - other people's money OPM - as a source for their flipping projects.

There is also the regular route of banks as lenders - I've read a few that have utilized this method through some creative financing.

OPM also comes by way of them utilizing their HELOC or Self-directed for lending.

I'm sure there are others but these are the ones I usually see.

@Steve DellaPelle I would definitely look into doing another if you can. Talk to a lender maybe they can say definitively based on your goals. Seems to be a fine line from what is described about them granting FHA loans.

After thought: I guess I should have qualified my "no" answer with the article I found on the FHA site. I read the part that specifically states if one is trying to acquire "investment" property but since you didn't really say under what circumstances in your post - you may qualify under other FHA rulings.

one time only according to:

https://www.fha.com/fha_article?id=539

June 14, 2017 - If a borrower is permitted to purchase one home with an FHA mortgage loan, what's to stop the borrower from purchasing a second property? How many single house can an FHA borrower buy with an FHA loan?

The FHA single family home loan program generally permit FHA loans only for owner-occupiers, so the short answer is "just one" in most cases. The rules for these circumstances are found in HUD 4155.1 Chapter Four Section B, which directly addresses the "owner-occupier" requirement. According to Chapter Four:

"At least one borrower must occupy the property and sign the security instrument and the mortgage note in order for the property to be considered owner-occupied."

But the FHA doesn't stop there. It also adds, “FHA security instruments require a borrower to establish bona fide occupancy in a home as the borrower’s principal residence within 60 days of signing the security instrument, with continued occupancy for at least one year."

That does not mean some borrowers don’t qualify for an exception in limited cases. FHA loan rules do permit borrowers to have more than one FHA loan under approved circumstances that can include changes in family size that may justify the purchase of a larger home.

Another circumstance that may warrant an exception to the “one loan” policy occurs when the borrower has a job issue that requires relocation. FHA loan rules address this in Chapter Four of HUD 4155.1, instructing the lender:

"To prevent circumvention of the restrictions on making FHA-insured mortgages to investors, FHA generally will not insure more than one principal residence mortgage for any borrower. FHA will not insure a mortgage if it is determined that the transaction was designed to use FHA mortgage insurance as a vehicle for obtaining investment properties, even if the property to be insured will be the only one owned using FHA mortgage insurance."

Chapter Four says that in addition to the exceptions we mentioned previously, borrowers who vacate a primary residence that was jointly owned may also be able to get a second FHA loan Non-occupying co-borrowers on an existing FHA mortgage may also be eligible for an FHA mortgage if the new home is "to be that borrower's primary residence" according to Chapter Four.

Exceptions to FHA rules in these instances are handled on a case by case basis–discuss your needs with the lender to determine if an exception to general FHA loan policy can be made.

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Hi all,

When it comes to design, I fall short of ideas. This includes picking out paint color.

I have a rental that I will include pictures of to get an idea of the room surroundings. 

My quandary is what to do with the fireplace that is extremely dated. There are built in wood book shelves on each side of the fire place that I thought of painting but then decided to just keep the wood look. However, the fireplace needs some lifting up from the aged look it has. The mantel is also a rough wood that I suppose I could paint but once that is done, it's done and if it doesn't turn out good then....

Some ideas after looking at what others did were to have stone put over the brick to give it a lighter color and more updated look. I've seen some do an acid wash and not try to cover up the existing but just clean it up.

In the photo, the real wall paint color is by Sherwin Williams Interactive Cream. The living room and dining room was taken prior to painting and still shows the white walls.

For those that have fireplaces in their rentals, cost-wise, what have you done to clean up or make the fireplace look better if it's aged?

Thanks for your input....

@Sol G. I would also add, look at the contract (if you can) to see if the contractors wrote down the correct property address. What she told them and what they wrote can be where the mistake occurred. If the contractor has her property address then I would think the contractor should make this right with her to remove her tank and fix your fill in properly. And surly an attorney with knowledge of contracts and (I don't know, land rights?) trespassing laws in that area can illuminate these issues.