All Forum Posts by: Theodore Rivera

@Stanley Nguyen there really isn't a way around this. Interest income is interest income, unless you decided to roll some of the current cash into a self directed IRA at which point your interest income would be deferred for a later time and allow your funds to grow tax free. I would suggest you up your rate from 8% to 10% to help off-set some of that cost. 10% is doable all day long here in Texas. Let me know if I can assist in any way.

@Nicholas Munford I would suggest as @Adam Schneider suggested in reading up on the laws of where you will be lending. No two states are alike. If you are fortunate, you may find a local REIA that may help in that area. Here are a few questions that will begin to point you in the right direction.

What requirements are imposed on you as a lender by your state in order to lend? 

What are the state's usury guidelines? 

What does the state's foreclosure process look like?

Who handles real estate closings in your state?

Do you have a real estate attorney on your team?

Have you determined your set guidelines for lending?

@Kenneth Garrett also provides useful advice on being able to vet the borrower and deal. Do you have the knowledge and experience for doing both? 

Do you have experience in interviewing people? 

Do you have experience and knowledge in assessing rehab costs?

Do you have experience and access to your real estate data base for determining current property values? After repair values?

If you lack in any of the above, do you have someone you can add to your team to help you in those areas?

Best of luck and be careful!

@Nicole P. A self directed IRA is simply a marketing term more than anything else. It is simply an IRA no different than a traditional IRA. I would venture to guess that if you rolled over an IRA it is more than likely sitting with a traditional custodian that invests in stocks, bonds, and mutual funds.

To answer your question, yes you can invest your IRA in real estate as long as it is rolled over to a custodian who deals in self direction such as Quest Trust Company. Based on your intent of investing you may want to look into a checkbook control option.

@Steven Hamilton II

 Not sure how you would insert a double entry into the form, but I believe I would be exempt in filing forms due to exemption stated by @Kyle J.  "You need not file Form 1098 for interest received from a corporation, partnership, trust, estate, association, or company (other than a sole proprietor) even if an individual is a coborrower and all the trustees, beneficiaries, partners, members, or shareholders of the payer of record are individuals."

I was hoping I could get some direction from an accountant or someone with tax preparation knowledge. I am working on completing my 1098 interest forms. I have a situation where I have two borrowers (an individual and a LLC) on a single note. I need to prepare the 1098 interest form but don't know whether I prepare two separate 1098's and divide the interest or put both borrowers on one 1098 form. Please advise.

@Dave Birck I am a California native and now reside in Houston and have been investing in real estate using my “401k” plan. As @Dmitriy Fomichenko mentioned, the idea is to transition your 401k plan into a self directed IRA providing it doesn't reside within your current employer plan. This will keep your retirement account from incurring any tax implications or penalties. Feel free to reach out to me with any questions.

@Michelle Fortier There is no structure necessary. It is included in the note/mortgage. It allieviates the need for an LLC (additional cost/time) and any complexities that may come in forming an LLC. I would advise that you hire the services of a real estate attorney to draft the necessary documents in relation to the by laws of your state.

@Kitty Jones Please do yourself a favor and check on the foreclosure laws for the Washington state. They last thing you want to do is tie up your funds for a couple of years and having to get through the foreclosure process. Also by lending to an owner occupant the Dodd Frank laws come into play, thus the reason that most private lenders stay away from loaning on owner occupant properties. This coupled with the fact that there is little equity would have me triple thinking this move. 

@Michelle Fortier Simply list the lenders as to undivided interest based on their investment in the deal. Example: Let's say the total loan is for $100k and John Doe provides $40k and Jane Doe provides $60k. Your loan documents would read as follows:

John Doe (as to an undivided interest of 40%) and Jane Doe (as to an undivided interest of 60%)

They would both retain 1st lien position based on their undivided interest percentage.

@Jeremy D. I would suggest you start with discovering what the rules and regulations are for your state. Every state is different not only as far as what is required to be a lender, who you can lend to, how you can lend to them, how much you can charge to lend to them etc. 

Then there is the other side of the equation, you've already loaned them the money and the deal goes sideways. Your borrower fails to pay on his note, and you have to foreclose. Oops! What are the foreclosure laws in your state? Judicial or non-judicial? How long is the process? 3 months or 3 years? Lending isn't difficult as long as you do the due diligence, and have the right people on your team. 

Here is a few quick tips. As @Kathie Riedel mention get the proper legal documents more importantly drafted by a real estate attorney, a lender's attorney. As @Rick Pozos mentioned, always close at a title company or attorney's office depending on your state. Vet your borrower, for experience, reliability, integrity. Vet the deal itself. Does the deal make sense? Would you do the deal if you were in the borrowers shoes? Do the numbers spell out profit? If the answer to these last questions is no, then kindly let the borrower know. Lenders serve as a second set of eyes to borrowers, especially to those who may lack some experience. The borrower's success is the lender's success.