Will this Deal Structure Work? What is the Best Route to Pursue?

[Daniel Dietz]

Nov 15, 01:03 PM

Vote

Hello,

Looking for some feedback as I am working on how to structure a deal(s) for buying and holding long term rentals while working together with a Private Lender.

I think I have found at least one private lender, and a trying to figure out how to best use that resource. They would be willing to lend funds at good rates for 3-10 years.

Here is my situation. I have a decent sized IRA in which I have bought one property, and likely a second one within the next couple of weeks. These were/will be cash deals from funds within the SDIRAs and will essentially use up most of my IRA funds that I want to put towards RE. These properties don't qualify for the Non-recourse loans I have found.... too old, too cheap, etc.. I would prefer not to use my liquid cash outside of my IRA if possible. I DO have sizable assets that are in my Life Insurance Policy that I would prefer not to use for various reasons (inheritance moeny, funds a nice policy, etc...) but could take a loan from it if needed. I also have large equity in my primary residence of a couple 100K.

I am weighing the possibilities of :

1) Using a loan from the PM Lender against say 50% (maybe more) of price of the properties I hold in the SDIRA, in order to further leverage my own SDIRA funds into other properties, which the PM lender would likely help fund also.

OR

2) Using the PM Lender's funds to buy properties OUTSIDE of the SDIRA. One of the thoughts would be to use the PM Lenders funds in the 'second position'. In this type of scenario, how could we (me & PM Lender) use the PM funds as a 'down payment'? Example, if the PM Lender has say 25K to put down on a 100K property and I was seeking a loan for 75K.

What would be the hurtles on #2 above. The PM Lender would prefer to just be a lender, not a partner. They would prefer to have nothing to do with the borrowing in #2 above.

What I envision is using the PM funds for the 'down payment' to secure further lending.

Is there a way this deal could be structured from the start to avoid the 'seasoning' needed for down payment money?

Could it work to for me to take funds from my Life Insurance, so that *I* would be funding the down payment, and then at a point in the future (1 year?) have the PM take a second position on the property so I could 'replenish' the LI Policy?

Is there a time frame for which I could simply borrow those funds from the PM Lender 'ahead of time' so that they would be 'seasoned' in my account and I could just use them as a 'normal' down payment? IF that is possible, could those funds be secured by a second position note on the property?

Hope this all makes sense.

Thanks, Dan Dietz