All Forum Posts by: Ricky A.

@Michael Plaks - I curious as to why SDIRA would use Trust instead of IRA (found under View Additional Types). Also, if someone (say, me) created the EIN as IRA, does that person (say, me) need to try to correct it?

You buy something for 100 and sell it for 200, your gain on that asset is 100. Simple as that. It doesn't matter how you finance it.

Follow the money:

- Say your starting bank account balance is 60K.

- You borrow 40K. Now your balance is 100K.

- You buy a property for 100K. Now your balance is 0.

- You sell the property for 200K. Now your balance is 200K.

- You pay back the 40K loan, and your final bank account balance is 160K.

You bank account increased by 100K reflecting the 100K profit you made on the flip.  The loan principal doesn't matter.

@Jonathan Faltot

I agree with what @Dominic Mazzarella is saying...you might be getting played, but it still might be worth it to do.  

I've never had this situation, so take this for what it's worth, but a couple things to consider:

- Don't agree to the $$$ too easily.  At least feign a negotiation.  Start low and make him work you up to his number.  If you agree to the 5K too easily, he might get greedy and go for more.  Hey, you might even save a few dollars.

- I wouldn't hand over any money until he leaves.  

- If you need to formalize an agreement, I would have it drafted/reviewed by an attorney.  He doesn't have any rights to the property, and you don't want to draft something that inadvertently may be construed as him having some type of property rights.

Simply report your accurate rents and expenses which you should be tracking as well and not simply relying on your property management company and their reporting. 

I think the downsides far outweigh the upside.  If a family with kids values D+ then the probably already have it, so providing smart TVs where they can log into their subscription is sufficient.  For families with kids that don't have D+, providing it likely doesn't move the needle because it's not important enough for them to already be subscribed.

I think providing streaming services (that require login) can have huge downsides if the service gets logged out.  Do you provide the login credentials upfront in case the service gets logged out?  Do people take those credentials home with them and continue using your account.  Or do you provide the credentials when they call to complain that the service is logged out?  Does that inconvenience cause them to ding you when they leave a review?  Do you need to update your credentials once they check out so they don't continue to use your account? 

To me, it's a lot of downside with very little upside.  I suggest having smart TVs and let them log into their own accounts, preferably with a guest mode so they auto-log out after a certain number of days.

For catering to families, I would concentrate on providing amenities like puzzles and games.  Depending on the location and properties, consider having a game room.

I guess my procrastination skills are slipping!  I just did all but one of mine on Monday.  I had purposefully waited as long as I could in case it was blocked, but I figured chances were slim at this point.  Oh well.

However, if it does come back, what I found was that creating the optional "Individual" FinCEN ID makes things a lot easier.  Instead of having to enter personal info and upload an image of your driver's license for each Reporting Company, the Individual FinCEN ID allows you to input your personal data once and then link the Individual ID to your various Reporting Companies.  If your personal info changes in the future, you just update it for the one Individual ID versus having to update it in each of your Reporting Companies.  Also makes it easy for each individual to maintain their own info in multi-owner scenarios.

@Patricia Andriolo-Bull, not sure if they've iterated the system since you did yours, but now there's a button for downloading the filing transcript (a PDF containing all the info that you submitted).  But I wouldn't worry as long as your filings said successful.  

I need to dig into how TPG values AmEx points at 2%.  The way I've traditionally used them (i.e., simply transferring from AmEx to Delta SkyMiles), they're only worth 1%...well maybe a bit over 1.15% because I also have a personal Delta AmEx which makes mileage tickets come at a 15% discount.  Definitely some work to do because if I can get 2% out of those points, like you say, it makes those purchase points worth 4% versus the 2.5% cost.

@Nathan Gesner - Can you share the name of the book you read about points stacking?

@Andrew Steffens - I've got a lot to learn!  I've been pretty pedestrian just collecting AmEx points and moving them to Delta.  At my day job (non-RE), we have a recurring vendor that charges us about $150K/month.  For the longest, they allowed us to pay via CC without an upcharge.  AmEx Platinum gives 2x points for charges over $5K, so were were getting 300K points EVERY MONTH from this one vendor!  They started charging a 2.5% surcharge last month, so now we pay by check...man, I was bummed!

@Richard Nguyen

I just set up my first SDIRA a month or so ago, so I haven't had enough time to speak too much about experience, but the company I'm using (recommended by my CPA) doesn't charge AUM type fees.  They use more of a flat fee approach.  They have an option for a smaller flat fee with per-transaction fees, and then they have a slightly larger flat fee with unlimited transactions.  At 2 transactions per year, the unlimited becomes cheaper.  

Note, even though you may have a per-transaction fee or unlimited transactions, it looks like pretty much each transaction will still have some additional associated fees for things such as AHC/wire or expediting docs, but they seem reasonable.

When I was setting mine up, I was told that the flat fee isn't charged until your first transaction.  So, you could set it up, fund it, but then decide not to use it, and you'd never get hit with the annual flat fee.  There is a % fee for withdrawing and/or closing, but that fee is capped at $250, so overall the fee structure seems reasonable to me.

I'm not sure if I'm allowed to post the company's name here, so DM me and I can give you the name.

@Zach Rumfield

I agree with @Bill B. and @Bruce Woodruff that, financially, this is probably a no brainer and that you should run the numbers to see how it pencils out because, even though your dad already owns the property, there are likely still some upfront costs to consider.

1. I would find 2-3 local property managers to interview and do walk-throughs with.  I'd want to know their rent projections, what needs to be done to hit those projections, and what could optionally be done to get even better numbers.  I would expect start-up costs such as stocking linens/bedding, upgrading certain furnishing and amenities, and pass-through costs for listing on the OTAs (like VRBO, Airbnb).  There could also be increased ongoing costs for upgraded internet, cable TV, etc.

2.  As a good son, I would spot check the property managers' projections by doing my own research on VRBO/Airbnb/AirDNA to see what I think similar rentals are doing.  This is sometimes called the "Enemy Method," and you can search for more details.

3. Make sure you get the right property insurance policy.  Actually, it scares me a bit that you say the property is currently only being used about three weeks per year.  I would contact my agent IMMEDIATELY to make sure they know that and to make sure I currently *really* have the coverage I think I do.  Some policies have vacancy clauses, and if the property is empty for, say, 60 or 90 days, your coverage may be reduced and you may not have the coverage you think you have.  One of our STRs has such a clause, but the insurance company waives it because the property management company does walk-throughs at least monthly.

4.  Consider the emotional aspect too.  I think there's potentially a different feeling when you convert a personal residence to such an investment property versus purposefully buying an investment property.  I think guests hardly ever damage things intentionally, but when you have luggage coming in and out all the time and little kids running around a "new place," there IS a lot more wear-and-tear, scuffs/dents/scrapes, and broken glass.  I can imagine that, with the wrong mindset, it could feel like an invasion or disrespect of your personal space.  So I suggest really being clear about the "why" and the "what to expect" to keep these inevitabilities in perspective.  Reading those little books that guests and sign and comment in can be very helpful and grounding when you have those times when it seems like guests don't care.