All Forum Posts by: Bryan Hartlen

@Caroline Gerardo I did mean self-directed 401K. Operates like SD-IRA but I have full checkbook control (and responsibility) without requiring a custodian. SD401k loans also need to be non-recourse. But I invest non-qualified funds also, so I was interested in how/where the terms typically vary between recourse and non-recourse.

@AJ Exner looking at options right now.  The ability (or inability) to leverage debt will affect the underwriting of specific properties (and how many properties). 

Thanks for all for your replies.  

I'm currently looking for options to invest my self-directed 401k funds in rentals. I can buy the properties outright but was hoping to find an option to scale by leveraging debt (hence the non-recourse requirement).

@Jamarique Wynn it’s hard to answer your questions without knowing the specifics of your contract. Are you making milestone payments as work is completed, or did you pay him in full up front, or something in the middle?

Assuming that your contract has terms that cover how the contractor could breach the contract (eg not completing work items in a documented prescribed order) then you would have grounds to fire him. Depending on how you structured payments in the contract you may owe him funds, he may owe you funds or even possibly in the middle.  This area is almost always open to some level of subjectivity. 

As for asking for a refund it woudl also come down to what your contract says and also if this is refund for work performed or for advances. Getting a refund for in-scope work, that was performed out of prescribed order, but work you still paid for - would probably be difficult. 

Lastly, taking a contractor to court for unfinished work seems like a waste of time (again unless you mean you paid him in advance and want some of the funds returned post firing).  Court will take months. Court will have costs.

Changing contractors in the middle of a job will almost always cost you time and money, so unless your contractor is incompetent or a cheat, it’s almost always better to try and see if you can find a way to complete the project with the same contractor.

Anyone have recent experience with terms for SFR DSCR loans? Any differences besides rate for non-recourse vs recourse?

@Arn Cenedella thanks for the post.  

What made you decide to put the extra $195k down to go with the fixed rate?  At the end of 2021 / start of 2022 interest rates would have started to move but I can’t remember to what extent? 

How do you position a deal like this with your investors?  
- The timeframe to exit is obviously longer: do you model for the full 10 year hold?  Or do you model 3 - 5 with the 10yr note being insurance should a longer hold become required?
- What about the impact on COC? The extra $195k required wouldn't help. Do you stress the impact of the principal pay down when you exit over the holdtime's COC returns?

I’m not a lawyer, but, assuming the cancellation was a unilateral right you had in the original agreement, then unless the rescission and restating was mutually executed, I think the agreement may be canceled. I don’t think you can cancel and then say never mind. 

Each housing authority handles the change process slightly differently (read paperwork and forms). 

If you keep the PM company they’ll handle. If you go the self manage route you need to contact the HA that issued the tenant's voucher and have them tell you what’s required to process the transfer. 

It depends what you want from the bank. If you’re investing out of state and plan to be looking for funds (eg hard money) then an account with a bank local to your investments will generally help. But it can also be set up at the time of funding a loan. 

If you’re just looking for a checking account to manage and pay expenses, then pick something local to you where you have relationships already. 

It’s hard to go wrong as you can always open a new account to meet specific needs in the future.

Hi Sonya. To answer two of your questions:  

- You can register your LLC(s) in one state and invest in another, but how you do this will change depending upon where and what your investments are. As an example, I live in Phoenix, my LLC's are registered in AZ and I invest out of state (including in AL). In AL, I have to register my AZ LLC with the AL state (and have to pay AL state taxes).

- as a practice its best to have separate bank accounts for your LLC(s). Assuming your LLCs are a sole proprietorship, the accounts should also be in the name of the LLC not your personal name.

As others have said, a series LLC is most likely overkill at this stage of the game. Think of each LLC like a compound that separates your liability risk. If you have $4M in assets all under the same LLC then a liability risk from one property could expose you to up to $4M worth. If instead you put 40 $100k assets in their own LLC then the risk for each asset is limited to $100k. But the effort and cost to maintain 40 LLC's would outweigh the benefit of a low probability risk. (Note there are instances where the above generalization doesn't hold and an attorney is best to explain this to you)

There are costs to create each LLC (even if it's a series) and you will need to prepare and file taxes for each LLC. If you are at the stage, or get to the stage, where it makes sense to split your assets across multiple LLCs there are options other than series LLCs which may meet your needs that are simpler and more cost effective (eg create a second LLC).