All Forum Posts by: Bernie Huckestein

Question about Master Lease and 1031 exchange

I have a lead on a property and wondering when the timer starts for the sellers 1031 here is the particulars

90 units needing of significant repair and re-position, property is currently @ 80% occupancy with most current rates significantly under market (units under market are month to month)

Property is in a solid area and with the intended rehab investments will enable the 90% for 90 Days required for eventual agency debt

The owner wants to 1031 his money into other commercial properties which he does not yet have identified...he is thinking a lot less management oversight

So my question --  I've discussed a Master Lease with the seller giving me time to bring the property in the 90 for 90; however, checking to see when his timer starts for 1031 hoping it is when the option is executed?  Doesn't help either of us if the timer starts at the Master Lease date.

Thanks, b

Figured as much, thank you!

I (or more accurately my SDIRA) purchased a SFR with the plan to fix and hold as an SDIRA asset. My question is about deposits for in this case electric. I could avoid having to put money on deposit to the utility company if I let them run my credit (meaning I would be personally responsible for the bill) -- I am okay with that as there is no danger of the bill not being paid by the SDIRA but wondering if this item would be a violation. I could have the SDIRA put the required monies on deposit but I would rather not.

Thanks, b

thank you 

Recently moved to FL and will rehab my first house in this climate.  1,200 sq ft house with 0 exterior wall insulation and NO vapor barrier.  The inside of the exterior walls are in good shape and have considerable detail --  great trim, wainscotting, etc. (craftsman house) and I really don't want to disturb this.  That said, I will be replacing the exterior siding with probably engineered product...the current siding is attached right to the studs no sheathing, so I will have access to the walls from the outside.  Looking for options on the correct way to insulate...I could use fiberglass batting without the kraft paper but given the vapor barrier should be inside the insulation I won't really have any way to do this.  I have thought of spray foam which creates its own vapor barrier but it is way too big of a job for the standard DIY kits.  I was planning on replacing the siding myself and if I contract the spray foam out they will want to do it all at once which will not be possible.  Appreciate thoughts  -- b

Checking to see if the following would be permitted under SDIRA investment, using an 80 unit complex as example. I have a solid albeit general understanding of SDIRA and disqualified parties etc. I do have a SDIRA set up which is funded via the an IRA owned LLC. Please consider:

• Looking to partner with 2 other individuals (no family connection whatsoever) on an 80 unit multifamily -- party A being my SDIRA LLC
• Each party will contribute 1/3 of the required funds and have 1/3 ownership---this is not a syndication but a partnership
• Balance financed via non-recourse agency debt with one of the other partners being the Sponsor 
• Property would be purchased under a separate LLC with equal ownership
• My contribution would be made not from me but from my IRA LLC -- not sure if this would be a loan to the joint ownership LLC or my SDIRA would need to be on title
• Normally a deal like this could and in this case would be structured with a couple of additional expense items:
  
  • An acquisition fee and potentially a disposition fee upon sale say 1.5% to the individual putting the purchase or sale deal together
  • An asset management fee (this is not a property management fee but more of an administration / manage the manager fee)
• These fees typically go to a designated member and/or the person that puts the deal together (me) but technically I suppose it could go to another 3rd party -- it is not part of the asset value they are expenses 

So my questions:

1. Can I be the designated person to oversee and collect these fees?
2. If so, would I be able to collect fees personally or does this also need to go back to my SDIRA?
3. If I can be this designated person but funds need to channel back to the SDIRA does it have to be 100% or can I take 1/3 (since this is the SDIRA's percentage of ownership) send that back to my SDIRA and keep balance directly?

Under a normal 100% SDIRA deal I fairly certain I can't be involved in the day to day management and/or swing a hammer for rehab etc but I can be the one who designates which Property Management company and/or contractor to engage...seems to me this is the same thing; however, due to the size of asset and effort required for managing the partnership it is significantly more involved --   I really don't want to do this without some sort of compensation either directly or back into the SDIRA.

Appreciate your thoughts  --  Bernie

Eliminate the carpet, I would use laminate or vinyl plank.  Can't comment for sure on the vinyl plank but in my experience within reason if your subfloor has a consistent slope (but not uneven) laminate will work fine.  If subfloor is uneven you will need to level in some way...how you do that depends on how bad

This meeting covers discussion / presentation on financial analysis of Multifamily properties 

As said this will not produce the returns you are speaking of, not even close.

I guess the official stance might be - what are you paying as an interest rate on the car and can you invest the funds elsewhere for return higher than that rate

That said, unless you already have a low Debt to income ratio and if you can pull together other money or Partner with someone on RE investments, I would pay the loan off allowing you to contribute the monthly amounts you would have paid on an investment mortgage...

You could do a RUBS program but a duplex is rather small for that, I would raise the rent or charge a flat Utility fee.  Either way it the total monthly cost still has to be in line with the market.

When you say this "kills" the cash flow that seems quite tight.  I have a duplex and the water / sewer bill is about $40...mine is in an inexpensive area but so even $80...If it were me I'd be careful...if things are that tight I you need is an unexpected vacancy or repair and that eliminates the cash for the entire year...say $60 a month X 12 months anything loss of rental or unbudgeted expense over $720 does the same thing.  I for one would not do it unless you and mitigate that expense AND everything about the property is in tip-top shape (and that is a maybe)