All Forum Posts by: Chris Torbert

Hi all,

My father and I have located a couple of properties that we would like to purchase together. I need him for additional capital, and since I'm investing with my Roth IRA LLC, I need him to personally guarantee the loan (since I cannot according to IRS). I bring the deals to the table, crunch all the numbers, and do the negotiating because he doesn't have the time. We fit very well together in terms of what we bring to the table. So, my question is this:

We want to purchase a property that is owned 50% by my father and 50% by my Roth IRA LLC. We would be splitting the down payment, getting a loan that is personally guaranteed by my father, and splitting all of the profit at the end of the year. Do we need a state recognized entity/partnership, or can we just have a lawyer draw up an agreement outlining the above? Also, does anyone know if there are any restrictions regarding partnering a Roth IRA LLC in this manner? Any thing else you all can think of that I am likely missing?

Thanks in advance,

Chris

Wow @Samuel DeMass this was incredibly insightful.  I really appreciate your "nerding out!  

QUICK UPDATE:  The property I was looking at ended up selling to someone else.  Have a few others I am looking at for now, but all of the responses and information/tips are MUCH appreciated!

Thanks everyone.

@Brent Coombs Thanks for you input...it is much appreciated. Do you have any rough guidelines that you use to determine how to hold back for CapEx, Maintenance, and Vacancy? Obviously it can differ for each property, but just curious as to the rule of thumb others might use. Thanks in advance!

@Samuel DeMass  Thank you for you input as well.  From your experience, what type of terms would you be looking for if you were going after a property like this?

@Dmitriy Fomichenko Same question as I posed to Sam...what type of terms would you be looking for in this situation? One lender had a 20-yr program that started as a 5/1 ARM @ 6%. Is that pretty standard for these types of loans?

Thanks to everyone who has responded.  The feedback is invaluable and much appreciated!

Thanks,

Chris

@William Rickett

Welcome to BP! I am also in the process of trying to purchase a property with my Self-Directed Roth. I have just finished the process of rolling it over and setting up my Checkbook LLC. If you have any questions at all, I would be more than happy to chat.

Thanks,

Chris

@Dmitriy Fomichenko

Thanks for the reply and the great feedback.  Yes, great catch on me not being able to pay myself for property management.  

Given your experience, what type of non-recourse loan would you recommend for this type of transaction?

Thanks in advance!

Hey @Chasity Henry

I'm in the Frisco area and am looking for small multifamily properties all the time (anywhere in DFW).  If you are building 2-4 unit properties, I would be very interested in learning more about them.  Also, I sometimes purchase raw land and it would be great to know someone who could develop it.  I'll send you a connection request.  Hope we can build a mutually beneficial professional relationship.

Thanks,

Chris

@Sean Kirkham 

Thanks for the introduction.  Certainly wasn't wanting to hijack @Brian Howards thread, but always happy to meet to folks in the area.  I'll send you a PM.  Looking forward to working with you.

Thanks,

Chris

@Brian Howard , welcome!

I'm in North Texas as well (Celina) and am basically in the same boat as you. I have read and listened non-stop for months now, and am looking for my first property.

I would welcome the idea of getting together for lunch one day to share knowledge and ideas. I'll send you a PM with more details. Welcome again!

Hi everyone, 

I have been silently observing here on BP for a little while now, rapidly educating myself on all things REI. I am a Realtor working to make the transition over to real estate investing. My ultimate goal is to build long-term wealth via buy & hold. I'm in the DFW area and have found a small multi-family that is very intriguing. I haven't seen the current lease agreements or the payment history of the current tenants, but I wanted to throw the current numbers out there, along with my tentative strategy, to get some veteran (or even novice) feedback. Here are the numbers from the BP rental calculator...thanks in advance! My entity strategy is also below. Would LOVE to hear thoughts/feedback on that as well!

Units:     2 currently leased at $475/each through March 2017

Purchase Price:     $45,000

Loan: 20% down @ 6% APR for 20 years w/ 0 points

-Looking at a 5/1 ARM for what it's worth

Current lease income:   $950/mo or $11,400/yr

Monthly Expenses:

-P&I:     $257.92 (27%)

-Insurance:     $100.00 (11%)

-Taxes:    $62.50 (7%)

-CapEx: $95.00 (10%)

-Management (paid to myself):      $95.00 (10%)

-Vacancy:     $47.50 (5%)

-Repairs:     $47.50 (5%)

-TOTAL:     $705.42 (74%) 

Monthly Cash Flow:    $244.58

CoC ROI: 23.48%

ENTITY STRATEGY:

I am thinking about using my Self-Directed ROTH IRA LLC to purchase this. Mainly because the CoC ROI is so good. Not great cash flow numbers, but i'm not overly worried about the cash flow since it's a retirement account. Also, I believe that 20% of the profits will be tax-free since it's in the Roth, and the other 80% of the profits will be taxed due to it being Unrelated Debt Financed Income. Any thoughts, or pros & cons on using this strategy to purchase the property? Am I legally able to pay myself to manage the property if it's owned by my Roth IRA? I'm fairly young, and see this as a way to grow my retirement at a very healthy rate without coming out my own pocket (yet) to do so. Any thoughts are so very appreciated. Have a great day!

Thanks,

Chris Torbert

Hi @Sherry Patterson,

This will be my first Meet Up to attend.  Looking forward to meeting everyone and making new connections.  See you there!

Chris Torbert