All Forum Posts by: Daniel Dietz

Hello,

Micheal B. covered the reasons pretty well from the operations side of things for the reasons to have an LLC within the SDIRA.

One other thing to think about is the liability protection offered. If it was 'just your retirement account' that owned the property, and not an LLC, in theory it would be much easier for a worker, renter, etc.... to try to sue you for personal recourse in the event of some incident.

To me, I see almost no reason NOT to have the LLC, with the possible exception of the states that have a high yearly fee like Cal. etc.....

Dan Dietz

Hello,

I too am just starting. I would not want to imagine the hassle of using a Custodian to write every check. We are doing buy and hold for rental.

We did the LLC route within the SDIRA. We used UDirect for the 'custodian' and they refered us to the law office of Mark Kohler who does a lot of SDIRA work (and has some good youtube videos explain things also). I was very happy with both of them, and found it painless. I DID do a lot fo home work upfront to be able to understand how and why we wanted things set up like we did, which is a three way partnership.

Good Luck. Dan

Rob,

The posters here are making some good points to consider, both Pro and Con.

I am currently considering doing just what you are asking about. Our situations might be quite different though.

Mine is this:

• Most of my funds to invest are in my ROTH IRA at about a 20 to 1 ratio fo my liquid cash, and I am seeking to do a deal (or a few) outside of my IRA so that I can put some sweat equity into it (no able to in an IRA property)
• We have a large lump of cash that was put into my LI policy, which is a 'pre 1985 policy' when a bunch of rules were changed. (side note; if any of you have policies out there this old, PLEASE first talk to a qualified person before completely cahsing them out). This is a gift from a family member that does not 'think' they will need it, but we want to be conservative with it if they do. I am talking in the 100k plus figures.
• In my policy, we get about a 5% return AFTER insurance costs, and can borrow at 8%, meaning there is a 3% net cost (it pays even on the borrowed portion at 5%). I can get funds in 48 hours. Repayment EXTREMELY flexible.
• My other 'cash' is tied up in my primary residence which I am going to be selling (3ooK+ equity) very soon, and do not want to muddy the waters as far as closing goes with needing to pay our a HELOC etc....

So, to me, it is a no brainer. If say you only had 20K cash value and a 2K a year premium on the LI policy it would be a whole different story. If CAN be a great way to go, but a LOT of 'what ifs' to consider. Good Luck,

Dan Dietz

Hi,

I have been looking, but with no luck, for a Buy & Hold analysis program for the long haul - meaning where you could project inflation into the rents, maintenance etc. And also that might show returns on overall vs on cash etc....

I am only one property into my Investing experience so far, but am looking to do many more and want to be able to be very thorough with projections etc...

Up to this point, I have just used a freebie from Dinkytown, which is great for basics, but I am looking for more. I realize Excel could do this, but I am not THAT good with it ;-).

Any thoughts, and thanks for all of the help you all are willing to give to us newbies!

Dan Dietz

Hi,

My comment is NOT directed at the "strategy' being discussed, but an assumption in the original post that "SDIRAs are not suited to the 'Buy-n-Hold' strategy (to paraphrase).

I personally dont see it that way, but then I AM new to all this..... I only have one property at this point in my SDIRA. I realize you loose the immediate tax benefits that would likely apply to the same project outside of an SDIRA.

The way I look at it is in my case, and I am guessing maybe a lot of others here too, I have WAY more $$$ in my IRA than I have in 'cash' or liquid sources.....probably over a 10 to 1 ratio. So the IRA is where I have the funds to invest at this point. It's either IRA or nothing for the next year or two.

So, if I get say a 12-15% return from operations, and another 3-4% from appreciation (about 4% is historical for our area over the last 50 years ) which I think should be relatively easy since we purchased it at about a 33% discount to the assessed tax rate, I would say that is not a bad return. This also does not tax into account rising rent rates over the years either, which have about doubled here in the last 20 or so years.

So, if we averaged it out to 15% over 15-20 years, I dont see how that is not a good fit, compared to say a stock fund that might do 10% IF you hit the market cycles right.

I also personally see it as a good balance to the other half of my ROTH IRA that I DO invest in stocks, probably more aggressively than a lot of people would be comfortable with. And, I envision it as a good possible income stream in retirement (20 years away) if I choose to hold them then. I have a friend in town who is in his mid 70's and has about 15 units, all relatively new/low maintainence etc..... and he has them all paid for. His gross income stream is about 150K a year, so after expenses maybe 75K a year to 100K a year. He has all of his NOT in an IRA so owes income tax on that income. Mine are in a ROTH, so will be income tax free :).

Just a different take on it.

Dan Dietz

Hugo,

Have not heard of that company, good or bad.

I just set up our (3 Partners) 'check book llc through UDirect IRA Services out of California. I would HIGHLY recommend them.

I did a lot of reading to understand the general concept of a Self Directed IRA before hand also. UDirect or other 'custodians' can not offer 'legal advice'...... they are just the 'facilitators' that make it all flow.

They put me in touch with the Lawyers at KYLER KOHLER OSTERMILLER & SORENSEN, LLP out of Utah (UDirect can provide a whole list of lawyers and lenders once you start working with them). I would also HIGHLY recommend them. I worked with a man named Jarom who was great at helping me work through a lot of very specific questions. Very reasonably priced compared to some of the prices I have heard........ours was $1500 since it was 'multi member' but I believe a single member is around $500.

Good Luck, Dan Dietz

Some good advice so far.

I am just now (literally yesterday) starting to market my first Investment Property, and 2 unit duplex that is a 100 year old over under type of unit. Very nice and spacious, bright and sunny etc..... New furnaces, roof, windows etc all in the last 5 or so years.

I partially, well mostly bought this because I was ready to start and it was the best deal around at the time. We paid 78K at an estate auction, it is appraised at about 125K, and should bring in about $1400 month. So a pretty good rent to purchase ratio in my opinion.

In our same relatively small town (15K) newer 20 year old side by side duplexes in similar areas run about 135K - 150K and only bring in about $1600 month. So to me, the older units, IF in good shape, are a better investment.

Both of these types of units have a pretty low vacancy.....usually less than 5% I would say.

The 4-8 units for the most part are price well at around 40K - 50K a unit, but tend to be in less desirable areas, no descript dingier properties, and have what see,s like a much higher vacancy rate.

To me, a big part of it comes down to looking at long term return on investment.

Dan Dietz

@Jon Holdman ,

As I said, I am new to this, so still a bit confused. I know I need to go talk to some lenders, but thought I would get some advice here too.

I realize there are ALL kinds of different Life Insurance policies out there - some great and some not so much.

One of the reason we keep a large cash value in my LI is that this 'lump of money' was a gift from a family member, and our goal is to preserve it for the next 10 or so years to make sure different people in the family can be 'taken care of' if needed. It also happens to make over a 5% return AFTER providing me with about 500K of life insurance to boot!

Jon, what I am wondering specifically is this; I DO have access to this where I can get up to about 125K on 48 hours notice. That does not seem much different than a bank account to me. Maybe I am missing something?

I know there are rules about 'seasoning funds' that are deposited into an account. Would that still hold true if I took out a loan ahead and deposited the LI funds into my normal bank account say a week before I needed to show POF?

Thanks, Dan Dietz

@Dave Godfrey ,

Not sure who you have yours set up with, but I had VERY good service from UDirect IRA services ( www.udirectira.com ) who also refereed me to

kkoslawyers.com (Mark Kohler's firm if you are familiar with him) where I worked with Jarom to set up a 3 member LLC that my 2 partners and I are all investing with our SDIRAs. GREAT service there too.

Good Luck,

Dan Dietz

@Dave Godfrey ,,

I am just starting to do this, and have been studying up on it for a while. I do see somewhat what the others are saying here as far as not having a few of the benefits of owning outside your IRA.

In my case, one of the main reasons to invest IN my IRA (ROTH) is that is where a huge portion of my equity/net worth is. I have close to 20 times the cash in my IRA as I do outside of it. So I somewhat see it as either own it in my IRA or likley not at all as of right now. Soon I will have a nice chunk of money from the equity in my primary residence when it sells that I plan to use OUTSIDE my IRA.

I guess part of how I see it for 'pros' to doing it in an IRA is that just like any investment in your IRA it can grow (income, appreciation, capital amortization) tax free and you could always reinvest the incomes into Notes or other avenues too. In my case it is in a ROTH, so no taxes ever.

The biggest case for me to do it outside is to more easily be able to leverage it to raise the return percentage a LOT. I am also working on a plan to find Private Lenders within my IRA, but obviously harder than doing a traditional loan outside of an IRA.

In summary, if I get say a 15% return inside or outside my IRA, they are both a good thing in my opinion.

Dan Dietz