All Forum Posts by: Eric Schwake

I really appreciate everyone's advice.  It's really been helpful.  I think the way I'm wanting to go currently is with a rental property like I mentioned and then purchasing a performing note.

@Jay Hinrichs I've run some calculations on the property I was looking at and it looks like I would bring in around $600-$700 month after expenses.  Would you think that's a bad thing to invest in within my SDIRA?  I obviously don't know how much appreciation I would get out of it but I'm 40 so I can't touch anything in the SDIRA for at least 20 years so I'd hope it would appreciate some by then as well as hopefully getting small gains in rental income over time.  

Ok so here's my scenario.  Would love some feedback on whether a performing note would be the correct option for me.

I'm in the process of opening an SDIRA. My first investment in that will be a rental property which I'll be buying for cash all in at ~$80k. I'll put about $8k into some low expense ETF's to hopefully earn a little interest but more importantly be usable as an emergency fund for the rental. I will have around $50K left in the SDIRA so this comes to the my question. Should I invest the remaining money into a performing note? Or should I put that $50K into low expense ETF's while looking for another good rental property to purchase at a later date. As a side note I'll still have ~$40K in my Betterment IRA investing in stocks so I'm not putting all my eggs into the real estate basket, just a majority of them :).

@Josh Caldwell So it sounds like you're saying Penn Hills isn't too great either?  How about North Versailles?  I'm also looking at some properties in Pittsburgh itself.  I'm assuming it varies widely about how places would be in Pittsburgh proper.  Besides looking at places like Trulia for neighborhood info do you suggest I look anywhere else to get a sense of things?

I'm looking at buying properties in Verona as rental property.  I'm out of state so don't know alot about the area right now other than what I'm able to find online.  Any insights into the rental market in that area? If you need any more info from me please let me know. 

@Dmitriy Fomichenko 

So basically if I paid 70k cash for a house I could turn around the next day and do a cash out refinance and pull out $30k which would allow me to spend $50k on a note?  I've never done a cash out refinance so not sure exactly how it works.  Also not sure if it's treated differently within an SDIRA but I don't think it is

Here's what I was thinking about my initial foray into this. Let me know what you think.

I will move $100K into a SDIRA with checkbook control. Of this I will look for a rental property between $65K-$70K. I will buy that property with cash. I'd like to keep 10% of the purchase price of the property fairly liquid within the IRA for emergency funds for the rental which is ~$7K. So on the high end this leaves ~$20k in the SDIRA (factoring in funds required for setting up the SDIRA). I'd like to use those funds to look at buying performing notes. I'm not quite sure if $20k is really enough to buy a performing note. However since I've purchased the rental with cash am I able to use the equity in that to help purchase a note? I'm not quite sure how using the equity in the property would work.

@Lynne Smith @Alina Trigub

Thanks for both of your responses.  I think at this point I'm looking at a few options on how to proceed with SDIRA funds.

1) Buy a single property with cash.  This seems fairly safe in that even if I have tenants miss rent I won't have to worry about covering the missed mortgage payments.  After I've got one under my belt depending on funds left I'll either keep it in the stock market or maybe do financing for a second property.

2) Finance between 2 and 3 properties. This provides me some diversity but also more risk because I'd have to have funds always available in the IRA to pay for missed rents.

3) Buy 2-3 performing notes.  This seems fairly low risk but I still need to do more research into note options.  @Alina Trigub look for a PM from me :).

4) Buy a note and a property either with cash or financing depending on my funds available.  

Thanks for everyone's feedback on this.  Obviously since this money is what I'm going to be using for my retirement I want to make sure I've done all my research before making a move one way or another. 

@Robyn Green

Great suggestion. I'll be buying that book and adding it to my reading list.  I'm already half way through 'Build a Rental Property Empire' but he's definitely not going to go into the ins and outs of self directed IRAs in that book. 

I was thinking about an LLC but still not totally sure if I'll get one. Maybe reading that book will convince me to. Is there a reason you used him to make your LLC? Are you comfortable to tell me his rate for doing so either here or on private message?

@Brian Eastman

Wouldn't UBIT also apply to a self directed IRA if I financed a home or would I have UBIT no matter if I finance or pay cash? I was under the impression I'd only have UBIT for financing. The other reason I was thinking about cash only is because perhaps some sellers would be more willing to give a better price if I offered cash rather than financing.