All Forum Posts by: John-David Herlihy

How many units is it?

I think it is acceptable to use actual expenses to calculate NOI. However, your client should expect an experienced investor to make their own calculations in order to present their offer. Also, a good rule of thumb for expenses is 50% of rental income. Any lower can be suspect, much higher indicates opportunity to improve NOI via value add.

@Judd Campbell I would see what you can do to make the loan work. If you need $100k for the down payment, the net difference of a loan vs early distribution is "only" $10K. That is in the range of an allowable "gift". Perhaps there is an investor that would like to JV the deal with you? As @Edward B. alludes to, think about how well that 40% can grow in your 401K, The house would have to cash flow like a best to be worth the difference. Also, the 40% estimate may be low, as you would increase your gross income by $100K and could easily move tax brackets.

@Justin Jeffrey @Dave Van Horn talks about this in his book on Note Investing and tells a cautionary tale. It is one thing to take equity from other investments and use to reinvest, expanding your portfolio. However, taking an equity line from your house and using it to invest, risks your personal residence in the investment. Therefore, if you choose this route, make sure to be conservative.

That said and if you are convinced on real estate investment, I would look into har money loans. You can use a bit of the equity loan as money down and fund the majority of the project through hard money. There are numerous lenders out there that will loan to even new investors with 20% down on the acquisition and fund 90-100% of the renovation.

@Carl Fischer I sent you a PM.

@Dmitriy Fomichenko Thank you for the clarification. To buy the additional shares does there need to be an appraisal of the LLC to determine the value of shares?

I think the additional steps of adding new funds to the IRA via rollover or contribution would be an important consideration when deciding between checkbook and traditional SDIRA. Especially, if you need to have the LLC appraised each time. Looking more like the route of a traditional SDIRA until I have a larger nest egg and do not need to make more contributions is a smarter way to go.

Hi Ryan,

I am sure there are legal pundits that can give a better answer than I. I too am getting ready to process my first contract via docusign. As far as I understand, I don’t think you need a notary when using DocuSign. It should be similar to signing the document directly with the customer. They digitally sign with the access to their personal e-mail.

When fully executed the document can be printed and brought to title company/lawyer as you would otherwise process.

When you set up an SDIRA LLC you transfer a portion, or all, of the funds into the LLC. Then what accrues in this account is tax deferred. Does the SDIRA buy shares in the LLC?

My questions is how do new contributions to the IRA (e.g., $6,500 per year or new roll-over funds from a 401K) get accounted for? Do you need to keep them in the original IRA account, can they be directly transferred to the IRA, do you have to buy new shares in the IRA? If you buy shares, do you need to have the LLC appraised for value each time?

Thank you for the responses @Brian Eastman and @Carl Fischer . These responses somewhat bracket what I have found out there. It looks like the liability associated with an self-directed plan is the reason most companies will shy away from this set up. I will continue to look into this as an option.

Thank you Carl for the clarification that all participants would have the self-directed option. This was my understanding and I believe what also leads to the potential additional liability.

I an no expert, but if I understand correctly, in the end, you would own a note for $100K. I believe the holding period would start with the note transaction. You could either hold the note for the long-term passive income, or season it for a few months to a year and sell it, leveraging that ~$90K into the next deal...

I have a small company, set up as a C corp, complete with a 401k plan. I would like to self-direct my contributions to the plan. Is this possible? All I can find is information on Solo 401k plans, but I don’t think that will work with how our company and 401k are structured. Currently, it is just my wife and I that are employed, but we are actively working to bring employees onboard.

Looking forward to the comments from the experts on this board.