All Forum Posts by: Lance Dacy

Anyone have recommendations for a Real Estate Attorney to help an investor get started with LLC, Leases, etc...?The properties will be in Rual KS (Pleasanton, La Cygne, etc...)

Thanks Jay, can you connect with me via email? Let's dig a bit deeper on this offer and if I can see an example structure with the amounts I am referring to, that would help. (let me know if you can't see my contact information). 

I have an opportunity that would eventually become our primary residence. The home appraised last year for 2.1m, currently on the market for 1.98. I am offering 1.5m (as it needs about $200k in updates for our tastes). My 4 year equity in the home minus mortgage is at $1m, so it's a good deal IMO. I wanted to place no contingencies in the offer, but we need to sell our primary home to get the funds to close. I could explore a remodel / bridge loan of some sort, but not sure what my options are. I could also take the money from another source, but wouldn't be able to carry the 2 mortgages on personal loan I don't think. I was thinking of DSCR as well as it would have no problem with LTV or DSC Ratios on appraised rent vs. expenses. Any creative options I am likely overlooking?

Thanks so much! I know it's a lot, but I have to move fast, so it might be the cost of my learning this time. I feel like the fix and flip I am only out a max of $20k of my own money vs. regular the whole shebang until I sell. 

I just contracted a house in a desirable location/schools that needs a lot of work. We are not scared of that, but got the home at what we feel is a great price and we thinking putting $100k in it will soar its ARV / Rentability (we are going to rent it out). I have an option to do the regular conventional loan and pay out of pocket for the renovation. I was also exploring a bridge/construction loan that would allow me to borrow the $100k in draws and refinance upon completion (owing interest only in the payments). My fear is that while the interest rate is high it's understandable, but also the origination points are 2 for the lender and 2 for the broker (nearly $20k just in fees). When I refinance, I will likely have to pay that again and just didn't know if I am overthinking this (as those are taxable write-offs) or just go ahead and close once and spend my own money renovating. Anything I should be comparing that I am not thinking of?

Yes, sorry that wasn't very clear (my brain moving faster than my words). I am exploring the type of home I can get straight cash vs. leveraged. So what I was reading in the IRS code concerned me if I was going to do a leveraged home and consideration for tax on top of tax (being taxed twice). 

My CPA/Custodian and I will explore more when I actually make a decision, but just looking for other people with experience actually doing it (usually empirical evidence and experience makes for better advice than just knowing the codes). So before I do anything, I was looking for people who have done it and how they learned from it.

I also had the notion that good cashflow back into the property is great, but not on an SDIRA because of the UBIT problem. So I want to find a home that doesn't cash flow a ton (enough to make fixes / repairs / Capex, etc...) but really is just a growth on market price of home that I could sell one day and pay taxes then LOL.

Awesome post, thanks so much. Yes, I think for me it is a diversification question. I have plenty in 401k right now that I will leave and let grow. This SEPIRA was just doing nothing and getting affected by the market heavily (which I cashed out without loosing a ton). So I think the best strategy is to find a home that I can use this money for solely and let it grow at the market rate and really be more hands off since everyone else has to do the work (other than of course managing the people doing the work and checking on the finances). Or private lending would be good too, but not sure the interest rate would be better than I would grow a future home in 20-30 years. I could also invest in a MF property with people and just take a % of dividends, I will explore that too. Thanks for the time!

So I had a SEP IRA from my other company that sat stagnate since we went to S-CORP (this business is not a real estate business its my other business). I recently moved the SEP IRA to a SDIRA with Trust/LLC and now have all the money in a banking checking account ready to use. The more I learn about disqualified uses though, the more I am thinking I either need to buy a long-term no problem home with this money or I need to go with an REIT or completely change directions.

Any one with experience with SDIRA and if you would do otherwise after doing it or you are an expert in them and recommend/don't recommend them? My CPA gave it to me as an option and said the custodian can help me with the ins and outs of how to use it, but he did mention I can't do the work on it and all the funding and proceeds has to go back to the IRA LLC (so I wouldn't obviously benefit until retirement which is the same for the SEP IRA).

Investment Info:

Single-family residence buy & hold investment.

Purchase price: $350,000
Cash invested: $80,000

North Euless but in Grapevine-Colleyville ISD. The backyard is a large corner lot perfect for a pool. The home is in walking distance to McCormick Park that connects to Eden Park. The living room has beautiful wood floors with high vaulted ceilings and an updated fireplace. The kitchen features a large eat in breakfast area with views of the trees in the backyard. The large Master Bedroom is downstairs and big enough for a sitting area.

What made you interested in investing in this type of deal?

School district, local/knowledgable about area, targeting single family Mom/Dads that want to stay in expensive ISD, but have landed on troubled times (Divorce, financial distress, etc...) as well as elderly people looking to cash out of their home and rent in a nice area.

How did you find this deal and how did you negotiate it?

Sadly, found it on MLS, so in the end might not be the best deal, but so far is working out for me. I have a calculator that I use to help me determine if its a good deal, so after looking at 10-20 homes, we landed on this one.

How did you finance this deal?

Conventional Mortgage (didn't know all my options at the time, but used my own money down and hope to grow this one long-term).

How did you add value to the deal?

We spent about $8,000 on painting exterior, landscaping, painting inside, cleaning, and just general replacement of a/c vents, plugs, switches to make it look nice. We also did maintenance on the HVAC and Sprinkler to get it move-in ready.

What was the outcome?

Upon placing it on the market, we showed the house to 3 different potentials, had 5 people interested, and found someone to lease before the first payment was even due. The person signed a 2 year lease, we came down on our rental price a bit for the longer-term lease (likely a mistake), but we are still cash flowing positive as of now and hope to keep increasing rent to cover some of the items I was not thinking about (learning from reading books).

Lessons learned? Challenges?

We should have accounted for a lot more money in the monthly rental calculation. While we are on par with the market in rent terms, we probably will have issues if the house starts having problems, but we did find a great home, had a great inspection, and hope to use this one to learn property management in more detail.

Did you work with any real estate professionals (agents, lenders, etc.) that you'd recommend to others?

Yes, Renee Ongaro in DFW at Ebby was great, I used SOFI as the mortgage, but will be going with FranceLending.com on the others and possibly explore private lending as well.