All Forum Posts by: Matt Taylor

I know it's confusing, but hey, it's the IRS!  If it were non-mortgage interest that you paid him YOU would have to give HIM a 1099-int.  But since it is MORTGAGE interest that you paid him, HE has to give YOU a 1098.  I have to do this every year - give all my borrowers 1098s.  The 1098 is entitled "Mortgage Interest Statement".

@Chris Licalovi

I am a private lender in NH.  I will explain how it is suppose to work.

I am assuming that this was a mortgage loan - in other words your private lender had a mortgage on the property until you sold the house and paid him off.  So sometime in the next couple of months or so your private lender is suppose to mail you a 1098 form showing how much interest you paid him.  Then you will report that interest expense on your tax form for the flip.

Samuel,

There are two kinds of SDIRAs.  The kind I have is a "checkbook control" type, which I much prefer because once it is set up you don't have to go through the custodian to buy real estate or stocks or whatever.  You just write a check and buy the investment as normal, but you have to know what you're doing or you'll get in trouble with the IRS.  In particular, you must get educated on the "self-dealing" prohibition.  For instance, buying a house with your SDIRA and then renting it to dear old mom or yourself or your kid would be examples of self-dealing.  Also the only kind of loan that you are allowed to use when buying an asset with an SDIRA is a non-recourse loan, which is difficult to get.  And then you have to pay taxes on the portion of your profits attributed to the loan.... as you can see it gets a little complicated.  

I hired this firm (selfdirectedira.org) to set up an LLC in my state. That LLC is owned by my SDIRA, but I am the manager of the LLC. The LLC currently owns one rental house, a mortgage note paying 12% and a stock brokerage account at Fidelity.

This company (www.iraservices.com) is the custodian of my IRA . Their annual fees are a lot lower than some of the others, but they don't hold your hand or even give advice.

You probably should retain the services of a lawyer who specializes in this area (very few lawyers know anything at all about it). I signed up with this law firm (http://andersonadvisors.com) which has one or two lawyers who specialize in using SDIRAs for real estate investing.  I pay a small monthly subscription (I think it's $35 for the "platinum membership") and am very satisfied with the occasional guidance they've given me.

I talk to a lot of people who are unsatisfied with their SDIRAs, but they all have expensive custodians who must approve every investment and by the time they get approval the deal opportunity is gone.  They don't have the "checkbook control" type of SDIRA.

Connie,

Hard money lenders and private lenders are "asset-based lenders", in that they rely on the value of the asset (the property) rather than your credit rating and financial situation to give their investment a margin of safety.

But these lenders typically lend less than 100% of the value of the asset (the property). I don't lend in your state and I am not familiar with lending practices there, but my maximum loan to value (LTV) ratio is 65% in New Hampshire. The purpose of this is to protect the lender. If the borrower does not pay and the lender has to foreclose, then the lender wants to be able to recover the lost interest payments, the loan principal, accumulated property taxes, property insurance premiums, utility bills and the legal and other costs associated with the foreclosure process.

@Andrew M.

I left San Diego a long time ago.  Now I live on the shore of a beautiful small lake nestled in the trees out in the country.  I could never afford this lifestyle in San Diego. Clean air, trees, swin in the pristine lake in the summer, no traffic, not so many oppressive regulations.

Plus your properties will  cash flow from day one.

Can't be afraid of snow & cold, though.

@Albert Bui Thanks for the post.  Here's another: Digital Federal Credit Union Visa Platinum.

 I only lend in NH, but to get an idea of how it works in general you can peruse my web site privatelendingnh.com.  The link called "progam information" gives rates, points and terms. Every lender is different, though.

@Mark Beekman

Thanks for the reference to Navy Federal Credit Union.  Another is the Digital Federal Credit Union (dcu.org).  Their Visa Platinum offers no cash advance fee and 8.5% interest rate on cash advances.  You qualify by joining the free software foundation (fsf.org).

Marcus,

Why are you saying that it's 100% financed if you're putting 10% down?  Isn't it 90% financed?

12% interest and also a 50% profit split? And presumably he has no obligation to share in the loss if you have to sell at a loss? You have to give away something to get him to come up to 90% ARV, but in my opinion you're giving away too much.