All Forum Posts by: Ben Reese

While I agree with Jon that IRA lending is a great way to go, there are still advantages to owning property, particularly if you buy it right on the front end.

As for UBIT, don't let that scare you. Essentially you pay UBIT because you made money by using the bank's money. That's a good thing! So assuming you financed the property with a 65%/35% non-recourse loan you'll only owe tax on the proportion of the income attributable to the loan. And remember, that taxable portion will be reduced by interest, depreciation and other expenses...and the first $1,000 of UBIT income is exempt. In a nutshell, the power of the leverage is going to more than offset the little bit of tax you'll have to pay. Just be sure you have a competent accountant looking over things.

There are a number of local and regional banks that make IRA loans and IRA custodians are a good source of info for the banks that are lending in their area. And nationally NASB (North American Savings Bank) and First Western Federal Savings Bank are active non-recourse IRA lenders. A few phone calls will get you quickly spun up on their underwriting criteria.

Lastly, don't put every last IRA dime into the rental properties. You'll want a healthy reserve fund so you can cover those occasional extraordinary expenses that always come with investment property. The IRS doesn't look kindly on you making contributions (cash equity or sweat equity) to your IRA.

I've been a SDIRA investor for the last 8 years and have had great success at it, but you have to be careful. Learn the rules by reading and studying. Don't believe everything you hear on the street as a number of people are misinformed. A violation of the IRS rules will result in the IRS declaring that your IRA was fully distributed in the year the violation occurred. That means that you will owe ordinary income taxes plus 10% for that year, and if its been several years since the violation occurred you'll owe all the associated interest and penalties for the intervening period. Not a good scenario.

Good Luck!
Ben Reese

Our group has acquired a portfolio of residential loan assets from a failed Milwaukee bank. We have liquidated a significant portion of the portfolio but still have over 100 income properties in Milwaukee.

Currently we are selling properties as we acquire title from our defaulted borrowers (about 55 are immediately available) but may also sell the Notes/Mortgages.

We will sell these assets individually or in bulk.

Ben Reese

Brian,

You may be able to give the seller some comfort by making sure he/she understands that you will be encumbering the property above the initial 30K only as the property is improved. If the deal is as good as advertised then the seller's 2nd position LTV should remain consistent as you make the renovations.

Ben

Thanks Shado and John,

I've been doing a little research on the issues you both have brought up. One Mtg broker I've spoken with likes the idea of setting up a Rule 504 offering to accredited investors. I suppose that could be made to work, *BUT* I don't think I want "Fund Manager" (with all its attendant hassles and risks ) to become my job description. So lets forget that!

How about this? I assume there is no prohibition or restriction on partnering with others ( like friends and acquaintances) so long as they are not solicited publicly. If that is so, would I be correct that a multi-member LLC could loan on deals that either exceed the capacity of an individual member and/or allow the members to spread the risk across more deals? Would this run afoul of the Feds?

At the moment, all of this is moot as I'm still in a position to do this solo. But if I find it successful ( and so far so good) I'd like the option of being able to grow this in some way.

Best,

Ben Reese

Thanks Calixto, I'll do that. What aspect of the business are you in?

Thanks loki... I think real estate is just something that gets in one,s blood... and trying to figure out how to make a transaction work is a lot more fun than a crossword puzzle!

Nate,

Thanks for sharing your secrets. Great story! I'm curious about your bank. It sounds as if they are essentially bridging you until you sell. Do they do this without requiring that you have an investor that finances with them? For such short term transactions are they charging points and fees or are they funding you more with a credit line?

Thanks,

Ben

Welcome Jay.

I'm a newbie too. I'm originally from the Carolinas and have a number of contacts in the area who might enjoy hearing about your projects as they come along.

Best,

Ben Reese

Jon,

I met last week with a mortgage broker in Boise who places private money. Seems like an upfront guy. And the ability to have someone do the screening indeed sounds like the way to go. Have you had any problems using this approach that you could share?

Thanks,

Ben

Thanks for the warm welcome everyone. I'm happy about the prospect of connecting with like minded and motivated folks