All Forum Posts by: Andrew Portnoy

I went to a presentation by a self directed IRA company and had exactly some of the same questions that you have here. As it was explained to me, you and your IRA can absolutely co-invest in a rental property. The key thing is that you need to be investing on equal terms from a cash/equity/debt perspective. However you split the down payment is exactly how much ownership each party has in the deal, including all income, expenses and profit.

You are essentially purchasing the property with a new entity owned by both you and your Ira. You and your Ira must fund this new entity and split all costs in accordance with your respective ownership percentage.

My understanding is there would be no way to personally guarantee a loan or have your Ira guarantee a loan for its portion of the JV because that would be viewed as a contribution or distribution, respectively.

Strictly speaking you would also be prohibited from improving the property yourself because that would be considered a contribution to the property. You are allowed to act as an agent of your Ira (eg arranging for a contractor to perform work), but doing the work yourself will jeopardize the tax benefits of your ira's portion of the asset.

You have exactly the right idea on providing the tenants instructions on how to pay July rent. You may consider drafting a letter advising them of the transition and who to contact for maintenance issues, etc. (assuming this is you otherwise a job for the property manager) have you setup a business email/phone/address? It may be handy to separate business and personal contact info even if you use something like google voice and have it ring your personal cell.

A FL expert may chime in here, but some states have security deposit rules, so you may need a separe bank account for those...

Good luck!

FYI It's possible that the title company will transfer the water/sewer for you so check with them first.

The wholesaler doesn't want to give out information unless you demonstrate that you're legit.

Technically sending out personal information and advertising a large bank account to someone through craigslist also make you a target of a scam, too so tread lightly.

In order to get a proof of funds letter, your best bet is probably working with the bank that holds the money (or line of credit) you plan to use to invest.

Also, consider a different approach in looking to meet the wholesaler for coffee in order to discuss more about their business and your criteria. Developing a relationship may make you the person they go to FIRST when they land their next great opportunity.

you're entitled to deduct expenses to offset rental income regardless of whether or not you own the property in an llc. LLC's offer asset protection advantages, but generally speaking the types of expenses you mention are deductions either way.

This article by Amanda Han @KeystoneCPA explains more:

https://www.biggerpockets.com/renewsblog/2015/08/21/llc-real-estate/

Three things come to mind:

1) economy of scale. For example, one roof for 2+ units is generally not as expensive as one roof per SFR. Maybe the duplex roof is more expensive, but it's not double. So the average maintenance cost per unit is generally lower than SFR

2) you started to hit on this, by saying multiple streams of income. If one unit is vacant you still have rent coming in.

3) smaller group of potential buyers. Generally speaking investors in SFR are competing against people who want that house to be their primary residence. On the multi family side, you can generally get a better deal because many buyers just aren't interested in a duplex. They may not be able to afford it or they don't want the hassle.

This last point does come with some qualification in that depending on the market there may not be a healthy supply of multi family homes driving up the price. Always check the numbers on an individual deal, but the above is just a couple of the pros to mult family.

By doing the due diligence now on rental applications, you saving yourself from headache down the road. Try to see these bumps as early wins. Scammers are out there, and you're keeping both eyes open.

Recommend you let the Zillow thing go for a few days. Also, double check that you're priced right. If you're only getting scammers, you may be asking too much. Are you willing to drop the price a little bit and get a bigger applicant pool?

Supply and demand here, the more you ask in rent, the fewer qualified renters you should expect.

just be careful if you ask the seller to fix it for you. I would definitely recommend trying to get a concession or just make sure you're comfortable moving forward at the agreed to price. The seller might have someone go in an 'fix it' only to have the problem reappear a month down the road once you're the sole owner.

The seller probably isn't too interested in fixing the leak otherwise they wouldn't have let it get this far. Maybe they already have tried, and done so unsuccessfully. Recommend you take the long term approach here and not go for the full fix after the tenant moves out. Put in a few thousand after they do and you'll be able to release at the market rent.

Interested to hear how things go so please keep us posted!  Congrats again on the deal. Good luck.

Generally speaking you need to wait 6 months until you can get a mortgage on a place you purchased with cash. Also it's probably going to be hard to get a loan for such a small amount on an investment property. Realistically, assuming this is cash flow positive after expenses, you'll be able to use that money to fund future investments. 

Option 1: find another all cash deal when you've generated enough cash from this place and/or your current job (as in, exactly how you purchased this one)

Option 2: look to scale up a bit by saving up for a down payment on a larger investment and obtain financing for it. 

To be more specific on the 2 years comment, you would need to get 2 years of tax returns showing this property's returns in order for banks to consider the income it generates as part of your total income for purposes of qualifying on a new mortgage. If you're planning to do all cash or you have sufficient income, then there's no 2 year minimum. Since there's no debt service on the place you bought it probably won't help or hurt your loan application.

For me, the liability of the swimming pool is a deal breaker, but you may have a different risk tolerance. Also you might get into tenant complaints like the pool is dirty which is inherently subjective...how often does the pool need to be cleaned and how 'clean' is clean. Does one leaf in the pool justify a maintenance call?

expanding on this, what is your maintenance plan? if you're a hands on landlord and you are doing it yourself or if you know a great pool maintenance company you might take the next step and estimate your income/expenses.

Have you looked into some comparable houses both with and without pools to get an idea of your expected cash flow and returns? Are there other deals out there that might also meet your criteria? All things being equal, no pool would make your life easier.

At least there's good news in that the problem is in the lower unit so the repairs will be confined to it. If the leak is coming from the toilet, there's a good chance that the toilet was not seated properly on a wax seal and water is escaping and deteriorating the floor.

Putting legality aside, both you and the tenants are interested in fixing the problem. the tenant also wants a functioning bathroom, which isn't compatible with a drawn out repair.

stopping the leak is your number one priority after closing, and it's causing the subfloor deterioration. A professional plumber should have no issue fixing a leak and returning the toilet to working order within a day, which is totally reasonable from a tenant perspective. Provide them the 24 hours notice to enter or whatever the lease requires.

Once that's done you can take the next steps. It's likely that the floor will be fine for a year as long as the leak is addressed. Once the tenant moves out, consider doing a bathroom renovation.

I'm guessing from the current situation that this isn't a high end rental otherwise the tenant probably wouldn't have signed a new lease. They probably saw the place on the market and didn't want the new owner to jack up their rent.