All Forum Posts by: Daria B.

 Hi Dmitriy 

I had two options:

1-lend to allow them to pay back original investor, which would be interest only payback including capital at end of term

or

2-equity position whereby I put up $xxx to allow them to payback original investor (no interest paid on lent money) with equity income (rental).

I chose option 2 for the income so it would be part owner.

As with previous deals (Mortgage Notes) my IRA was on the deed and a promissory note was created as a result of the lending with a mortgage.

As I read your questions and write in response I am now wondering if this is typical. Essentially, I’m lending free money (no interest) and only receiving rental income (split 50/50) including split (50/50) on sale of property. The sale would make me whole from the capital and also include profit. So I guess it’s one or the other when option #2 is in play. I don’t know if others pay interest on money lent to them and also rental income and split sale proceeds.

Anyway, I will not have any hands on the property. The JV is assuming all responsibility for upkeep and paying bills (although my IRA has 100% responsibilities for expenses).

I believe my custodian may require a promissory note / Mortgage regardless of terms as protection- am following up with them tomorrow. And as protection I should want it as well.

Does that make better sense?

Hi all-

I’ve done quite a bit of reading and searching the forum - some posts came close to my scenario but not on the mark. 

For 3 years I have been JVing with a partner to buy Mortgage Notes (6 plus to 1ur holding) - simple process of funding to buy the Note, receive % split on income and same doing a % split for selling - all proceeds went back to SDIRA. Simple model that works well. No issues like having to foreclose and nothing that required additional funds from IRA.

Now I’ve been presented with a different investment - new for me.

The JV partner already owns the property and has been rehabbed and currently has a renter. All the essentials are in place like insurance, home owners warranty (already rehabbed but carrying as a precaution) and taxes paid. I will have to find out if they expect only renewed taxes and insurance to be SDIRA responsibility.

They currently want to refi and pay off original investor that got them through the purchase and rehab.

In walks my money SDIRA (not a ROTH so all tax deferred) to refi and also partner on holding the investment for rental income.

Anything can happen even though it's rehabbed with a home warranty - all expenses are 100% on the investor side (my IRA) which means if additional money is needed that the rent does not cover, my IRA will have to pay the expense. At this point I see why I never ventured down this path.

Will the IRA be subject to this UBIT or other tax?

I found several posts that get into a more strict and complicated investment and that does not apply here.

Any help is appreciated?

@Dmitriy Fomichenko I know you deal in this and I found several of your posts. Is it a simple cut and dry process with no adverse affect of taxing? What else should I be asking or looking to educate myself on with respect to using my SDIRA to finance (lend) and hold a property for rent?

Thank you all...

 I will send a message to your inbox.

He does all the work. I was quite surprised, pleasantly, that he does what he does. I originally hired him for his forte in painting. Inside and exterior whole home for 2 rentals, he did both. When he paints he will have his brother help if it’s a large job. When he was at the rental and saw the damage the former tenant did and just the state she and her family left, he offered to help. He’s done laminent flooring, I pulled up the carpet and pad and disposed of it to assist in my costs and have it ready for him to jump in.

 Hi Mike

I live here in Gainesville and use someone that is also an investor. He’s very good at thinking outside the box and has saved me tons on repairs/replacements. Meaning I repaired when it wasn’t necessary to replace and the work still came out great.

If you want I can send you his contact information.

Hi @Ken Wang

What @Costin I. said, which is why I mentioned getting to understand both - they work together when implemented correctly.

 Hi Ken-

Seek out land trusts to see if that will suffice your business as well instead of a direct LLC. Properties in a land trust then have the LLC as the benificial interest (beneficiary). Hopefully Inphased that correctly.

 Ken-

I don’t have any steps or advise, although I too have looked into this myself.

If you have an attorney and CPA it might be good to begin with them to find out the pros/cons of doing this. 

I reference the CPA since there are tax implications of an LLC (although pass through to the individual taxes) verses you as an individual tax payer. There still seems to be some differences between these two however minor.

The attorney should be able to help with guiding the legal aspects of doing this.

It’s cleaner I suspect if you own the properties out right.

I tried to do a land trust and Wells Fargo still gave me grief - luckily that note is paid and I no longer have to deal with WF and hope never to again.

.

Hey Gerardo

Long time how are you. I sent you a message with a contact. Let me know how it works out.

Daria

I am not looking for advise rather I am looking for passive or semi-passive investors and who they currently employ for property management in the areas named in the subject. 

I'm looking for PMs that are not highly restrictive with contract on dates and fees. 

Restrictive meaning, things like charging a fee whether they place a tenant or not and want to be paid if contract is terminated for the remainder of the lease although they are not managing. Or things like renewal fees or termination fees excess of what I mentioned on tenant leasing.