All Forum Posts by: Daria B.

 Hi again G-

You can get an idea for materials if you are using standard off the shelf stuff from Lowe’s or Home Depot. Likely it’s labor included with their quote but you can see that on what was given to you.

For a 4-plex kitchen and bath for its complete overhaul I would think that's a close number, baths really don't cost that much (I found this out with my own rehab). I'm also going by a standard to less than kitchen size that plex's have relative to a SFR. If there is no outlandish electrical or plumbing and only plumbing hook ups for bath then no extreme cost there.

Are you buying appliances?

 Sage advise: Invest in what you know and understand.

I’m trying to learn about other types of investments and along the way  am finding the numbers just don’t work for what I want as a return verses risk. Better to read and discuss than to jump in blindly.

Hi

I posted earlier on the use of the SDIRA with regard to UBIT and received some very good answers that I could then go off in a direction to learn  more.

Upon looking over this venture and reading other peoples similar deals, it dawned on me that the SDIRA may not be the best use for rental property. 

Expense payments need to come from somewhere and if it's not the rental proceeds then the SDIRA could in fact be tapped for the additional expenses. I don't want that kind of carte blanche on my account.

Somehow out-of-pocket (which cannot be done in the case of using SDIRA owning the rental) would be a better fit instead of depleting a retirement account that has taken years to build up.

I am now wondering if this is the best investment venture and use of the SDIRA money.

Who else has used there SDIRA for rental property?

Pros/cons I should be aware of besides having to use additional SDIRA money for upkeep of the property (by the way has already been rehabbed but still there could be something in need of funds).

Thanks

 Thanks Brian-

This is a great statement and what I was looking for:

“Passive income not subject to UBIT includes royalties, dividends, interest, rent from real property and gains on the sale of an asset that has been held to produce such passive income.”

It will help me with further research on this topic. Not always sure where to start looking for answers.

As I mentioned to Dmitriy, I still have finite details to absorb. It's the tax implications or UBIT for the fact that additional monies may be needed from the IRA after the initial purchase.

 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.