All Forum Posts by: Ron Read

I've identified a distressed seller of a multi-family, but I can't quite scrape up the 25% to get the commercial loan. The seller owns the building in the name of XYZ LLC, and doesn't own any other properties.

I was curious if it might make more sense to just buy the LLC instead of the title. I could put a bunch of cash in his pocket now, and pay terms on the remainder. He has the property listed with a bad broker who hasn't done anything right by him, so I'd assume he can just delist the property, and sell the company instead, and could also save himself from paying 6% to someone who has done nothing but keep lowering the price for him in the year he has been trying to sell it.

Would this mean there is no county-recorded sales transaction, since the entity which owns the property would remain XYZ?

Would this trigger a due-on-sale clause with a lender, if XYZ is still the de facto owner of the properties?

Would this save the seller in paying some sales tax?  

Are there any implications on depreciation?  (He's owned the building for 10 years).

Am I just making this way more complicated than it needs to be?

I realize there are some other gotchas, like I would have to make sure that XYZ didn't have any other liabilities or pending lawsuits, but I'd let the attorney manage all that.

Would love to hear a podcast special that just focused on investor nightmare stories (and how they were ultimately resolved). 

Maybe a Halloween special?  

Thanks for filling my commutes with infotainment,

Ron

Thank you so much @Nicholas Aiola for the response.  Time to find a deal on my dream condo.

@Nicholas Aiola Thanks for your time, I have a few questions about a scenario I am considering:  

If I purchase an investment property with the intention of renting it out for a decade or longer (all the while depreciating it), does the depreciation cause any complication if I move into it when I retire instead of selling it or continuing to rent it? 

Are there different implications if it is held in an LLC?

What happens if I sell it after it becomes my primary residence, or pass it on after my death?

But how many jobs were lost when Kobe retired? XD

@Dmitriy Fomichenko that's disappointing. 

I was hoping to do some sort of value capture by purchasing an underperforming small multifamily or two, but it sounds like I'm better off just leaving my retirement savings where they are.  While note investing and tax liens seem mildly interesting, I'm not interested in trading the passive investments I understand for those I don't.

Thanks again to all three of you.

Sorry if I seem like I haven't gotten this exactly, but I first want to summarize my takeaways.  Please correct me if I'm wrong. 

1. It is possible to create a single LLC which I could manage (without collecting any compensation, since it would benefit me, a disqualified person)
2. Shares of the LLC (which I manage pro-bono) can be purchased at the time of formation by each of the three checkbook SDIRA accounts, in which my wife and I are beneficiaries, even though they are disqualified parties from each other.
3. I'll  assume that ownership has to be inline with contribution amounts, so as not to benefit a disqualified party--i.e. 50k, 100k, 100k would result in a 20%, 40%, 40% stake.
4. If I use only the cash belonging to the LLC to purchase buy & hold investments outright and cover related expenses, I shouldn't have to worry about UBIT and/or UDFI
5. Annual contributions could go into the checkbook SDIRAs, but could not be used to buy additional equity in the aforementioned LLC--It would have to go towards other investments (possibly the creation of another LLC for another venture?)
6. Coverdell participation is a headache I don't want because these things are so hard to unwind without dismantling the whole partnership

If I have that much right, could the LLC pay dividends back to the checkbook SDIRAs, as long as they're representative of each owner's equity?

Also, (and this might seem like the dumbest part, since it's the whole purpose) can I put sweat equity in? i.e the LLC purchases all the materials, but I do repairs and maintenance pro-bono for the LLC?

@Brian Eastman The Coverdells each have a little over 10k in them, and my oldest is still 7 years from college.  Do you feel this is too small to convert to SD?  

I'm also having difficulty getting my head around why I might not be able to pull the account out of the partnership, as long as there is enough liquid cash in the partnership to do so.  Can you elaborate?

@George Blower Would having say all five accounts as joint owners in one LLC allow me to pass in contributions still? This would change the equity balance, as the traditional IRA will receive no further contributions (unless I leave my current employer and roll my 401k in), while the Roths and the Coverdells will have annual contribution.

Also, can a single member of the partnership leave with cash equity as long as it's representative of the interest in the partnership?  It's probably frowned upon to create a new partnership and transfer assets, since transferring property between like-entities be considered self-dealing or prohibited transaction?

Quick follow-up. I also have relatively small Coverdells (aka education IRA) in the names of each of my children. Could those also be converted to self-directed, and pooled as well if the first three can? I'm not getting the growth I need with traditional investments. And if so, could they be severed from any joint entity when it comes time to attend college so as to take distributions, without selling the property and dissolving any joint relationship?

I have an IRA and a Roth IRA which I plan to roll into SDIRAs in the next month or so. My wife also has a Roth IRA.

I realize I'll have to create 3 separate SDIRAs to handle these rollovers since the funds cannot be comingles, but was wondering if the resulting accounts could invest jointly to buy multifamily property which none of the individual accounts could afford on its own?  The Roths are both twice the size of the traditional, so it would be about 40%, 20%, 40% equity.

If so, how would I structure this?