All Forum Posts by: Steve Kuptz

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My business partners and I each have set up self-directed Roth IRAs which we then invest in LLCs that then invest directly in real estate and real estate loans. There are certain rules you need to follow in order to be deemed "not" actively involved in a trade or business. Your Tax Accountant and Roth IRA Administrator/Custodian can help you navigate those waters.

Within the Roth IRA we lose the benefit of depreciation on the real estate but we pay no tax on the disposition of the asset. We can then strategically decide where to redeploy sales proceeds without the 45/180 day timelines required under the 1031 rules.

We also invest in real estate outside of our Roth IRAs and enjoy the traditional tax benefits and then struggle with the tension between "hold unto death" or sell and 1031 the proceeds.

Bottom line is we are investing in real estate both inside and outside of our Roth IRAs.  It's not an either or decision :-).

While it is a long way off for you Katie, another current benefit to Roth IRAs is that you can withdraw any funds (contributions or earnings on those contributions) without tax consequence once you reach age 59 1/2; and as long as it has been at least 5 years after the first contribution to your Roth IRA. This is a tremendous benefit for those of us who are on the back end of our real estate careers.

Best of luck to you!!!

Contact Kat Hungerford at AAPL

Start with the conventional lender regarding your current portfolio but also begin reaching out to Private/Hard Money Lenders with what your plans are for your next acquisition so that you understand their underwriting parameters will be for the product type you will be pursuing

It sounds like you’re in a great position Lance!!

If timing is not an issue, start with conventional bank as rates, points and terms will most likely be better.  Pick a Bank that will grow with you, who is truly interested in a relationship and is active/understands your market.  Over time you will want more than one bank in your corner to ensure they stay competitive.  Once you go through the initial headaches of qualifying with a conventional bank they should be there for you when you need them next.

I would also establish a relationship with 2 to 3 Private or Hard Money Lenders.  With the equity obtained from the financing of the 11 units you can then marry that equity up with Private/Hard Money to be in a position to act quickly on your next acquisition.

Good Luck!!

Hi Chanakya

Any lender - private, hard money or conventional will look to their ultimate exit strategy as they underwrite your loan request.   Most Private/Hard Money Lenders will take the total rent into account when underwriting. Unfortunately they will also cost much more than a conventional lender which will negatively affect your bottom line.

If you do end up going with a hard money or private lender make sure you have enough time on the liss aaan to further season the property to get the $250,000 you need

All that being said, you are not that far off at $230,000. With today’s low interest rates I would continue to work on a way to finance conventionally.  Perhaps a 2nd TD if your conventional lender will allow

Good luck!!

@Eduardo Reyes

In addition to the other comments you need to know the lender’s loan to acquisition cost; loan to after repair value requirements for the product type you are considering acquiring. You also need to know if the lender requires appraisals or do they perform their own property assessments/valuations. Appraisals take time and can extend the time to close which could hurt you in a highly competitive market.

Good luck!!

Hi Collin-

I agree with Will 100%.  Once you've successfully completed your first deal, reach out to a few Private/Hard Money Lenders in your area and schedule a meeting.  There are a number active here on BP.  Share the specifics of your transaction and what you are looking to do in the future.  The Lender will let you know what they are looking for and the terms that they are willing to lend on.  Many also have websites that you can go to directly to get a general sense of lending terms and deal parameters.   Once you have 2 to 3 you are comfortable with (and they are comfortable with you :-)) you can aggressively seek opportunities.  Most qualified Private/Hard Money Lenders can close in 7 to 10 days (sometimes less if Title and Escrow are on board and the deal is straightforward) and many will provide you with a Letter of Intent that you can provide to the Seller to assure them that the capital necessary to close the deal is available and ready.

Good luck with your first deal!!

Pacific Premier Trust (formerly Pensco) can do this for you. I’ve not worked with Advanta but I believe they can help you as well

Hi Chris-

Look to a Lender who warehouses their loans (rather than selling off to Fannie/Freddie).  You will pay a higher interest rate but it will allow you to close on the home (sounds like you have enough equity) and give you the time you need to prove income and then refinance in 12 to 18 months once you have that demonstrated history in place.

Good luck!!

Steve