All Forum Posts by: Sophia Wang

@Sophia Wang,

It is very unlikely you will find a lender willing to do a construction loan for the IRA, none of the none-recourse lenders I know of (https://www.biggerpockets.com/...) would be willing to do it.

Bringing on a partner does not change the fact that your IRA is developing a property, which is usually looked at as an active business and therefore will trigger UBIT on IRA profits from such activity for the IRA. Retirement accounts were designed to invest passively. You may want to consider renting the property for couple years before selling it. Get a good CPA with experience in this area on board to help you navigate through your strategy. 

@Sophia Wang, What do you have to bring to the table to acquire the property? This might be a good staring point. If the wholesaler is asking 5k cash and your cash flow is 400/month, you COC is pretty darn good. Not to mention this loan does not register in your financials, so if you go to get lending on another property..... However if he is asking for 50k and now you have 50k tied up for minimal cash flow that might deter your interest. Just a thought!

@Sophia Wang  does 400 cash flow account for all costs including maintenance vacancy PM lease fee's  and are tax's and insurance impounded and accounted for in the mortgage?

I have bought a substantial amount of sub too's and I never played the cash flow game they needed to have at least 25 to 30% equity I could care less if they cash flowed.. I have seen to many go down with thinking they were going to make cash flow only to have those blow up in their face and the cost to sell is greater than the equity... and then default and the original seller is very upset. etc etc.

Now if its 400 a month after accounting for everything and you have a good 6 month to a year of payments in reserve plus another 10k in cash.. then its a pretty safe bet..  Always have to think about the what if.... tenant goes nuts and our stuck paying the payments while you try to evict... this is where many go south.. Bad deal for the seller generally or Risky might be a better term.

Hey @Sophia Wang I think what @Steve Vaughan is saying is that there should 5 times as much equity in the house as what is technically owed. For example, if there was $10,000 in back payments (i.e. in arrears) then there should be at least $50,000 in equity in the house. 

Hey @Sophia Wang its really a personal question on what your exit strategy is. If you're looking for cash flow properties, then you will look at the cash flow. If you're looking to basically flip the properties, equity will matter for you. For me personally, as long as it's cash flowing a minimum amount, is in decent shape (i.e. won't have to invest money or time in it) and I can mitigate certain risks, I'll do the deal. That being said, I'm in the midst of closing a deal where I'm buying it subject to, with minimal cash flow. I plan to list and sell it because I'm getting a good amount of equity with the purchase and will be able to sell retail (even though I'm taking on some interest rate risk because it's a variable rate mortgage).

Agree with @Marvin McTaw. Forgiveness is much better to ask for than permission with these things. Know there is risk of a DOS someday. Do your DD, buy right and make sure there is at least 5x equity vs arrears. That's a benchmark for me anyway. Good luck @Stephanie Garcia!

@Sophia Wang  As Bryan mentioned, you probably would be wise to consult with an attorney that can best advise you for your specific situation. 

We developed a 48 lot residential/multi family subdivision, where we handled the subdivision map, and once recorded, had all the excavation done, utilities, roads, curb gutter and sidewalk put in, and then buildout of the houses, marketing and sales of the houses. We did all of it under our LLC.

However; our family is licensed general contractors, electrical contractors, and real estate brokers, that had years of experience. For someone new, I'd say be cautious on how much you try to take on yourself. There's a lot that goes into development.