All Forum Posts by: Wayne Connell

Dimitriy,

Yes you are correct, the owner is financing the property and I need the money for the down payment, the remainder is going to be structured as a non-recourse loan from the seller. Regarding your other questions, I have the property set up with a qualified person to run it. The only maintenance will be some snow removal and possibly some mowing, (literally about five minutes worth) which. I am aware that I cannot literally "change a light bulb" on the property (example I was given by the IRA custodian). My issue is completing the form to get funds for the down payment. My down payment is approximately 12% of total loan. One of the consultants for the IRA custodian said that I can then only get 12% of the money needed for the down payment. Another said I can get the entire amount, hence my confusion. The second person I talked to, when I asked them how I needed to request funds to ensure that we got the full amount of the down payment stated that they could not give me financial advice, just advice on how to complete a form?? Also, this company does allow alternative investments such as real estate.

I am currently trying to locate someone locally who can help me navigate through the process. I understand much about how the basics work I just need someone to teach me the finer points. I am consulting with a CPA on ensuring it is set up correctly for taxes and you are correct, the IRA is actually in my wife's name only. Furthermore, we are trying to figure out how to set up the remainder of the note, is it in our name or in the name of the IRA? Can we hold it in a LLC that we hold our other property in or does it have to be on its own? As I said in my original post we are looking to use the funds to fund another project later in the spring so I am trying not to make too many mistakes and cost myself thousands of dollars in penalties and taxes. Thank you for replying. Wayne

Taylor,

Thank you for the reply. Yes there are some challenges using a self directed IRA but as far as managing the property we have it all worked out where I will not be involved. The company I use charges a fee based upon the dollar amount of the IRA not each transaction so I pay the same fee each year, which makes it easier to plan. I am a little confused about the finer points but am slowly working through them. Thank you for taking the time to reply. Wayne

My wife and I have a retirement account we rolled over into a self directed IRA to use for down payments on two projects. One is a purchase of a small storage unit facility and the other is building a four plex. We would use about 15% of the purchase price from the IRA to purchase the storage units and the remainder of the purchase is going to be owner financed. On the build we will use about 30 to 35 percent of the build cost from the IRA and the remainder will be bank financed. Both will be non-recourse loans. While I am familiar with the pros and cons of using a self directed IRA and how they basically work, as well as some of the unique requirements when utilizing one, I am far from educated about the finer points.

The main issue I am having is I have the storage units under contract and I am trying to make a request for funds. However, the company I have the self directed IRA with says they cannot give me financial advice and I have checked with my attorney, financial advisor, and my CPA and none are very familiar with the self directed IRA. My CPA is willing to try to help getting it set up but is researching the procedures. Does anyone have any advice or guidance about how or what I need to do to ensure this is structured properly or can put me in touch with someone who can educate me. Thanks in advance!

Hi Chris, I live in Nebraska and we are allowed to use the deposit to pay for rent owed.  Furthermore, I have a clause in my lease that states the tenant has to pay a "non-refundable fee" to hold the property until move in.  After the move in date the fee becomes the deposit and is refundable after that date, according to the parameters of the lease.  That being said, I rent one property on a short term basis to traveling nurses.  One backed out at the last minute as the property was not within the on call radius that the hospital required, (which I advised her she needed to confirm prior to signing the lease and she said she did).  I kept $185 of the $685 dollar fee and returned most of it to her.  She was very happy with this and actually recommended my rental to the company that placed her.  Good luck with your situation and I hope it works out to your satisfaction!  Wayne 

Thank you all for your replies/advice! I will definitely add it to the lease as that seems to be the consensus. There are several good ideas on how to structure it and I really like the terminology of "lease buy-back cost" that Mr. Steciak suggested. 

I own three rental properties, all duplexes. One is a short term rental but the other two have a year lease option or month to month option with different price points. I have read on Biggerpockets articles, about agreeing to let someone out of a year lease early, if they agree to pay a penalty. It was suggested that this penalty be equal to two months rent. My question is, should this be detailed in the rental agreement or just "standard operating procedure" if or when it happens? Also, I thought about if it was within the first three months of the lease to charge a three month penalty? Any thoughts or comments for or against would be appreciated. Thanks!

Thank you for the reply!  That information does help.  It just seemed odd to me but I can understand the reason for doing it and that it is legitimate income.  Thanks again!

I am evaluating a residential rental property and the owner, who has a business separate from the rentals, apparently leases a building on the property (not a rental unit), out to himself for an office for his other business, (this building could be rented out as an office so he is not calling it something that its not). This rental amount was included in the valuation on the property as part of the rent rolls.  By my figures the rent amount he charges himself increases the valuation of the of the property by 35 to 40 grand.  Is it normal to rent property to yourself and include it as part of the rent rolls when it comes time to sell?  If not, does anyone have any suggestions on how to handle it with the seller?  Thanks! 

Thank you Thomas S. and Mr. Collins, that does help me understand better why 30 year mortgages are more desirable.  Mr. Rien put me in touch with a bank that will do the 30 year mortgages so hopefully I will get everything on the right track.