Louisa's Journal - The Sky is the Limit!!!

Ok, so the "action" part of this day - Day 3 - will be a bit limited since I'll be flying to D.C. to join my husband for a couple days. I really almost feel guilty about it, because I am so driven to get this RE stuff done now, no vacations YET!! But seeing as it is a last very-short trip before the baby is due, I will do my best to enjoy. But you may not be able to keep me away from the DG site, or from stopping at a Kinko's to work out some contract while I'm up there!

A quick report on yesterday's self-directed IRA meeting: AWESOME!!!!!!!!!

I spent an hour with an Entrust rep, and am thanking my lucky stars that I had a few corporate jobs back in the day that had 401K that I rolled into an IRA. Little did I know I would be able to invest that money in my real estate career!

Before I go further, I must tell you about the BEST THING THAT HE SAID!! It was almost said in passing at the very end, as if it wasn't a big deal, and I was about to jump out of my skin:

He knows 2 lenders that give out non-recourse loans to IRA account holders. A non-recourse loan is based on the deal, and the deal only. With an IRA account, you have to pay in full for a property...full cash, that is. So for me, I'd be looking at very cheap properties, which is just fine...anything to get rolling, right? So with full cash - you want to be able to make the most of it. These 2 lenders make you put 30-40% down (instead of 100%) AND they will lend you the REST of the money at 8%....or I should say "lend your IRA" the money, so that you can purchase multiple properties with your money. Granted, the 8% is higher than rates these days, but if the deal is structured correctly, this could be AWESOME, and you could always pay it off early. And let me not forget what Randy thankfully reminded me of, that Joe and Stacey always add too ----DO NOT BE AFRAID TO ASK! If the deal is good enough, why settle for 8%. Who cares what the bank is used to? You have a great deal, with a great return, you can ASK the bank for better. What do you have to lose? (I usually don't want to push the rules and take them for face value, so this asking stuff always comes as a surprise to me! Why NOT ask?!)

THE IMPORTANT THING HERE: Their lending IS BASED ON THE DEAL ALONE!!! No debt to income ratios, no collateral...THE DEAL and the numbers themselves! Why? Because YOU are not able to contribute any personal funds legally to the transaction at all outside of your IRA due to the "wall" that is put up on this tax-protected account, so the numbers must be great, and the lender must feel assured that your deal is a good one in order to give money towards it, because if they get burned, they get burned....they can't come after YOU for the money. So there is no point in collateral or your debt to income ratio for this type of loan. This is like a dream hard money lender (which I have not been able to find) to your IRA account. The other good news ----you find out "what they consider to be a good deal" just like finding that out from any buyer on your buyer's list, and you go find great deals ---and you will know that they are great if they lend to you, because WHY ELSE WOULD THEY LEND YOU THE MONEY BASED ONLY ON THE DEAL! This is why this guy only knows of TWO lenders that do this....one here locally and one in the Midwest. He's emailing me the info.

So of course I'm still going to pursue deals outside the realm of my IRA as I need money in my pocket today and not all at retirement (as a reminder, you can't take the money out of your IRA without penalty until 65 I believe? and your real estate profits are going directly back into your IRA, not to you directly), but as a source of immediate funds to run with, and ONE avenue of many to take, I definitely plan to go down this road. Not to mention, I might as well take advantage of the tax benefits, and get this started when I'm younger and ASAP rather than let my IRA funds be invested in a poorly-returning stock market!

Ok, gotta run. Wow, I actually feel so great in the third trimester, sometimes I forget I am pregnant (minus the big clothes and moving a little slower..ha!) I have more energy than I have had in a LONG time!!!

More soon,
Louisa

Hey Louisa, great info!! If you happen to speak to him.ask him if his company works in NY also. I am interested in opening a self directed IRA too. And using it for REI. THANKS.
Richie.

Hi Luisa,
I came across your list of things you learned in your last deal....
<< --how to work smarter next time
<< --how to prevent some things I never even thought of (unclosed building permits with the city that were thought to be closed, were not and have held up this transaction big time!)
<<--how to budget better for next time (great project to learn on, because I still did very well profit-wise)
<<--how to market better next time ---signs outside the house WHILE the house is being rehabbed
<<--how to plan better for termite inspection (prior to house being renovated, rather than after!) More later on this...

The most encouraging thing to me was to think that even though you had a few hiccups and are still learning, if you can get something at the right price you can still make money.

Roger

Richie - Thanks for the note!

As far as Entrust ----you can go to http://www.theentrustgroup.com/locations/ and look for a location near you. They have offices nationwide, but for anyone looking into this from afar, you can still use their company ---you just need to allow an extra day or so to get original signed documents to them for a transaction. They really have a niche market (or so it seems to me)...there are probably competitors out there, but there aren't too many companies that do what they do. Oh, just as a note, as I found out, if you are opening an IRA account, I wouldn't necessarily OPEN one with them....they strictly hold your money as a middle-man (it can't be invested in anything, nor does it gain any interest, it just sits there waiting for you to do a deal), so it's actually advisable to hold your funds with a brokerage, so they can be earning something and then when you are ready, move them to a company like Entrust that handles the self-directed IRA accounts. Note: It can take 3-4 weeks to process a transfer, so if you're wanting to "close quickly", you will want to have moved the funds prior, and have them ready at Entrust. Fees? Not sure if this varies per office or state, or if it is flat fee across the country, but I was told it is $250 maximum annually per asset....so per house or real estate purchase, etc... OR you have the option to do a sliding percentage of purchase price scale that may work out to less per asset (they have a chart). Another interesting thing they didn't advertise (but I asked a trillion questions and dug a little) ---- you can form an LLC underneath your IRA. Now, this wouldn't be an LLC that you personally do business under (due to tax purposes), but a completely separate LLC that ONLY your IRA owns. The benefit in doing this also applies to the fee structure to Entrust. For instance, instead of being charged PER asset, the LLC itself is considered an asset, and you can have as many properties under that LLC as you want -----and you are still billed only ONE annual fee of $250. Granted, you have to weigh out the difference of the cost to set up an LLC in your state, and see if that is worth it to you per the amount of assets you currently have purchased with them ----but the point is, long term, as you grow to have many properties in your IRA portfolio (after all, we're going to do lots of deals, right?), this company provides options like this as you grow so you're not clobbered with fees! While it may not make sense initially to set up an LLC for one or two properties ----it absolutely becomes critical later....which actually leads me to the question ---are you able to move properties under an IRA LLC AFTER you've already purchased them (I.e. you decide later on to set up the LLC as you realize you are growing and want your previous properties to now fall under that LLC). I'll have to ask that one....for some reason I doubt it. Maybe it just takes a leap of faith to set that LLC up and just go for it.....there is probably some "threshold point" in your investing, where one decides they need to establish the IRA LLC ----once they're pumping out deals like a machine. I'm just curious as to what's the smartest way to approach the LLC or no LLC decision as far as your IRA goes. Lots to think about

The self-directed IRA is is also how Chip and Andrea did some deals (I SOOO need to talk to them on this point), so seeing that they are the experienced ones on this, they may be a great resource! I need to search this site for blogs on this too! Hope that helps Richie!

*****

Roger ---I'm so glad you gleaned some encouragement from the rehab deal.

You know, when I first saw the house, it was such a dump ---I knew a lot of investors wouldn't touch it with a 10-foot pole. When I arrived at the house the first time, and couldn't get in, I called the birddog advertising it, and he said "just break a window" ---there was no key ----this is how bad it was! But I also knew if I could get it for dirt cheap like I did (same price of vacant lots in this particular area, and the only eye sore on the block), and get a bid on it that had a huge spread between purchase +repairs and after repair value, I knew there was room for error and room for learning (like $50K+ room), and THIS was EXACTLY what I needed to have a financially-stress-free deal where I could afford to make mistakes and still make money.

A house like this isn't the best way to go in terms of quick turn-around, nor am I sure I want to have to put that much rehab work into something when there are deals out there where you can make half as much money in one month verses 5 months on a project requiring only cosmetic work. However, it was a great project for me, and I learned SO much. Not to mention, I made more money on it, than I made last year for so much less work (since it was hired out and I just picked the interior). Albeit, there was some stress the last couple months, but not extreme stress in a "can't pay the bills" kind of way!

Your post reminded me that I hadn't reviewed a few things that came up...

COST OF FINISH OUT AND FIXTURES
One thing I wasn't clear on was the finish out expense. I wanted this to go on the retail market, not just the investor/rental market, and I knew I had to upgrade some features to get it to sell quickly and make it appealing in this up-and-coming neighborhood that is still not quite "there" yet. With this in mind, some of what the contractor had picked out was very different from my ideas to sell the house quickly. And my ideas, while I did shop for wholesale bargains online and in town and picked out all my flooring, counters, cabinets, fixtures and paints (I wanted a few colors that would make a couple rooms "pop", not just one neutral color throughout), this was still more costly than I anticipated. I just hadn't figured some of these "extras" in. But it was well worth the cost. I was just glad I had a project like this to "learn" on, so that I can better estimate this upgrading in the future.

USING YOUR LOCAL REI GROUP FOR RECOMMENDATIONS FOR CONTRACTORS AND RESOURCES
Another point ----after I had already contracted the project (and I do really like my contractor and would use him again), a well-respected investor at a local REI meeting told me about a crew he uses that gets everything done top to bottom - fully gutted - full rehab ---in 3 weeks time. You better believe that I'm going to be calling him for a next BIG project. He was super resourceful and super helpful. In fact, I'm glad you reminded me of him ----now that I have some time, I need to call him!! My advice---go to your local REI meeting, and find out who investors use for their rehab projects including turn-around time on the bigger jobs. Asking the biggest investors for who they recommend and use regularly is your best bet before taking on a project....this is probably an obvious tip, but it's one I missed, so I thought I'd share!

All the best Roger to you and your deals. Thanks for stopping in to comment.

Well, I'm on a mini-vacation...and I'm cut and pasting this since our hotel's internet didn't work last night (power was out), but I haven't forgotten about real estate. I was up at 3am writing these messages to post later because I couldn't sleep...had too much real estate swirling in my head.

Today isn't a huge action day but I want to be determined to do at least ONE thing even when I'm "off" ---so today:

---Calling back the Entrust rep to get some clarification on a couple things regarding the LLC within the IRA. This will be critical to getting set up for this next deal.
---Setting up appointment with bank rep that does non-recourse loans as I described above to the IRA

That is all for now! More later!
Louisa

Just wanted to let you know everything is under control till you get back. I didn't want to bother you on your mini Vacation. It's Really amazon the Lady is already working on your home and is dieing to give you 2k once we figure out what we need to do. Call when you get in and have fun.

Randy

Just caught up on all your info on the self directed IRA. This is GREAT stuff - thank you for sharing and in so much detail as well. I will be contacting them asap. And I love the LLC idea....and I just LOVE learning all these new techniques from everyone. This RE is just so cool

WOW, you are on fire Louisa! I found myself scrolling back, I think I missed something? What was the LLC thing, I couldn't find it. It's amazing how much everyone helps each other out on here, why couldn't this have been around about 20 years ago???

Randy ----thanks so much for your note. I got this when touring the Baltimore Aquarium and it put my mind at ease! I can't tell you how I wanted to sneak away to work on this!! Great talking with you, and you've given me some awesome questions and perspective on the self-directed IRA set up as well. Can't wait to see how this all turns out!

Laura ---Thanks for stopping by! Yes, I'm finding the IRA LLC stuff intriguing too....I have a meeting with my attorney on Wed to set up the LLC...more to come!

Chris ---Thanks for the note....the LLC....if you take a look above at my post to Richie and Roger ---that is where the stuff on the IRA LLC comes in. I'm still learning, but that's the detail I have on it for now. Hope that helps!

OK, so last week was a little crazed....I haven't forgotten Dean's "you can make excuses, or you can make money, but you can't do both" but nonetheless, last week, due to circumstance, was a little bit of a wash for me. Baby steps, right?
---My husband had to have ankle surgery to remove a bone fragment that had separated itself from his ankle due to soccer
---The very day after his surgery, he spoke at an adoption agency where he is on the board (he is adopted), and he speaks periodically to parents wanting to adopt....he speaks about his personal experience, his family, and his experience meeting his birth parents. I have never attended, and always wanted to (middle of a work day mainly got in the way...this is the kind of thing that I think now I have a better perspective on "take a day off" for this important thing next time!), so I was thrilled to go...it was very special.
---So also while he's hobbling around and I am 7 months pregnant, we took a 10 hour child birth class (well, over a 2 day period)
---Finally finished 2009 taxes ---wow, word of advice: keep up with your receipts and your mileage for all your RE endeavors (whether or not you are making money yet, because YOU WILL BE) ----if you don't, you will have to chase them the following year (like I did!! crazy!!!) AND GET A GOOD ACCOUNTANT!! (this was also Matt's Edge advice this year, and I absolutely understand why!)
---My Mom moved from Texas to Nashville (about 10 minutes from us!) and closed on her house and moved in this past week, yay!

So I probably shared too much non-RE information, but all that to say, my daily RE was in true "tidbits" this past week, due to all that was going on above...but I'm back at it!

Main accomplishments, though small they may be:
---Learned that setting up your own LLC for your self-directed IRA should not be done by just "learning yourself and doing it on your own" ----I usually like to go that route, especially due to lack of funds, but in this case, after more investigating of what to do and how to do it, I found it is very detailed, and you could lose your shirt later, if it is not done properly (and I found out that it is much more than a simple form or format) - so I determined by late Friday afternoon, that indeed, an attorney is needed
---Scared by quotes on google for attorney's fees for this set up $3-$5K, but learned that an attorney I use (who by the way, gives discounts to local REI group members...another reason to join your local REI group!), is only $250-$300 for this set up. Actually, the main part you need from an attorney is the operating agreement for the IRA LlC. I believe registering it on your own is fine, but the operating agreement must be written properly for IRS purposes. Your custodian (mine will be Entrust in this case) that acts as that middle man for the IRA LLC may have a list of items they prefer in the operating agreement, which you need for your attorney.
---Key component to that operating agreement in your IRA LLC is that when putting a "cap" on the funds you are investing in your LLC which is usually stated in the operating agreement ----BE SURE to put a cap equal to the LIFE of that LLC (that you imagine). For instance, many make the mistake of deciding they want to put say $25K into a real estate investment, therefore, they move $25K from their IRA to their self-directed account, pour their money in their real estate purchase, and then later, decide they want to put another $10K into it. But in their operating agreement, they put $25K as the cap amount. Basically, that means you have done all the deals you can do within that LLC! You can't later "add" $10K. So be sure to cap your LLC out at an amount in your operating agreement, that far exceeds your expectations, and mention that you may only be funding it a certain percentage of that cap amount at the current time, but you can continue to hold many assets long term in your IRA LLC as long as your "cap" remains high, which in turn costs you less to operate to your custodian like Entrust as one of the many benefits of a self-directed LLC being under your IRA. (going back to that Richie & Randy response post from above)
---F.E.A.R. ---Heard a cool acronym for FEAR. False Evidence Appearing Real. I like that....makes me want to take it head on.

More tomorrow about action steps for this week!
Louisa

Hey Louisa,

We all have those weeks, where despite our best efforts we just don't get everything done that we wanted to. Life surprises creep up on us. It's going to happen and you just have to take it as it comes. The important thing it to not lose focus and get back on track as soon as possible after you are derailed!

You have one BIG change coming up soon, that will be demanding a lot of your time. Take a look at what Carol is doing, maybe you can find a partner that you can work with?

Thanks for the info on the self directed IRA. I have one also, with Preferred Trust in Las Vegas. They have a lot of experience with Real Estate and I have been very happy with them so far. They are the ones who steered me to the property I bought in Jacksonville.

Thanks for the note and encouragement. Great suggestion on Carol and finding a partner. I am really looking forward to some of the networking events I'm attending this month with the REI meetings, and another meet-up group of investors. Long term I am definitely looking for some synergy with other members, and think that finding an agent sooner than later, will be extremely important!

Awesome that your custodian of your self directed IRA steered you to a property --that's great! Just curious...if you get a chance, did you happen to set up an LLC under your IRA, or did you just proceed with using those funds for that property purchase? (Understand either way, I'm just curious if you had experience with the LLC side of it).

Great that you have that money working for you!!
Louisa

Here are a few things I plan to get done:

---Get another year lease signed by a tenant this AM in our one rental we have. We would like to keep her as she is a good tenant and know that she is interested long term in purchasing the property, but currently has no down payment. We are charging her about $100 more per month than we might otherwise be able to get (it is about $300 over our mortgage), so we have told her, her original deposit ($875) and $100 a month of her current rent from now on can go towards the $5k of the down payment and once she has that down payment, we can re-do the lease and make it a lease purchase. Whether it works out (she purchases the property) or not, it cashflows well right now, so while it does tie up more of our money than I'd like (I think we could make twice as much for half the money on another property), it is a decent rental, and very low maintenance, so we'll just keep it and work on others for now.
--Attorney is available at the earliest on Wednesday afternoon to meet about the operating agreement for the self-directed IRA ---getting this appointment on the books
--Calling to re-schedule my meetings with contacts on the non-recourse loans for the self-directed IRA...may be able to meet as early as this afternoon. Bringing in the current contracts on the one deal with Randy that I'd like to consider a non-recourse loan for. Once I meet with them, I'll share the details on this deal, and their response, turn-time, interest, etc...
--Coming up with a game plan for the rest of the week ----really back to basics with mailings, bandit signs, auctions, driving by the vacant property leads I have that are a bit dated, and looking up each of them to see their status ---if they are now with banks, figuring out how to pursue those, and getting my "script" together (when I first start this stuff, I like to review what I'm going to say on the phone in response to callers...it has been a little while)
--Get a game plan for my daily RE education this week ---DVDs, Edge Review, etc...

Lots to do! I'll report back later...
Louisa

you are doing such a great job. love how you delineate everything in your posts so we know almost exactly what you are doing each day. thanks for sharing.

I like what you are doing with your rental. You are leaving great options open for everyone (no pun intended.)

Back to basics is good too mailings, bandit signs, etc. I'm looking forward to hearing about how this progresses for you.

Glad you got your taxes done. This is one of my least favorite tasks so I force myself to keep up with it. After a time consuming goof up I created ways to check, check & double check my #'s.

What a kind way for your husband to give back by being on the board of the adoption agency and speaking to parents wanting to adopt. It's got to mean more to others coming from someone who has 'walked the walk'. You must have been so happy to finally get to hear him speak.

Take care my friend,

Lea
SPR Property Solutions, LLC

Sounds like you have been working non stop since the EDGE. You rock girl and keep it going. Best luck with everything and i'll be watching your progress and success stories.

Lloyd

Louisa, you are rocking the REI world!! I still get tired reading your posts just thinking about the amount of effort you put into it lol.
THAT Randy is everywhere great to hear you guys are working deals together. say hello to the hubby for me he is a nice guy. hope to see you next yr at the EDGE again. paln on more time if possible.

good luck on your deals.
Richie

Hello Louisa!
I hadn't been on much lately so I thought I would catch up on your journal and your really doing well!! Go sista go!!!

Sounds like you enjoyed the Edge and everybody really enjoyed you. How awesome! Hope I can make it next year. I'm still counting on that cup of tea.

Best of luck on your deals..
Barbara

More tonight to respond to each of you...Linda, Lea, Lloyd Richie and Barbara (I've missed you!!!)

Just real quick...I've been rolling in setting up this LLC IRA and I think we are almost there.

---Filed the IRA LLC with the state (for my self-directed IRA)
---Met with an attorney for the LLC's operating agreement which has to be set up very specifically for the IRS. Still going back and forth a bit with drafts but should have this resolved/finalized by Monday or Tuesday at the very latest
---Ready to transfer IRA funds and get on with this deal! Need some more info still on non-recourse loan to see if I will use this or not...have to work the numbers to make sure the interest rate all makes sense in terms of the return on investment...sometimes this finance stuff kills me in terms of grasping all the numbers, but it works on my weaknesses for sure!
---Called to set up my IRA LLC's bank account in a third party's name (since I can't manage it myself, but my tenant checks will need to be deposited there in order to feed my IRA directly) Should have this bank account finalized on Monday.

So much to do, so little time. Got a little tied up the other day with doctor's appointments...and then had to schedule another ultrasound as I was measuring "small" but all is perfect and the baby right at average in size (50 percentile) and currently weighs 4lbs. 5 oz.

So glad you guys dropped by to say hello...I'll write you each back a note...

I just didn't want to leave this place too long! Oh, there is so much to catch up on here! I need another "Louisa" to read all the journals and comment back to everyone's awesome progress.

More soon!
Louisa

You are amazing. I really enjoy your posts and insight. I can agree with what Laura said about the baby agreeing with your 5 deals and timing. Take care and keep up the good work. Oh thank you for the tip about posting in the deals/mydeals. I'll do that.
Blessings,
Cathy L

You have got to be the busy lady in REI, wow I love reading your journal.

hi there !! karen and i had so much fun at the edge meeting wonderful people like you !! sorry i didnt touch base sooner just catching with everything,i see you are really taking action with everything!! the edge pumped us all up !!! its great to hear all you accomplish .will check back wit ya soon and dont stop your enthusiasm is catchy !!!1
jay

Where are you ??

Hello Luisa, or course you know I am pronouncing your name wrong but you cant hear it
Hey just stopped in to say hello and I hope everything is ok. Say hello to the hubby fro me. keep up that drive you have to succeed.
Richie.

I think she might be busy having a baby.

lol, that wont stop her cathy She is a bundle of energy. I think she said 7 days from now she is due. Hubby better get that catchers mitt broken in

Just coming on to say hi and let you know Im thinking about you like all the other people here! You are missed on the site and I will be anxiously awaiting your return and all the news you have to share Love ya girlfriend!

First, I want to congratulate you on your success, also I hear you are having a little bundle of joy!

I hope to see you on soon, maybe we can get together and talk sometime...when you are up to it.

I had seen some of your old posts, I wish I would of been on here sooner when you had your little group going. I am planning on getting a membership to our local rei when I have the means to do so.

I have read both of Deans books, pfrern and your town. I love this website, so much info and so many nice people.

I hope you are well, hope to see you on here soon!
Dawn

Man I thought I would miss a whole lot but I hope all is well with you Louisa. You have been on my mind much lately. I've not had much time on here to post so felt guilty about it. But by now I'm sure you're wrapped up with a new bundle of joy. I hope all is well.
Take care my friend,
CAthy L

Hey Louisa, where you at?? I know you have a new addition now and must be loving getting up every 4 hrs lol, Tell Jamie I said congrats also. sorry if I mispelled his name
I am still calling you LuIsa hahaha. give me a call some time and say hello.
good luck with the baby.

Richie

Waiting anxiously to hear your baby news!!!!
Praying all is well - sending love and best wishes xoxoxo