Hello & Intro from Indianapolis!

[Chad Kiel]

Hello Bigger Pockets!!!!

My partner, Nick Wiggins (not sure how to tag yet and I wanted to introduce ourselves here to the community – and hopefully have this be the first of many, many value added discussions. We look forward very much to connecting with many of you, building relationships (and wealth) together.

In addition to saying hello, we wanted to take a few minutes to tell you about ourselves. We are based in beautiful Indianapolis IN, and have each lived here for most of our adult lives. Our model is constructed primarily around the BRRRR strategy, while being open to other opportunities that occasionally arise when you build a real estate company. We are forming ourselves as an LLC, have completed a business plan, have our attorney and CPA lined up, and are engaging hard money lenders as well as mortgage professionals to finance our first deal or three. Our long term goal is to acquire distressed properties to BRRRR, and then to use the 1031 strategy to move into multi family units.

Besides our business model, Nick is a professional licensed architect and licensed realtor, and I am an engineer and MBA. We both view real estate as a sustainable path to diversified income and wealth, not overnight, but over many years with hard work and dedication. We are avid BP fans, with Nick having listened to pretty much every single podcast, and myself having gotten through the first fifty or so in the last month. We look forward to engaging on these forums and adding value, as we believe the pie is more than big enough for us ALL to succeed!

As we mentioned above we have most of the details, we are moving forward and have begun our search for our first properties, and have our first private money meeting with potential investors this Thursday, so we are very excited! With that being said, we are hoping the team here might help us out with a couple of questions that have come up during our formation process:

1. As an LLC, we intend to have this entity execute our leases. Our attorney is pushing for us to use commercial lending on the investment property for our cash out refinance instead of a Fannie/Freddie loan. The draw back here is not only a higher rate, but also a shorter term, along with higher transactional costs and the need to refinance every five or so years. The reason we need the LLC of course is personal liability protection. What we would like input on is why we cannot have the cash out refinance done in our names with Frannie, and the lease via the LLC? This would seem to be the best of both worlds.

2. When speaking with one of our potential hard money lenders today, we learned about something that seems to be relatively new, called the delayed finance exception for Fannie & Freddie mortgages. It is a situation that forces you to make a choice during the cash out refinance process of a BRRRR. Of course, the goal is to complete the rehab and lease the property to cash out refinance as quickly as possible. With the delayed finance exception, Fannie/Freddie forces you into a choice. You can do the cash out refinance as fast as your process allows, but if it's under six months, you can only finance the exact amount the property was purchased for, NOT including the rehab costs, which of course essentially increases your equity in the property by the amount of the rehab and other miscellaneous costs since you can't refi them. The other option is to wait six months, where you can then do a "true" cash out refinance. Of course, the kicker here is that you're stuck holding hard money for six months at a much higher interest rate. We wanted to see if anyone here has run into this and how you might have handled it. One idea we had was to work with a small community bank or credit union (if you know of any in Central Indiana) that would be great!) that actually would hold the loan, and not sell to Fannie/Freddie, to do the cash out refinance. The other option we thought of was commercial, but again, you're running into some of the same challenges we mentioned in point one. Hence, we would love some feedback!

As we are new to the process, we would love to connect with anyone in the Indy area. We are extremely excited to execute our plans and become as active as we can here. Thank you in advance, wishing everyone the best!

[Eddie Brady]

@Chad Kiel Welcome to BP! I'm a somewhat newer investor as well but have had similar questions before. You might want to look into:

1. Buying properties in your personal names with a mortgage to start, then Quit Claim the property to your LLC during renovations and before a tenant moves in. The main catch here is to get correspondence from your lender stating they will not use the acceleration clause in your note (most have this) to call your note due. The process itself is simple, you can contact any title co. ( I use Investors Title in indy) to draft the paperwork and then get it notarized. The title co will record the Quit Claim for roughly $200. As long as you have permission from the lender, this can work well.

2. If using Hard Money, 6 months to a year is not an uncommon amount of time to pay them back. In that case, you could keep the property in your personal names until the standard cash-out refinance. If you're worried about liability, talk to your insurance company about umbrella options or increasing coverage.

Looking forward to seeing what others have to say!