All Forum Posts by: Adam Horowitz

The HML and commercial lenders I am using will not lend to properties held in land trust. I must use LLCs. So I perform the BRRR method and now want to involve a land trust for anonymity purposes and other purposes. How can I get this done? Does the Garn St Germain Act apply to LLCs?

I have read strategies to use land trusts to assign personal property mortgages to an LLC for asset protection and liability purposes. I am asking a different question specifically about loans already issued in the name of an LLC.

I cannot speak to this individual company, but to a common theme on this thread that "anyone can do this themselves". I know several people that wanted to DIY and they end up with $30k in credit, a FICO hit of 30 points, and extra fees from the credit card companies. 

Professional companies will get qualified investors up to $250k in unsecured funds. I have personally recommended to several people from BiggerPockets with success. It is just a fact that you will not be able to do this yourself...unless you have some competitive advantage that I am unaware of.

@Shayna Queen I regularly advocate HML with an LOC to new borrowers and get them setup with both the large LOC ($150k+) and HML BUT you must be super smart about this. Your strategy is not for the faint hearted and can lead to a painful experience very quickly. Here are some tips:

1. Have secondary exit strategies lined up before taking on any debt, just like @Alicia Yoder advocated. That means if you are flipping, make sure that you use a lender that can also refi the property in a pinch...you have to check on the rental refinance loan terms to make sure your DSCR is manageable for the lender; do the math as if you have already taken out the HML and LOC. Some sophisticated lenders are now using the debt service ratio instead of DSCR after 2008. Look those up before and do the math before getting involved. PS. Some lenders will want to see bank statements showing skin in the game. You will have to properly time out receiving money in your bank with how your LOC lender reports to credit bureaus. Otherwise, you may have money in the bank but too high a DTI for your lender.

2. Make sure the LOC you are receiving is large enough for your future flips. If you are just starting to climb the real estate investment ladder, the tendency is to go after the smaller deals first with hopes of building up confidence and your bankroll for your third or fourth project...so keep that third or fourth project in mind right now and get a larger than needed LOC.

3. Discipline yourself on the rehab. Go after a property that has minimal rehab. That will help you to avoid some of the pitfalls mentioned above. Plus lenders love to see these projects and will be more willing to fund. Here comes the discipline part...these projects are hard to find. Just keep looking and be disciplined. Especially with a large LOC, you will be tempted to go after a project with a large or even normal rehab amount...but stay disciplined.

@Wayne Brooks @Jay Hinrichs Thanks. Cash upped investors it is. 

I am looking to establish a track record with a short sale lender, so if and when credit gets tight, I can have access to funding for short sales. Likely, will go with the lenders that already have a short sale or foreclosure lending product, for obvious reasons. 

Bottom line, I am looking for a lender that has an iron stomach during a correction. Any suggested lenders? 

@Branden Sewell You absolutely can fund a duplex house hack today. Will you turn a huge profit is the question? First, I would go to a hard money lender. HMLs lend based on the property value first. Being new, you can get 70% LTV. That would cover $140k of your $200k. Get a personal line of credit for the remainder and to start rehabbing the property.

Is the HML and PLOC going to eat into your profit margins? Yes. Will you have to wait 2 years to get started in real estate investing? No. Besides, using other people's money is always the best approach. PM me for more. I do this everyday for motivated real estate investors.

Not to be Debbie Downer on the FHA approach, because 203k is a great loan product....but when a duplex has competing bids, the FHA offer will be pushed aside. Why? FHA loans have exact qualifications and are more often scuttled at closings than other loan products or cash offers. On the other hand, cash offers take precedence in the mind's of a seller. That is what I am proposing, making a cash offer.

If I still have not convinced you, at the very least do not use FHA, use Fannie or Freddie's competing loan products. Freddie Mac's Home Possible mortgages can get you 15% down, but then add in down payment assistance programs and you can achieve 0% down payment...here is the real advantage over FHA, PMI disappears with Fannie and Freddie after 20% of the loan is surpassed. FHA maintains PMI throughout the life of the loan. That adds up to a huge savings.

Yes, you can get involved in real estate investing with nothing down. 

@Ed Neuhaus from what I understand, the IRS looks hard at captive insurance companies. They are a tool by the mega wealthy for tax evasion. 

@Sunny Wilson Option #1 is to contact the states tax commissioner and negotiate. 

@Ryan Keenan Make sure that the income generated from the property is 2.5 times the debt payment on the LOC (make sure to include all your new debt payments in this number, not just the LOC).

That will keep your DTI to a level below 40%. Also make sure to find a lender that will accept the rental income in the 6 month window. Some will not accept the newly generated rental income within 6 months. You can certainly ask a lender that question beforehand.

@Clark Childers HML only for a limited time. 4 to 6 months. then rental refinance out of it. This will only cost you 4 to 6 months of high interest. Does that help with the high interest fears?

As for balloon payments, the rental refinance will provide you enough to pay back the balloon payment. If you repair wisely and the ARV rises enough, you will end up with a nice little cushion after the balloon that may pay you back for the interest and points on the HML.