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All Forum Posts by: Antonio Chelala

Antonio Chelala has started 12 posts and replied 45 times.

Post: I need a dscr loan

Antonio ChelalaPosted
  • Posts 45
  • Votes 5
Quote from @Jason Wray:

Yes, Your wife can be on the mortgage and your funds can be used for the down payment.  You will want to talk to your Banker up front so that they can prepare a few things to avoid issues in underwriting.  Pretty simple set up so there shold be no issues as long as you do nto use a newbie!

Oh nice! Is it allowed to get the down payment from someone else when the mortgage is on your name? How does it work

Thanks!

Post: where to find deals?!

Antonio ChelalaPosted
  • Posts 45
  • Votes 5
Quote from @Saul Nev-z:

Hi guys new to this, been researching rental properties as an investment for a while now, working on my credit, saving for a down payment, watching YouTube videos and what not. I've been talking to realtors around my area but still have yet talked to a lender. i live in California so that's out of my budget (prefer elsewhere). where do you guys see potential cash flow deals at? do you guys use a specific site? other than Zillow and realtor, I feel like they never show fixer uppers.  

Good question! I think you should definitely train yourself to analyze deals on Zillow. Don't forget: location, location AND location!!  is extremely important. Furthermore, make sure to be as close as you can of the 1% rule. Also! You should be making sure that the area where your prospect property you are looking at is a safe area, I like to open crime maps and googling the zip code. Investing in bad neighborhoods where a high crime rate exists will lead to a bigger headache despite the high cashflow ( you can even find the 2% rule apply in those areas if not more!) I do not advise, think about opportunity cost!

Congrats!

Make sure to notify your lender! In the future when you do have many loans taken, make sure to consider the DSCR loan which does not take into account your personal income but the property's rental income.

Post: How to off with this Joint Venture?

Antonio ChelalaPosted
  • Posts 45
  • Votes 5
Quote from @Doug Smith:

Hey Antonio, 

You've got a lot of questions here, so I'll copy and paste a bit. We started in a similar manner as you, but my first partners were bankers and title people, so we had a background already in this. We still are partnering with others to do deals. So I'll answer your questions with how we do it...

Should we do an LLC for the joint Venture? An LLC or S-Corp is like an entity with several owners. You will come to an agreement on what percentage of the entity you each will own, what percentage of profits you'll get, who'll provide what capital, who does what, who can sign, etc. You'll create an "Operating Agreement" (LLC) or "Bylaws" (S-Corp) to spell that out. An LLC would be a good vehicle for multiple owners. Good fences build good neighbors, so make sure everything is agreed to in writing in the Operating Agreement or Bylaws.

Under whose name does the property go under if buying with an LLC? The entity owns the property. It has similar rights to a natural person including that of property ownership. You and your friends own the LLC or whatever entity you go with.

Should we get a mortgage on our names in order to avoid having to take a commercial loan (Min 25% down), and how does the mortgage work with a Joint Venture ? Unless one of you is going to own the property personally or if you all go on the loan, this wouldn't really work well. Conventional loans for investment, non-owner-occupied property are likely going to require 20% down anyway. Low down payments are usually for owner-occupied property. 

Can you refinance if you have an LLC for the property, or is it better to move the property to an LLC after refinancing to avoid the due on sale clause? Technically, the due on sale clause is triggered when property title transfers, so transferring it after you refi would technically trigger it. That being said, that would be highly unlikely. If you get a commercial-style loan, simple have the closing agent/title company make the change as part of the closing. Disclose what you're doing with the lender and have them shepherd you through that process. We do it all the time for borrower and we buy our investment properties in LLCs. This won't be difficult. 

Would the deed have the LLC or the LLC holders? In most jurisdictions, the deed is recorded and that is part of the official record. If Snidely Whiplash (for Dudley Dooright fans) steals the deed to the property and ties Nell to the railroad tracks, the recorded deed is still in the name of the LLC. Someone can stick the paper deed in a safe deposit box, but it's no longer as important as it once was.

If you have any more questions, let me know. I'm happy to help. I do hope that helps you.  

Thanks for the great explanation! This was extremely helpful, appreciated:)

Post: How to off with this Joint Venture?

Antonio ChelalaPosted
  • Posts 45
  • Votes 5
Quote from @Alesandro Breguez:

@Antonio Chelala, @Eliott Elias, im not an attorney but based on my limited experience here a few insights and thoughts:

1. JV formation: you dont need necessarily a LLC, you can form a JV partnership for each specific deal. The downside risks of the shared LLC is that you will be exposed to the liabilities of your partner, so it's important to know well the other party.

2. Financing: this connects to (1) above, is the shared LLC is taking the loan, both will be grantors and liable for the default. This might put you in a risky situation. Some JV regulates that the funding partner hold the mortgage and title.


 Thanks Alesandro for the tips!

Quote from @Michael Plaks:

@Antonio Chelala

I find the random and unqualified statements made earlier by my colleagues on this thread rather unhelpful.

Generally speaking, when you are just starting, you should not worry about tax benefits of various entities. Keep it simple and focus on finding deals. 

Here're some very general rules of thumb as to when you may want to start considering business entities:

- if you're concerned with legal protection (as opposed to tax benefits), and your attorney recommends an LLC - this is when a simple single-member LLC or a husband-wife LLC may come into play

- if you're partnering with someone other than your spouse - then a multi-member LLC should be considered

- if you're already rolling as a Realtor/wholesaler/flipper and already making some serious money - ask your accountant about changing the tax treatment of your LLC to an S-corporation. It's not always helpful, so don't do it without solid tax advice specific to your situation

- if you're making more money than you need to spend on your lifestyle - then is time to research whether a C-corporation can make sense

Once again - if not sure, then better do nothing. Setting up entities is very often  unnecessary and sometimes is outright counterproductive.

Bonus tip: never put rentals into any type of corporation.

Thank you for the detailed explanation 
Quote from @Vicki X.:

@Antonio Chelala  I found asking for demos and talking to the sales from those companies directly to be effective.  Which feature are you looking for specifically? I wasn't aware of the partnership between those two companies.

Hey Vicki,

Thanks for your reply!

Yes RentRedi provides Maintenance assistance and support through Hemlane!

Quote from @Chris McCormack:

I would agree with @Ashish Acharya in that there are serious tax implications to holding it in an s-corp. I would also take it one step further to make you aware of the implications of a c-corp. C-corps will be taxed once at the corporate level (21%) and again at your personal level. 

As Ashish said, speak with a qualified real estate CPA before making any decisions. There is great potential and great risk.


 Thanks Chris!