All Forum Posts by: Bill Hamilton

And not to question your experience level or the lender etc., but is the lender actually requiring it to be a commercial loan or are they insisting it be a Non Owner Occupied loan? NOO is common with hard money. Requiring it to be commercial raises a huge number of flags for me. But maybe others will chime in about why they might want you to go commercial. Given that this is a flip and your first, I assume you don't own a ton of other properties. A lender requiring you to go commercial with those parameters makes me sincerely nervous about the lender. Unless you have enough properties to do a "wrap" loan for cross collateralizing or something along those lines, I don't see the purpose of going commercial. Are you getting the ability to do a non-recourse loan on this?

Are you using a trusted mortgage broker on this or are you working directly with the lender? All of this is starting me down being very concerned with the lender. If you aren't using a very trusted mortgage broker or loan officer, I would have a RE lawyer review this deal. Not saying it's a bad deal or that there are less than above board things going on but my gut is telling me there is either something I don't know about this deal or there is something wrong. 

No lease, no close. End of discussion. If she is really anal about her "super secret lease" language, offer to sign an NDA (non disclosure agreement) which your lawyer can draft, that says you can't use anything unique in her lease, to design your own lease. The thing is, you could be accepting a totally non-enforceable lease.  

So, a lot of what I say will be conjecture but I would call the lender and make sure if they are the ones requiring the commercial endorsement. And if so, what commercial endorsements. If the lender is the one requiring it, then the only way around it is to see if they will drop that requirement or to get a new lender. Getting a new lender would cost you way more time than the alternative. Also, call the title company and ask them if and why they are requiring a new survey and if that requirement would be the same if you weren't purchasing as an LLC. Most of my experience is with either a true commercial property loan or with a standard residential loan, rather than a company getting a loan to buy a residential property. But, in my experience, a new survey is usually only required when there is new construction in the area or some other reason that the boundaries of the property are in question.

I agree with @Jay Hinrichs, a land contract can be a great mechanism to achieve control/own land. It's just something that is not very common in a lot of states, but if I remember correctly they are extremely common in MI. Have a lawyer review the document and you should be fine. Also,(to Jay) Washington Federal had/has some of the best raw land/construction loans I have ever seen. They were one of my go to places when doing mortgages in Idaho. Sadly they only lend in the pacific NW last time I checked. And I have never found a bank that matched them in other areas I have worked.

@Gary Hall it looks like my post came out far harsher than I intended. Nothing personal was meant towards you or anyone else. Clearly everybody has the right to set their criteria wherever they feel comfortable. It's your asset and you have complete control (unless local laws mandate other things).

I would also say that in the Denver area, if you aren't getting a large number of applications, then your pricing is possibly too high for the neighborhood, but always pick the strongest applicant.

I will stick with what I meant as the main point of my post. Having been a wholesale AE for a mortgage company for many years and working in about 35 states, I will say that while the ratio of income to rent/mortgage is certainly important, in high cost areas we would grant a great deal of flexibility to those who had a significant amount (based on actual dollar amount rather than a percentage basis) of disposable income. For instance we would often allow borrowers to go to 55-60%DTI if they also had disposable income, after all expenses, of $3,000-$4000 per month or higher. To us, this meant they had a decent amount of discretionary income they could allocate towards rent if something else went wrong in life. It was huge in terms of "compensating factors".

Of course that level of disposable income was far more common in high cost living areas like LA, San Diego or Seattle than it was in Wichita KS. Nothing against Wichita or other areas. It's just a demographic thing. But it's also why higher priced cars tend to be more prevalent in those types of areas. A higher percentage of the people there make higher salaries. A car payment that would be a huge percentage of the average persons salary in Paducah Kentucky, would be a relatively small percentage in Boston etc.

Again, whatever makes you comfortable in renting your asset out is what you should do. I was just trying to say (again, I do apologize for the tone) that strict percentages that may be appropriate in one market don't always make sense in another market.

Crap. Y'all need to learn that places like Denver, LA, NYC etc. are very different from where you live. Don't bother offering advice unless you have lived/been a landlord in a high cost area. A renter in San Diego etc. could make $10,000 a month and not hit your 30% ratios. Yet they can have $6,000 per month in disposable income. These judgments are strictly based on your local demographics. Pay no attention to non-regional answers.

I know Chase (at least on a business account) allows you to get cards that give others "deposit only" access to your checking account. The people you give those cards to don't even get to see what the true account number is. Check with your bank and see what solutions they might have.

I guess I understand both sides to an extent. If I own the building, I might want pretty tight control over who stays there. If I am a renter in the building, I expect a great deal of leniency in who I allow in my apartment. I want my sister, my girlfriend, my parents, my best friend etc. to be able to access the apartment when I want/need them to. If you can't grant that as a landlord I, as a perspective resident, would probably look for a different living arrangement.

If you as a landlord want tighter control without having the argument (as much) spend more on locks for the building/apartments and have keys that are very difficult and expensive to duplicate.

I guess I don't know anything about RE laws and practices in Canada. Here in the western US I wouldn't buy a property without title insurance under any circumstances. The title company (depending on some variables) protects against unrecorded liens etc. And in my experience they know how to find liens and title issues that I would not have known to look for or where to try and find some of them. And here in Colorado, especially in more rural areas, they know about water and mineral rights issues that are far outside of my general experience.

Well, in terms of Hard Money @Sharif Palmer, if you can get that deal take it and run. Yes, 30 year fixed from a HML is possible but not common. Also 2 points on the front at 7.5% on a 30 year is something I have never heard of. Not saying it doesn't exist. Just saying be very careful about what is in the contract/note. And make sure you close with a title company or an attorney.