All Forum Posts by: Brian Stephens

@Christina Tkacs I would HIGHLY recommend running this question past the lawyer that would handle your evictions.  Every state's laws are different and what may seem like a small error can end up costing you months of lost rent if you do have to evict.  If Hemlane would handle this for you, you are going to have to follow their instructions completely to avoid being liable for any issues that arise.  I would also have a local Real Estate attorney look over Hemlane's terms of service where it applies to the evictions as well (assuming they handle this).  Evictions are going to start going up at some point so we need to be as prepared as we can!

@Justin Crosby

Louisville is actually a pretty easy market to figure out. As long as you stay outside of the 264 bypass and inside the 265 bypass you will typically be in good shape on a rental. There are some hot spots like Shelby Park and Smoketown but if you don't know those areas well you can get burnt.

@Anna Catron

You will definitely get better terms from a portfolio lender but those options also come with different requirements that vary widely from bank to bank.  I'm not aware of a portfolio lender who offers a 30yr fixed rate fyi.  You will get very frustrated if you are asking for that.  Portfolio loans typically come with a 3-10yr fixed rate period and 20-30yr amortization.  The most common is a 5yr fixed rate period.  The most difficult part about finding what you are looking for is that every Bank/Credit Union has different options and not every loan officer at each bank is able to provide every type of loan they do have.  I don't lend in TX unfortunately or I would help.  What you are going to need to do is spend some time on the phone calling local Banks and Credit Unions.  You need to ask to talk to someone about "Refinancing a rental property"  The person who answers the phone will likely not know what a portfolio loan is.  When you get that loan officer on the phone you need to ask about their portfolio loan options and if they offer commercial loans for your property type and loan amount.  That will get you the information you need.  Rinse and Repeat!!  

Good Luck Anna!

@Julian Davis

Great question Julian, this is a common misconception simply because there are so many different ways to structure financing for property owned by a business entity. Financing for LLCs have options that are much higher than traditional mortgage rates (as in 2-3x as much) and some that are slightly lower. The highest rates are from hard money lenders. There are great reasons to use this type of lending in certain circumstances such as house flipping. There are non-traditional lenders that offer features like "your credit score doesn't matter". Again, those options have their place as well and could be the best option for an investor but you pay for those features in both your rate and closing costs. A traditional mortgage on a 1-4 Family property gives you a slightly better rate and is the most common loan mentioned on BP. Rates can vary significantly depending on the LTV, credit score, origination fees, ect. Mid 4% to mid 5% is normal now. Commercial Bank/Credit Union financing gives you your best rate and LTV but is also more difficult to qualify for. I'm doing mid 3% to mid 4% on those now. When your transaction gets above $2-3MM there can be even more options depending on the type of property.

@Mo Muigai

If it is a conventional 30yr then that rate is about right. I am doing a 5yr ARM 20yr AM as a commercial loan (LLCs allowed) for under 4 right now in my market of KY so they are out there for under 4 percent but on a shorter amortization. If you want to find this type of loan in your market ask for a commercial loan officer when you call the bank. If they can't finance your loan under a business entity they aren't a commercial loan officer. Ask for someone who can. Don't bother with the big banks though. They typically won't offer commercial financing on anything under $1MM. Sometimes the cutoff is higher.

Borders & Borders does a great job and is very knowledgeable about all types of investor transactions.  Harry Borders is the man to call. 

@Michelle Reid

During competitive times like this in real estate, prices in large markets like the greater Boston market spiral out of control because of the formation of investment groups who are more than happy to take a 0-5% return and bet on profits being made primarily on appreciation 3-5yrs down the road.

Appreciation is a better way for them to show a return than cash flow as well because there are a number of tools they use to reduce taxes on these gains to 0% whereas rental profits will be taxed.

The bottom line is that these groups can pay 10-15+% more than the local investor while projecting the same return we are. This doesn't make deals impossible to find just harder in large markets especially. These investment groups scoop up listed properties because it is an easy target and they know they are only going to be out bid by other investment groups.

Good luck out there Michelle!! There are plenty of ways to win in this game still, you just have to keep educating yourself here on BP and elsewhere to find your nitch!

@David Zachery  If they own the property free and clear, the best way to do the transaction would be for them to provide seller financing.  This is where the owner "becomes the bank" and writes you a mortgage.  You would have a real estate lawyer write up a mortgage document to reflect the rate and term of the loan and the title would be transferred to your name.  If you don't hold up your end then they would be able to take the property back.

If they still have a mortgage and you don't have the $$ to purchase or get a traditional loan then I would HIGHLY recommend that you sign a 1 yr lease with the family member which would guarantee them an amount every month regardless of the income generated and the balance is your profit.  They would still have to hold the property insurance and pay the taxes (and possibly other costs depending on the location) since the property will still be in their name so those costs should be included in the lease amount.  Doing business with family is something to be careful with and your highest priority should be to provide DEFINED EXPECTATIONS.  The most important expectation is the $$ they receive.  I know you may feel you are giving them more financial upside by offering to split the profit but that is because you are a business minded person.  Most people don't think this way and only find comfort in a monthly number, even if it is lower.

If all goes well you should have a down payment saved up to purchase shortly.  Good luck with the opportunity and I hope it works out!

If you are looking for 30yr fixed rate financing every bank is going to offer the exact same terms because we are all offering the same loan program that is underwritten by Fannie Mae or Freddie Mac.  The only downside is that the loan and the property has to be in your name at the time you apply for financing and you can only have 4 loans in your name (including your personal home, vacation home ect) at one time before the terms change and get a little tougher to qualify for.  

If you are ok with an ARM that has a fixed rate for 5yrs there is more flexibility at some banks who offer these as a portfolio loan but the requirements vary from bank to bank.

These are the only two options I am aware of to get long term financing based on the appraised value.  

@David Lowe I wanted to make sure that you were aware that the city of Louisville now requires you to go through an approval process to have a STR anywhere within the city. There are a few qualifications you must meet as well.

https://louisvilleky.gov/government/planning-design/short-term-rental-information

Personally, I wouldn't want to purchase a property that would not cash flow as a traditional rental property as well unless you can absorb the negative cash flow if/when the laws change in the future.  The backlog of applications is huge right now and the laws are very much in flux.  I would plan for 3-6 months for an approval.