All Forum Posts by: Brit F.

@Ameenah Muhammad-Diggins, it depends.  Can you post some pictures?  What else (floors, backsplash, counters, lighting) is in the color palette? 

We once did a two-tone (grey lowers, white uppers) in a u-shaped kitchen that had a ton of natural light coming in.  The tile floors were lighter colored and walls were off-white.  The grey lowers balanced the brightness in the room.

In contrast, if it's a closed-off galley kitchen with bulkheads and one small window above the sink, I would steer away from grey cabinets.

@Oliver De Ausen, you can absolutely do it yourself. But first, unless your lender requires the Quitclaim Deed (which would be odd), why not use a Warranty Deed? The Quitclaim deed has historically been the default for LLC transfer, but that was before the rules changed in our favor.

To get the correct verbiage for your deed, can you use the previously recorded deed for your subject property as your template?  From there, just modify the appropriate sections, such as Grantor/Grantee, dollar amount/consideration, and potentially the lender/servicer if your loan was transferred. 

Here's a good tip: newer Microsoft Word (2013 and beyond, I think) can open up PDF's and automatically converts them to editable text.  If you have a PDF of a deed, try opening it in Word.  If it works, review it carefully since the character recognition isn't perfect, especially if the source PDF is angled/tilted or a poor quality copy. I have Word for Office 365 and it opens PDF's fine.  Worst case, type it out yourself in Word or similar; it's only 1-2 pages and won't take long.

Then, since it sounds like the lender is on-board, you could send them the unsigned draft deed for review, or to a Title Co or real-estate attorney (local or here on BP).  I say 'unsigned' because a signed deed could be binding in your state, even without being recorded.  Getting the unsigned deed blessed isn't strictly required, but strongly encouraged on your first go-round of DIY deed-ing.

On the other hand, since this will be your first time, spending the couple hundred dollars on a lawyer-authored deed could give you some piece of mind.  You can always use that as your template for future use.

Once you've got your deed, just follow your county's procedures for recording.  In counties I've been to, they require the original notarized doc, ~$30 for 2 pages, and it's recorded immediately if you go in-person.  It takes me longer to park than complete the recording.

@Dean Wright, you can absolutely transfer a conforming loan to your own LLC, as long as your lender sells the loan to Fannie Mae (not Freddy Mac). See my Blog more details and techniques to guide your servicer: How to Transfer Property to your LLC without fearing Due-on-Sale

When Fannie doesn't own the loan, it's up to each lender to make their own rules.  Just ask them...but, be very clear in your request: 1) you want the servicer/lender to approve a property transfer only and 2) You aren't requesting a release of liability, and you aren't seeking a loan assumption.  The worst they say is 'no', and it costs you nothing but a few phone calls/emails.

Sidebar: Maybe we need to all call Freddy Mac and request that they update their Servicing Guidelines to be better aligned with Fannie on LLC transfer rules?

@Justin Butterfield, echoing what @Wayne Brooks said: If the bank is keeping the loan, the underwriting guidelines are theirs to decide, including identifying which transfers are exempt from a Due on Sale clause.  On the other hand, if the bank is selling the loan (ideally to Fannie), then read my Blog post and educate the bank: How to Transfer Property to your LLC without fearing Due-on-Sale

Correct. It would be really unusual to require a down payment on 50% LTV - regardless of the lender (bank, mortgage broker/banker, HML, PML, etc).

Don't think of it as a 'down payment' requirement; down payments are just equity you buy to meet the lender's LTV requirements. In your case, your Dad is gifting you 50% equity, which puts you well below the LTV maximum.

Hope that helps.

@Yadriel Carrasquillo,

The good news is that you shouldn't need any down payment when you purchase the house for $60k because you'll have 50% equity already. (The 25% down payment requirement for investment property is based on the loan-to-value (LTV) ratio; it's not just 25% of the loan amount).

At Refi time, if you're going with a typical lender who originates conforming loans, the bad news is that you'll have to hold on to the property for 6 mo's before you can do a 75% LTV cash-out Refi. Your Refi lender will require another appraisal - hence the question on value in 6 mo's because that'll determine how much $ you can pull out. You might be able to find other lenders (small local banks, credit unions) who will ignore the 6-mo waiting period (aka seasoning period), but you'll just have to call around and ask.

I don't know much about Killeen.  You might make friends with a local RE Agent and ask them to pull comps and get their insight on the market in the next 6 mo's.  One theory is that we're entering the slower part of the home selling season.  When you're trying to Refi, it might be Feb/Mar, which means prices might be seasonally lower...but it's hard to know how much or if other mitigating factors might offset that.

About HELOCs on investment properties, it can be difficult to locate a lender. Search around the forum - lots of threads. PenFed might work for you; they can lend in TX, as long as you own fewer than 4 properties incl primary residence. The sticking point is whether or not they'll be okay as a second position lien on your investment property. I have a LOC on investment properties from local bank, but they want to be the first/only lien. Call a local Title company and ask which lenders have been doing HELOCs on investment properties recently.

@Yadriel Carrasquillo,

Kudos on getting started!  A few q's:

• What will the purchase price be when you buy it from your dad - $60k? (If current value is $120k, then make sure your Dad talks to a tax professional about potential impact - there might be no impact, but it depends on his situation)
• How long do you expect repairs to take - days, weeks, months? If you're just painting, sounds like a quick 1-2 wk turnaround.
• Once repairs are completed, what will the After Repair Value (ARV) be - still $120k?
• Do you expect the value of the house to change (up or down) after 6 months?
• Is the property still cashflow positive at 75% LTV?
• What would the potential HELOC attach to - your primary residence or the investment property?

@Mark S.@Mark S., no offense taken.  That's why I phrased it as a 'contingency plan' because it's a risk that may or may not manifest. 

But, here's something to consider in terms of the way the Quitclaim deed is written based on the idea that it's a 'transfer' vs 'sale': if a QC deed mentions a dollar amount exchanged or 'other consideration', is that a 'sale'?  I don't know...I'm not a lawyer.  The devil is in the details of the verbiage, which is again, why it's important to consult with a local attorney and have a backup plan.

@Todd Rasmussen and @Mark S., conventional wisdom suggests that people use a Quitclaim deed to transfer property to their own LLC, based on a perception (emphasis on 'perception') that the lender won't notice or care about the transfer when using a QC deed. I don't like this method because it implies the transfer isn't disclosed to the lender, which is risky regardless of the instrument/deed used.

Alternatively, if the lender approves the transfer (doable for many investors thanks to Fannie's 2017 rule changes), then a Warranty Deed is the instrument of choice.  In TX, when there's a mortgage attached to a transfer/sale, we use a 'Warranty Deed with Vendor's Lien" doc.  Your state(s) could be different.

@Sean S.A good rule of thumb: if you think you need to use a Quitclaim deed, first talk to an attorney and title company to ensure you understand the risk and impact.  Identify a contingency plan if the lender sends a Notice of Acceleration at some point in the future.

@Daniel Wolz, personally, I would keep them separate.  If you're already diligent about keeping your business and personal finances separate, then stick with it and don't mix them.  Additionally, have you considered these other options:

• Buy in your personal name using a conforming consumer loan, then transfer to your LLC per Fannie Mae's allowed exception, D1-4.1-02. I wrote a Blog article about this if you're not familiar with this exception: How to Transfer Property to your LLC without fearing Due-on-Sale.  Since you're talking about getting a new loan, there is a risk with this approach: you can't control if Fannie or Freddy buys your new loan.  If Freddy buys it, the exception above doesn't apply.  If you choose to go this route, ask your loan originator if there is a way to craft the loan so that Fannie buys it (not Freddy).
• If your LLC has some cash, could you partner with your LLC? Maybe the LLC contributes 50% cash and you get a loan for the other 50% which reduces your personal risk. Your bookkeeping will be more complex though.
• Do you have access to a Line of Credit - either primary residence or for your LLC? If these rates are better than the standard commercial mortgage rates, it might make sense to use. For example, you could be the lender to your LLC using your primary residence LOC as the source. (I'm not a fan of using LOC's for buy & hold, but thought I'd mention in it just in case)

For the tax implications, you might want to talk to a CPA. In general, yes, even if you purchase the property in your personal name, you can deduct business expenses.  Or in other words, you can deduct business expenses, whether or not you have a 'business entity'.