All Forum Posts by: Bruce Olsen

I have recently been told that a property owner can qualify for a conventional loan (which requires the owner to occupy the property) by maintaining an office on the property. For example, a landlord owns a duplex, and builds an office space in the basement. 

The information came directly from a bank (not sure what the role of the banker was).

I'm very skeptical, given the prominent use of "primary residence" all over the rules I've seen--though I can imagine some smaller banks that don't sell off their loans might be willing to allow it.

Does anyone have any solid experience/evidence on one side or the other?

Thanks!

@Kevin Fanning put up a great answer in another thread, which I pasted below.

You can actually do it yourself, though it's a lot of work to juggle all of the cash balance transfers needed to keep it interest-free. 

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I have done it. Make sure that you need the money bad enough and that this is your only option. They can deliver the money they promise, but it is extremely damaging to your personal credit and can interfere with your finances. It actual cash comes to you a little bit at a time also, which limits your plans on using it. I will spare the time to write about the fees that were not in the contract; however they DID make that right by refunding some of the upfront “consulting fee”. In short… You are paying them to open up several credit cards in your name. They told me 3-5 cards. However, it ended up being SEVEN cards. They are then just coaching you how to do cash advances and balance transfers from card-to-you and card-to-card in order to get cash. These seven credit cards caused my credit score to go from the high 700’s to the mid 500’s. This triggered a negative domino effect of other issues within my personal and business finances. My own long time credit card canceled me because I was now considered a credit risk. I used that cash reward card for everything for close to 10 years, and I paid the balance to zero every month. However, that was the first thing that was taken from me and began a crash. The seven credit cards and damage to my credit then went on to interfere with my long time business line of credit. WCAP/funding4flipping/seed capital did try to help out by “coaching” me how to repair damage. They try to say that your credit score will even come up higher when all over. I went through it all. I ended up having to reach out to a real, private hard money lender for the cash to bail myself out of the credit card mess. However, when all said and done, my credit score never bounced back up. Now, most recently… some of the credit cards or “bank cards” that they opened up in my name are now reducing the limit, because I have too many credit cards (all cards that this program opened in my name). So now, the amount of cash (which is really just credit limits) is less than what they said. And because these credit card companies are reducing the credit limit…it throws of the balance to limit ratio…causing my score to drop again. If nothing else, at least understand what is happening with this “lender”. You are paying them a consulting fee to open up however many 0% credit cards it takes to reach the amount they tell you. That is how they tell you it is a “0% loan”. It is not a cash loan. These are your normal credit cards. And this company is getting you the cash by balance transfers, credit withdraws, and the % fees that goes along with each transaction. Also, know that these funds are not accessed immediately. The cash trickles in due to different credit card company policies. Some of these cards only allow certain dollar amounts at a time, and they only allow one transfer every so often. So you do not get the amount you need or promised all at one time. This program did nothing for me. It actually caused a chain of events that really destroyed a lot of my personal finances. I am still digging out of it and will be for a long time. Maybe in certain situations, this program would work. It would only be those where you didn’t need all of the money right away for a purchase and where you didn’t worry about the damage that all those credit cards will do. There are plenty of private hard money lenders out there wanting to lend money on good investment deals. You may pay a little more for them, but there is no damage done, they don’t affect your credit and personal finances, and you get the money you need when you need it. BE CAREFUL AND KNOW WHAT THIS PROGRAM REALLY DOES. 

@Kevin Fanning left this great response on another thread.  

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I have done it. Make sure that you need the money bad enough and that this is your only option. They can deliver the money they promise, but it is extremely damaging to your personal credit and can interfere with your finances. It actual cash comes to you a little bit at a time also, which limits your plans on using it. I will spare the time to write about the fees that were not in the contract; however they DID make that right by refunding some of the upfront “consulting fee”. In short… You are paying them to open up several credit cards in your name. They told me 3-5 cards. However, it ended up being SEVEN cards. They are then just coaching you how to do cash advances and balance transfers from card-to-you and card-to-card in order to get cash. These seven credit cards caused my credit score to go from the high 700’s to the mid 500’s. This triggered a negative domino effect of other issues within my personal and business finances. My own long time credit card canceled me because I was now considered a credit risk. I used that cash reward card for everything for close to 10 years, and I paid the balance to zero every month. However, that was the first thing that was taken from me and began a crash. The seven credit cards and damage to my credit then went on to interfere with my long time business line of credit. WCAP/funding4flipping/seed capital did try to help out by “coaching” me how to repair damage. They try to say that your credit score will even come up higher when all over. I went through it all. I ended up having to reach out to a real, private hard money lender for the cash to bail myself out of the credit card mess. However, when all said and done, my credit score never bounced back up. Now, most recently… some of the credit cards or “bank cards” that they opened up in my name are now reducing the limit, because I have too many credit cards (all cards that this program opened in my name). So now, the amount of cash (which is really just credit limits) is less than what they said. And because these credit card companies are reducing the credit limit…it throws of the balance to limit ratio…causing my score to drop again. If nothing else, at least understand what is happening with this “lender”. You are paying them a consulting fee to open up however many 0% credit cards it takes to reach the amount they tell you. That is how they tell you it is a “0% loan”. It is not a cash loan. These are your normal credit cards. And this company is getting you the cash by balance transfers, credit withdraws, and the % fees that goes along with each transaction. Also, know that these funds are not accessed immediately. The cash trickles in due to different credit card company policies. Some of these cards only allow certain dollar amounts at a time, and they only allow one transfer every so often. So you do not get the amount you need or promised all at one time. This program did nothing for me. It actually caused a chain of events that really destroyed a lot of my personal finances. I am still digging out of it and will be for a long time. Maybe in certain situations, this program would work. It would only be those where you didn’t need all of the money right away for a purchase and where you didn’t worry about the damage that all those credit cards will do. There are plenty of private hard money lenders out there wanting to lend money on good investment deals. You may pay a little more for them, but there is no damage done, they don’t affect your credit and personal finances, and you get the money you need when you need it. BE CAREFUL AND KNOW WHAT THIS PROGRAM REALLY DOES. 

@Wendell Raboteau You mean it permits only charging orders, which mean that only when money comes out of the entity can a creditor be paid. 

That makes their collection process a game of chicken. If they're big and have time to wait you out you'll eventually pay them in order to get money from your entity. If they're small they may offer to settle or just give up.

Other states allow creditors to seize your interest in an LLC (which doesn't affect other LLC members) and some allow the court to force dissolution of the LLC, which affects all members.

There's more to setting up a solid structure than that, and this all affacts your tax burden. So see a RE-friendly CPA and lawyer. Small differences in structure can make big differences to you.

It's often suggested to use a land trust to avoid the due on sale clause and transfer taxes. Here's an overview of the concept; I'm not a lawyer and there are many fussy steps needed to make this work right.

• You set up a land trust and transfer property into it (just like you can if you have a living trust used to avoid probate). If you need to finance it you do it before it's in the trust.
• The land trust is considered personal property, and it's not registered anywhere.
• You can then move the land trust into an entity.

Folks also suggest that it can be used to hide ownership.

Refers to the conditions under which a rent-stabilized property can lose its protected status and revert to market rents. 

Was this a listing in NYC?

Welcome, Ray. My wife and I are in Pasadena, and we'd enjoy getting together with either or both of you.

@Mabel L. - Congratulations on being so close to independence so young!

My wife and I also live in Pasadena; perhaps we could meet for coffee and share our investing experience with you two.

My wife and I specialize in impact investing.

We are currently helping to develop a crowdfunded business model that we believe can be replicated to about 2 dozen US cities that contain appropriate pools of distressed properties. The business provides 100% financing to flippers with no out-of-pocket cost to them, and offers a 9% preferred returns to our investors with waterfall participation. Not surprisingly, initial interest has been strong, and we are testing the concept with two 506(c) blind pools, to serve flippers in 2 of those 2 dozen cities.

So we need someone that can give us high-quality analysis of the business model, and let us know what it will take to grow from 2 to 2 dozen. I have a spreadsheet that needs "professionalizing" so that we can accurately understand our business. We also need it to generate some sales tools including appropriate financial measures (because it's different from other funding models, some education is needed).

My wife and I have begun to test a second business model that will need the same kind of analysis, and we have other models waiting after that. 

We live in Pasadena and would like to meet in person at least once.

We're looking for an investor-friendly bookkeeper.

We do small-scale equity-based JVs so we need someone to set up QB or some other accounting system to track the business.

We also occasionally make a loan and need to track those as well.

Finally we're setting up a blind pool and need help setting up accounting for that as well.

We live near Los Angeles but we're open to remote help.

Thanks!