All Forum Posts by: Carl Cheung

Ah, didn't realize the bank would not loan if the downpayment was borrowed. Sure, I understand higher risk for higher return but as you said, this may be much more risky than a usual HML. Thank you for your insight.

Hi, I was approached by a friend with an opportunity to invest. His plan is to get a loan from me (promissory note) and then use the loan as the down payment from the bank. After talking to an attorney, he explained first/second position and that the bank would likely not take a second position. Likewise, it doesn't seem prudent for me to take second position, even with a personal guarantee, as it seems much more risky and I am putting in the initial money that would make the deal happen.

Questions:

1) Are HMLs almost always lending out the full amount?

2) What options/alternates are there to try and make the deal work? Even multiple second positions on his other properties doesn't seem like much security. JV deal? If so what profit margin should I expect?

Would like to explore options before I approach the attorney again.

Thanks!

Hi, we will definitely consult our tax professionals but wanted to brainstorm some ideas before approaching them.

Situation: Private lending for downpayment and rehab costs for fix/flip

We discussed doing a promissory note, return of X% after 6 months. However, that will be taxed as ordinary income (high).

Also discussed promissory note for the principal, then have investor be a small stake shareholder in the LLC. Then, after sale, will keep the money in the account for a year (yes, realize will be paying short term cap gains on this) and then pay it out as dividends(?) so that it is considered long term cap gains for the investor. This route does extend the timeline to repay the investor by quite a bit though. Is this possible?

Any other ideas? Thanks

Gotcha, thanks for the insight. Definitely will consult a CPA once I get a better feel for it.

Hi all, I am thinking of lending money to a friend as a promissory note. From what I understand, the interest on the note is subject to my personal marginal income tax rate. Is that correct?

Any ideas on how to reduce the tax liability? Different structure for lending the money? Thanks

Hi, I'm looking to start hard money lending, looking for a good, experienced real estate lawyer in Washington state/Seattle area. Thanks!

Hi James, thanks for hosting this class! I'm interested in attending, but due to work won't be able to make it until 6:45ish. Would that be OK?