All Forum Posts by: Christopher Dunson

@Nick Broce To try putting it a little more clear, what @Chris Mason is explaining is that when you buy a house, you don't have any other units to rent out, so your income is whatever is stated ($2400)

When one buys/house hacks a multifamily, the lender knows there are other units in the building that will be rented out and will be earning income for you. The lender, knowing that takes the income from those other units and adds them onto your stated monthly income therefore increasing your monthly income and qualifying you for a higher purchase price before you even buy the property.

Ex: Your interested in a duplex for 200k, but you only qualify for 188k because your monthly income is only $2400/mo. Both sides of the duplex can be rented for $1500 per month. You will live in one, and the lender knows you can rent the other unit for $1500. The lender adds the $1500 to your $2400 your already making giving you an income of $3900 per mo, and in turn qualifying you for the 200K purchase price.

I realize I explained the same thing twice in two different ways, but I just want to be as clear as possible.

I have recently completed my first 8 unit BRRRR, and will be moving the primary focus of the business from flipping, and small multifamily to apartment syndication.

Recently, I took my RE license test for the state of NV and passed, but I have not associated with a broker because I would like to get more familiar with the advantages and or disadvantages of being and not being licensed while syndicating deals. 

Thank you all for your time and insight.

Currently the properties are financed through hard money, and the hard money lender is also the one with the refi program as well. I've done plenty of business with them (6 deals), and all with good turn outs, but this refi program has a score requirement and unfortunately my good history with the company doesn't come into play in this situation.

Honestly, to the best of my knowledge, I'm better off financially than my entire immediate family put together, so I would assume he doesn't have much more than 5k in his account.

I was already planning and prepping for this refi ahead, so I spoke with a lender months ago to see what I would have to do to get my score where it needed to be, and they told me to pay off around 10-15k. I paid off 10k and two cards lowered my limit, so I paid 5k on another and they lowered my limit, so in the end my utilization rate has hardly improved, along with the score.

I'm always assuming something is going to happen, and I'm going to be challenged to MAKE things work. In the end, I can sell and be in a great position to 1031, but then I would have tax requirements on a portion that I would need to take for credit, and individual loan and interest purposes. If that its my best option then I'll deal with it, but I'm trying to build cashflow and equity, so I would be starting over on that end. Maybe if I'm forced to sell, I can turn this into a blessing.

@Ashish Acharya

Everything you outlined is pretty much what I figured and tried to explain to him Nonetheless, he is scared to move forward all of a sudden. It seems like I will need to find another cosigner to join the LLC.

Lesson learned on running up the personal credit cards.

I actually don't have a good business attorney. The one who organized mine originally didn't do an operating agreement, and also set me up with an LLC to flip houses (which I have since learn is not ideal). Do you have any attorney recommendations?

From what I can see it doesn't affect him by me adding him onto the LLC for loan purposes. It could affect my taxes.

But say everything went bad. He has no money in the deal, and since he is a member on the LLC for this deal, he is not personally liable. The bank would not go after his property, nor credit to the best of my understanding. They would repo the properties, which with this loan will still have 120k equity, and if they are owed more, would go after other company assets.

At the moment, I'm not seeing where this could really affect him.

I'm writing this post on his behalf. All of a sudden he got nervous when he needed to be added to my LLC. I don't think there is a reason to be nervous. Imo it's even safer than personally guaranteeing.

A year ago, I purchased two Four plex with the plan of improving and refinancing within a year time period. More or less the BRRRR strategy. Of course there have been all of the unexpected learning experiences from this venture, and as I foresaw, there is one final challenge.

Since I originally purchased the properties, my credit has gone from 710-595 due to pretty much going all out in the real estate industry and just doing as much as I can, as fast as I can, and until recently it was working out pretty well.

My hard money lender will refinance my properties with a 7.775 cash out interest only loan (unfortunately a 3 year lock in with a prepayment penalty something along the lines of 3,2,1, each year. Over all with my score at the moment I'm fairly happy with the interest rate. 

They brought up that if I had a co-signer that they could lower the interest to 7.375, so I decided to bring my father in on the loan, but because my credit didn't qualify alone for their program, the problem is they want him as a member on the LLC.

As of now, I am the only member, and with this change I am concerned for the following:

-How can this affect my taxes, and business?

-Does this truly have to be permanent, or can I just add him and then remove him after approved and eat the cost?

-Can being a member in the LLC negatively affect him?

-Am I able to put him as .01 percent owner or less with no pay outs or are there minimum requirements? He is not looking to get any income from this at the moment.

-Any important points that I'm missing would be greatly appreciated.

I hope I explained clearly.

Thank you all for your expertise. 

We also had an official inspection done, which showed problems with the property that he himself directly worked on. That definitely helps.

Update: I tried to settle with the worker to just remove the lien from the property, but even offering him double what he would have actually been owed , he declined saying, "I would rather pay an attorney all of the money of the total lien than settle with you." So, I went to Andrew Pastwick as recommended by @Account Closed (thank you), and provided him with copies of checks paid as well as estimates provided to me by the worker ( who was not a contractor ) which made our case easier. As I said, if the work was completed (which it was not) he would have only been owed $1500 more or less, but the lien was for $7500, which is illegal. My attorney ended up calling me a week before the hearing, with the news that he had spoken with the worker's attorney, and that the lien will be released in full, with no court. Thank everybody who pitched in for your advice. I hope this will help others in similar situations. 

@Christopher Brainard

Hi Christopher,

I don't think I made it very clear in the last post, when I requested "other recommendations," what I meant was other RE attorney recommendations that anyone may have some experience with. Thank you.

@Mike Cumbie

@Christopher Brainard

I ended up being able to close on the sale of this property by holding the money in an escrow account. 150% of the amount of the lein. I can hold it there for 6 months. The attorney Andrew Pastwick recommended to me by @Account Closed seems to be out of town, but I would like if I could get some other recommendations, so that I might be able to move forward with the process. If anybody has any questions about this, or input please ask as it seems like this is an uncommon but useful way to get the property sold if you feel you have been leined against unjustly. Thank you.