All Forum Posts by: Clayton Silva

Quote from @Neela David:

Quote from @Clayton Silva:

Yes it does. There is no box in Loan Estimates for NonQM loans (DSCR is a Non Qualified Mortgage...meaning it does not get sold to Fannie or Freddie). As such, most DSCR loan estimates go out as "conventional" in the box you highlighted. Nothing out of the ordinary there.

Couple notes in case your lender did not explain it:

1) The owners of the LLC are still personally guaranteeing the loan contrary to popular belief. Despite the LLC technically being the note holder, there is still a personal guarantee.

2) DSCR loans CAN report to credit. While they may not initially, these loans get packaged up and sold to different hedge funds, servicers, insurance companies etc. When they do get sold/transferred, the new servicer may not fully read through the agreement and may report the loan to your personal credit.

3) Regardless of whether it reports to credit or not, it technically will impact DTI once reported on Schedule E for tax returns. Might be able to make the case that if it is not on credit and title is in LLC name you can omit it from DTI calc, but that is going to come down to specific lender guidelines and underwriter a lot of the time in regards to how they interpret that.

Hope this helps!

 Thank you, sir, This makes more sense for now. 

 My pleasure! Happy to help

Yes it does. There is no box in Loan Estimates for NonQM loans (DSCR is a Non Qualified Mortgage...meaning it does not get sold to Fannie or Freddie). As such, most DSCR loan estimates go out as "conventional" in the box you highlighted. Nothing out of the ordinary there.

Couple notes in case your lender did not explain it:

1) The owners of the LLC are still personally guaranteeing the loan contrary to popular belief. Despite the LLC technically being the note holder, there is still a personal guarantee.

2) DSCR loans CAN report to credit. While they may not initially, these loans get packaged up and sold to different hedge funds, servicers, insurance companies etc. When they do get sold/transferred, the new servicer may not fully read through the agreement and may report the loan to your personal credit.

3) Regardless of whether it reports to credit or not, it technically will impact DTI once reported on Schedule E for tax returns. Might be able to make the case that if it is not on credit and title is in LLC name you can omit it from DTI calc, but that is going to come down to specific lender guidelines and underwriter a lot of the time in regards to how they interpret that.

Hope this helps!

Definitely consult with a licensed CPA first, my gut tells me that if material ownership is not changing it shouldn't have any meaningful tax implications other than how you file the income. Curious what the reason is for dissolving the LLC though.

Welcome! This is a great place to do that and see some of the unique ways people invest in real estate

Outside of insane luck, like a lottery win, nothing is going to retire you in 12-18 months.  Best case scenario spend a few years flipping properties and get really good at that.  Build up a cash reserve and live off the profits is possible.  Once you have enough cash, then get into buying long term investments that can pay you enough to generate the income you are looking for.  I guess flipping could retire you from your job but you are swapping a full time job for another full time job.

Quote from @Dan Guenther:

Hey @John R Bongiovanni -  I don’t have a ton of advice here, as I’m navigating some similar challenges myself. Mainly following along to see what insights others share.

I also go through Travelers and, so far, haven’t received a dreaded non-renewal for my rentals. However, I have recently been denied insurance quotes for new sober living homes in the Denver area that I'm working on setting up. I’m curious if this is also a result of the shifting landscape in the insurance industry. Anyone else experiencing similar issues?

 Sober living is a whole different beast.  It carries a lot of additional liability issues and is difficult to get financing (mortgages) and insurance.  

Quote from @Jared Elms:

 @Clayton Silva thanks for the response. My goal is to get an influx of cash to pursue a business acquisition and not worry about a HELOC or tenant problems at any point with this property. That being said, goal is quicker cash with quicker offload. I hope to just offload and not wait until September when tenant would renew or not or I tell them we will not be renewing so I could get ready for MLS market. I found a business I would like to purchase and this revenue would assist in the acquisition. What are you thoughts?

I think you are going to sell it faster for higher by having a larger buy pool.  You are going to be better protected as far as representation as well by having a listing agent and posting on the MLS.  

Funny, I just sat down last night with a family friend who was a partner at a large hedge fund up until about 4 years ago.  He ran a lot of their real estate, equities and bonds trading and now he has a unique business model that he started after going out on his own.  He finds lots that large builders are looking for.  He purchases them, does all the horizontal work (permits, plans, grading, electrical, sewer, water, etc.) to get the lots shovel ready for big builders so they can jump right into their projects without all the time delays and holding costs of getting the land ready.  He said the key is just good purchase price, good underwriting, and a strict schedule.  I think he is currently doing about 15,000 lots across the US.

Depending on the goal, and if you plan on scaling and tapping into the equity of the home, we often recommend having one tenant be the primary tenant and structuring the lease with subleases from there.  It makes your financing more seamless typically and can greatly reduce headache when scaling.  Of course, always check your local tenant landlord laws and confirm with a property manager or legal professional to see if this type of lease structure is suitable for your needs.

What is your goal? Is it maximum number of doors in lowest time frame? Is it cash flow? Hard to know without a lot more detail about your situation and a lot more detail about your goals and comfort level with debt.  I often recommend paying down personal debts in times of waiting for the next opportunity.