All Forum Posts by: Daniel Pitta

My wife and I own a townhouse in Calvert county but we're looking to purchase a row home in Ridgley's Delight/Pigtown area, as my wife has recently opened a boutique in downtown Baltimore.

Our plan is to purchase a 3 br owner occupied rental and rent out the other two rooms, preferably to medical professionals/residents from UMMC. 

I'm not familiar with the Baltimore market at all; it seems that Pigtown is an area that is currently being gentrified and prices are lower than Fed Hill/Fells Point/Dundalk, etc. - I know that Baltimore City doesn't have the greatest reputation...if anyone has any intel/advice on buying an investment property in this area, please share.

Thanks!

My wife and I currently own a townhouse in Calvert county but she recently opened a business in Downtown Baltimore so we are in the market for a row home in Pigtown/Ridgley's Delight.

Is anyone here familiar with that area? Looks like lower prices than Fed Hill/Fells Point/Dundalk, etc. and an area that is currently being gentrified. However I'm not familiar with the market up there at all.

Originally posted by @Angela Winbush:

@Daniel Pitta LLC protects you legally.

Well yea obviously, I think most people realize that. My question is if there is any tax advantage/financial benefit to investing under your business’ name rather than your personal.

I'm going to be investing in my first deal next month, a SFH in NE DC. I'm trying to decide whether to invest as an individual, through my personal checking account, or through my small business. I'm going to be covering the 10% down payment and carrying costs, and my business partner (who has his own LLC) is going to be handling the loan from the HML, as well as the points and EMD. For tax purposes, is it better to have my name on the operating agreement, or my business' name? For purpose of paying as little tax on the profit for the sale, does it matter if it's paid out to me or my LLC? Thanks.

Originally posted by @Randy Thomason:

It's your business and you run it like you want but, Me personally, I wouldn't lend on it without security collateral.  Just asking for trouble.  It might be fine the first time and maybe the second time, but somewhere down the line you will get bit.  Just my opinion.  Murphy's Law 101. For example,  What happens if he has a heart attack or a car wreck and is injured or dies?  Can't work, can't finish the deal.  I bet your are screwed.  Or the IRS seizes his bank account for back taxes.  So many things can go wrong. Set you business practices up and your rules and follow them. It is when you deviate from your standards you get burned and fail.

Agreed. I spoke with him today and he's going to discuss with his partner the possibility of me joining their LLC as a partner. This would allow me to be on the deed of trust and avoid the whole scenario of coming in second position with an unsecured note.

Originally posted by @Randy Thomason:

Without the mortgage filed you have no security for the note. It is considered an unsecured investment. With that being said, who is the note from? His company or him?  or both? 

A mortgage even in a second position, it is better than no collateral. If he signs personally guaranteeing, then you could tie up all his assets if he defaults, that is if he has any that you can find and he doesn't file Bankruptcy. The property (collateral) is what you want. CLTV (combined loan to value) of the first and second mtg should not exceed ___? my suggestion is 75% tops but preferably 70% or below. A lot depends on your market there. When the market turns down, and if it goes quickly, you only have a 30% buffer. Remember how fast it went down in 2007 and 08?

If you are in the second position and he pays the first but not the second then you have to foreclose and still have the first mtg ahead of you. Do you have the money to take it over?

He had sent me a copy of a promissory note that he had distributed to a private lender on a previous deal. It is notated as a 'secured' promissory note at the top of the page, between the lender and the borrower (he has himself listed as the individual on the note, not his LLC).

My RE attorney friend advised that another avenue I can take would be to join the borrower's LLC as a partner. That way, Id' be able to take advantage of upside returns if I otherwise do not have downside security. I talked to my friend about it and he's considering it. Thoughts?

I have a good friend who is a GC and investor here in the DC area. Long story short, he’s able to locate offmarket deals and uses private lenders to help fund the rehab costs, in exchange for a percentage of the profit.

He’s asking me to invest in a deal that he and his partner are looking to close, however he says that what he offers the lender, is a promissory note that they can register. I’m not able to come in first position as he’s using a bank loan to fund most of the project.

My RE attorney friend claims that a promissory note is not legally binding and I’d be putting myself at significant risk if I don’t record a deed of trust against the property, so that I could have the power to foreclose if the proverbial S hits the fan. 

Can any private lenders shed some light on this? I’m trying to take action however I need to understand the risks as I’d be putting a significant portion of my savings into my first deal.

Thanks in advance !

Originally posted by @Wayne Brooks:

@Daniel Pitta Yes, like all deeds of trust, in the county where the property is.

Is it necessary to go through my LLC was being a private investor?

Originally posted by @Wayne Brooks:

I assume he is getting a loan to buy it, so you can’t be in first position.  In addition to your note, with specific payment terms, you need an executed and recorded 2nd mtg/deed of trust.

Would the deed of trust need to be recorded in the same state as the property? I live in VA and the property is in DC.

Hello -

I am looking to invest in a fix & flip in the DC area as a private investor. A good friend of mine has a business rehabbing properties for rentals or flips. He is about to secure a loan for a 3br 2bath SFH in NE DC, that is a pre-foreclosure. The ARV is ~$700-725 and he's looking to close on it for ~$400. I'd be coming in to cover some of the repair costs, with about $40k of my own money. He's looking to turn it into a 4br 3bath and possibly turn the basement into a livable space.

He offers a promissory note for a payout of either a set interest rate or percentage of the profit, whichever is greater. This is a new venture for me, so I want to make sure I understand what I need here to protect my investment as much as possible. Should I have him add language to the promissory note that I am paid out first upon sale of the property? Should I be in first lien position? When writing a check for the investment, should it all go through my LLC or can I use my personal checking? This is giving me some anxiety so I'm looking for any advice I can get. I'd be tying up a good deal of money for 6 months so want to make sure at the very least I'm getting my money back. Thanks in advance.