All Forum Posts by: David A Lisowski

@Paul Winka

Do the commercial loans report on your personal credit?

If they do, they must be included.

If not, you should be good, but you will probably have to provide documentation or additional explanation depending.

One additional caveat: do you report these properties on your personal 1040 Schedule E or are they filed through a business 1065 or 1120?

If you put them on your personal tax return, you *might* have to include them regardless.

Again, nothing is for sure, and each lender (and underwiter) views things differently. Also, there's more to analyze than just a credit report or tax returns, but that's a good start.

Certain markets will be affected differently.

First-time home buyers, and heavy primary markets may have/feel the biggest impact.

However, 2020 and 2021 were not normal years. They are outliers.

Just because a home doesn't sell in 5 seconds st 20% over list price doesn't mean the market is crashing.

Price reductions are just showing how insanely over-priced the past 2 years have been, and to expect a continuation of those price growth trends might be naive.

The appraisals are still hitting numbers in my area (from the ones I've seen), but the values are certainly plateauing.

My local market is definitely not a common market so my insights are certainly biased. Investors have loads of capital (still) to invest. The only thing now is that is costs more to borrow so you need experience to navigate the market. STR and second home markets are not necessarily feeling the same effects as a primary home market.

However, lack of inventory definitely contributed to the surge in pricing. Now that people have been sidelined (due to cost to borrow), the limited supply will probably catch up to the demand.

In other words, if you are sitting on money to invest or equity to invest, waiting for a crash, thinking you will swoop in and buy a bunch of homes on the cheap... you are wasting your time and losing ground.

@John Warren

Much appreciated, John. We have something similar setup right now. I get what you are saying about the LLC costing extra money than it might be worth.

So we do have an LLC established, but not on title to the property. The bank required an LLC and EIN to open the business checking account.

We deposit rent directly to that account and pay the expenses for the investment out of that account. Mortgage, water, HOA, HELOC, etc.

But correct, the LLC doesn't offer any legal protection. The "veil" is pierced, I believe they say. It costs money to maintain, and I'm definitely not looking forward to taxes this year. So it might cost me CPA or tax accountant fees as well. Should be easy enough, but I'm no tax professional.

There's a few other reasons I set it up despite the cost. One is to use the established LLC for the next investment. We might also transfer the title to the LLC. You never know. A few others I can't recall at the moment.

The bookkeeping so far is very simple. As you mentioned, bills are setup on auto-pay. Have them a few days early, and at a flat amount. A little extra for the mortgage and HELOC, and luckily down here the water is the same each month. HOA is annually. The tenant pays electric and gas and maintains the yard.

Thanks again!

Investment Info:

Single-family residence buy & hold investment.

Purchase price: $417,400
Cash invested: $105,000

Long-term rental property, located in a nice, quiet neighborhood in Santa Rosa Beach. Minutes from Seaside, FL, and the beautiful Gulf Coast. Conveniently located near scenic 30A, Panama City Beach, and Destin/Miramar Beach.

What made you interested in investing in this type of deal?

We wanted to obtain another rental property, but rather than deal with STR, we wanted to offer a long-term rental to offset the over-saturated STR market.

How did you find this deal and how did you negotiate it?

Worked with a local realtor we met at our neighborhood pool. She found the deal before it was listed, and we were able to get our offer accepted without any competing bids.

How did you finance this deal?

We used a HELOC on our primary residence, and used the builder's mortgage company for the $7,500 credit to closing costs.

How did you add value to the deal?

We are currently leaving equity to build as the neighborhood phases get completed. We will update and upgrade once there is tenant turn-over (i.e. wainscotting, soft-close drawers and cabinets, shutters/blinds, screened-in porch, etc.) to match the final phase upgrades.

Did you work with any real estate professionals (agents, lenders, etc.) that you'd recommend to others?

Yes, Lynne Andrews was out realtor, and she was fantastic.

Hey all, I got banned from the messaging for "spamming." I'm attempting to message each of you directly with the information I discussed earlier. It'll take some time.

@Greg Soon

It doesn't have to be commercial, but that's probably the best general description.

Any non-conforming and/or, non-TRID loan should fit the scenario.

@Tracy Williamson

FNMA and FHLMC (Fannie and Freddie) do not allow LLCs to hold title. But they aren't lenders, they are government-sponsored enterprises. Any lender using conforming loans will have to meet those guidelines.

There are plenty of lenders that do allow LLCs to hold title.

Some of the advice here has been incorrect, or not clarified.

@Cassidy Burns

Second homes are popular along the Florida Panhandle.

We have a current lender with a pretty awesome 2nd home loan product. 89.99% LTV with no MI up to $3,000,000 loan amount. Sure there are other qualifications, but on the whole, great product.

We also have an awesome DSCR product for investors.

We moved into our vacation rental home in April 2020. The property management company charged us for May and June for "lock maintenance," and a few others charges that required someone to be at the property... I worked from home... like literally 5 feet from the front door, and pretty much only left the house to run. So there's no way anyone came to the house, let alone did any work or came inside.

I'm sure there are some others

@Joe Marcum

@Joe Marcum

Hey, Joe, I live here full time. We had a vacation rental for about a year and a half, but have moved into the property. We purchased a different investment property for long-term leases.

There is plenty of competition (obviously) for vacation rentals, but there is also high demand. Charging $500 per night in peak season is probably doable.

The property management company will make or break you. Most rental companies know that owners are not as attentive, and probably not readily available to access the property. They usually charge 15 to 25%, and will throw in random (often fake) charges for things like "lock maintenance" or other non-tangible things. They aren't all bad, but if you want to make money, the selection of the property management company should be a top priority.

You should request the rental history for the property to give you more accurate numbers.

The setup you gave is "too good to be true," or "if it was that easy, everyone would do it."

I've found that in most places, you will either need to buy early or put a bunch down. Typically the larger houses (a 3/3 isn't large down here) barely make rent to cover RE taxes. 10% down on an $800,000 purchase means you're running very tight margins if you are looking to make any money. If all you want to do is cover some expenses, then you can definitely do that.

There are others who market their properties well, and have made some good returns. But they are not the "set and forget" type of owners.

I hope this helps! Happy to give more insights.