All Forum Posts by: Dima R.

@Joe Villeneuve I can't tell if you're arguing my point or the opposite. Doesn't paying down a loan aggressively (with "free money") to then cash out refinance (thus generating "money that costs you money") cause exactly the problem you're describing? Any idea what Greene was getting at then, or am I just misunderstanding his point? This passage followed a discussion of the benefit of paying extra mortgage payments towards principle, so I can't imagine what else the advice would have meant.

In Long-Distance Real Estate Investing, Greene discusses amortization and the benefits of paying down loans quickly. At the end of Chapter 4, he writes, "...why not reinvest that income into new properties? Pay down your loans faster, refinance them, and then reinvest that chunk of tax-free income into a new multifamily property or several single-family properties?"

Sorry if this is painfully obvious to toehrs - I'm just starting out - but are loans generated by cash out refinancing typically at much lower rates than the initial conventional or commercial loans through which rental properties are typically purchased? And if not, what's the benefit of aggressively paying down a mortgage, only to then cash out refinance? Wouldn't it be the same to pay the mortgage down at a slow rate and then use the excess funds to invest in new property?

Thanks.

@Grant Thompson, what's your approach to researching the types of loans described in option 4?

Thanks @Tom S.. Is there a way to make the umbrella insurance route work if investing with partners? And even if I'm investing on my own, if I go the umbrella insurance route, is there a conceivable way to scale such that eventually I'd be able to put the properties into LLCs at a time when they are still mortgaged?

Thanks Grant. Would be curious if anyone else has a different (or same, for that matter) perspective, given how often this seems to come up. 

Hi all,

First, a huge thank you to BP and the entire community. I just started my REI journey and have found the BP community immensely helpful. Thank you all for what you do.

I have a few related questions regarding LLCs with which I was hoping you could help. As background, I have a low net worth as I'm just starting my career, but a high income job that I worry exposes me to liability. I'm interested in owning LTRs through LLCs both for asset protection and anonymity benefits.

Question 1: How can I best obtain a mortgage on a LTR that I'd like to own through an LLC? I understand that the options include:
1) obtaining this as a personal mortgage and then moving the property to an LLC, with the potential problems of a) triggering a due on sale clause, b) piercing the veil if I'm actually paying the mortgage, potentially negating asset protection benefits , and c) title insurance complications
2) obtaining this as a personal mortgage and then moving the property to an LLC, and hoping for the best that the lender doesn't act on the due on sale clause. I'm surprised by how frequently this seems to be people's solution. Am I missing something about the risk that they're assuming?
3) avoiding the above problems if the loan is held by Fannie Mae because of updated guidance since 2016 (https://servicing-guide.fannie...), so long as I solely own the LLC. Though there seems to be similar guidance from Freddie Mac, I continue to see posts, including on this forum, that seem to suggest that nearly all conventional mortgages do have such due on sale clauses.
4) obtaining hard money or other loans that don't have the above requirements.

Are there options that I'm missing in considering the above, or a mistake in how I'm thinking about this?

Question 2: If the solution to the above is option 3 (i.e., that this is allowed for Fannie/Freddie conventional mortgages), what options exist if instead I want to purchase a property through an LLC with a business partner?

Question 3: Is the longer term solution for the theoretical LLC that I control to own multiple assets, in which case they and their cash flow would be considered by mortgage lenders for future mortgages?