All Forum Posts by: Edwin Epperson

@Michael Hamby yes sir, and well put together deals, will always find the capital available to make it happen!

I 100% agree with @Bruce Woodruff and @Chase Hoover. As a PL that brokers out 30yr fix rate capital for STR investors, there has to be some sort of "record" of expenses. You can calculate taxes by visiting the county records website for Monroe County, here is their website: https://qpublic.schneidercorp..... You could also call an insurance agent to get a quote for coverage on an STR.  This will provide you with your most fundamental costs.  Then it boils down to estimating Electric/ Water/ Internet & Cable or Satellite and cleaning fees.  I would highly recommend the software we use in the underwriting of our STR loans called AirDNA.  It provides a LOT of quality metrics and data.

@Nathan W. I 1000% agree with @Alex Talcott, series LLC's make it VERY attractive from an ownership standpoint, but you will need to discuss with the attorney how that relates to asset protection. I would also say, just because the STR is being listed by an individual, DOES NOT mean that is how Title is held. You can personally list all the properties and make it seem that the STR's listed on your AirBnB profile are yours, but legally speaking it all boils down to who is on Title. Several professionals, I would recommend that you discuss your idea and structure with

- Corporate Attorney (which your doing and kudos to you for taking that step to arrange before posting on BP about it)
- Property Insurance agent.  This will be critical, because you don't want too complicated a process that the insurance companies overcharge you (not sure if this could be an issue but it strikes me as a possibility)
- Lender. Unless you plan on buying all cash, and never touching the equity, or if you have a broad base of private money (not private lenders, there is a difference) then you will need to understand the lenders' requirements for STR's, and more importantly how they will expect to have title held so that they are protected. Having a preferred lender involved in your conversation, especially when talking with the attorney will save you ALOT of back and forth between parties, thus increasing unnecessary costs.

Personally, I do not see you overcomplicating things, you are doing your best to be well educated and approaching your venture with eyes wide open. It took me over FOUR years of studying and sitting under mentorship before I made my first real estate investment deal as a lender. I actually made that loan while deployed to Afghanistan on the side of a mountain, to an RE Investor in Pensacola, FL. So while everyone bangs on the "Time is short act NOW" drum, you continue to shore up your knowledge and confidence. I believe the previous three mentioned professionals will help answer any and all questions that you may have concerning your structure as well how to best proceed. Best wishes and much success. I've attached a PNG file that may better explain my thoughts. You basically have the idea down, yet you may want to have the Management company NOT owned by the owing entity as well you may want to structure the ownership entity as a Corp, so that you can #1: collect a W2 #2: contribute to a solo 401K #3: Run more personal expenses through the entity for tax write off options such as health ins. and other insurances. As a side note this Ownership Corp could easily be replaced with an LLC taxed as an S-Corp, but you will have to consult your CPA about that as well.

Investment Info:

Single-family residence private money loan investment in Memphis.

Purchase price: $125,000
Sale price: $125,000

This is a private loan I provided to a family who owned two townhouses as rentals. I cross-collateralized these two properties along with the one the son was purchasing in Pensacola FL. The loan was for 12 months, with n approved 18-month extension. During that time they used my capital to fix & flip 3 properties total. Their return compared to their costs was phenomenal. If you are struggling with capital infusion, offering up your or a partner's free and clear assets can do wonders!

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

I was collateralizing a total of three properties with a combined loan-to-Value of 25% of AS-IS! While this allowed the investor to get into the deal, with $0 out of their pocket and I offered 100% true financing, my security and safety was in the fact I had 3 properties two of which provided rental income that paid for my debt. These are the type of deals, I look for. Looking for ways to offer equity to a "property rich" but cash-poor investor is a great way to structure your capital stack!

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

This deal was referred to me through a contact I had on Facebook. I spoke with the son of the family who was fixing & flipping aproperty in Pensacola, FL, and then he brought in his parents who owned the Free and Clear assets to discuss a strategy to get him in his deal with $0 out of pocket.

How did you finance this deal?

I financed this deal using my own capital, as well I structured a participation loan for some of my capital investors so they could participate, and earn passive income while investing just like the banks do; in a secured and risk-controlled position, while shifting all known risks, to the borrower. A true win-win-win!

How did you add value to the deal?

By thinking outside the proverbial "box" of lending, and because I lend out my capital, not brokering for these large national lenders, I have a lot of flexibility. Discussing the needs of the client, and finding a solution that meets their specific needs goes way beyond just "rates and points" questions most RE Investors ask. I much prefer to connect and discover ways to help an RE Investor grow and reach their goals. I'm not a fan of working with rate shoppers and I charge them the most.

What was the outcome?

They needed some more time on their loan, it was originally a 12 month loan, and ended up going a full 18 months. Because they always paid on time, I easily granted them an extension, and the extension fee was charged on the backend. I gave them another 6 months before requiring to be paid off. During the 18 months, they completed a total of 3x fix and flips while using my capital, and allowing me to collateralize their rental assets.

Lessons learned? Challenges?

This was an easy, great simple loan, and to all you RE Investors out there, having the willingness to discuss your goals, strategy and hurdles you are trying to overcome with TRUE private lenders, can result in some fantastic results and solutions. This strategy will not work with large national HML, but if you can find a private lender, that operates in your backyard, then you can find some true win-win-win scenarios.

@David Gorman I live in Tampa, and there is such an adult community North of us in Lutz, FL. I would say really understand the rental demand in those types of communities. You cannot look at standard rental comparisons, specifically because the requirements/ restrictions in such a community make your tenant base hyper-focused. I would think that the community has an HOA as well as a management company. Speak with the management company to find out the demand, rules, and regulations for renting in an adult-only community. Do the renters need to be vetted and verified? I'm sure that's the case, and if you're going to be holding this as a long-term rental I'm almost positive that the management company has a list of potential renters... if not... you may want to rethink it. After you get over that first hurdle it really boils down to the numbers and lining up financing for the purchase of such a rental.

I was going to help line up financing for an investor in the very community I had mentioned to you, but they decided to wait until Nov when someone they knew would be moving out and selling their community condo, and then they wanted to purchase their neighbor's property as well, refinance their property. All things being equal I would have been able to facilitate that investor locking in a 30yr fixed rate loan to their LLC that was refinancing the property. Best wishes to you and much success.

@Ryan Taylor I feel your pain.  I struggled with wondering why all the "sexy" and sophisticated offerings were always to accredited investors.  But that's only because of the filing type.  I personally have filed for Reg D 506(c) and (b) offerings for real estate investment funds as well as other asset funds.  The key is to network.  Every now and then you may find a syndicator who is wanting to raise capital from "family and friends" and goes with a Reg D 506(b) offering.  This offering can hinder many large funds but can be very beneficial for the fund manager/syndicator if they have a large network.  One of the disadvantages of filing a Reg D 506(b) is the no public solicitation rule.  However because the SEC requires the fund manager/syndicator to personally know the investors, they cna have up to 35 non-accredited investors and an "unlimited" number of accredited investors.  I "quote" unlimited because actually there is a limit of 2000 but you would be hard-pressed to find a fund that manages 2000 individual investors unless it's a Reg CF, Reg A, or Reg A+ fund.  As I mentioned identify fund managers/syndicators get to know them, and let them know where you stand as far as investible cash, you never know when they may have something they are looking to create and may offer you a seat in one of the 35 non-accredited spots.

RLTW/ DOL - Edwin

@Ileana Fonseca, as a PL, my notes are like gold. They are the physical representation of the money I have loaned. If your thinking of purchasing a NPN, whose current lender does not have the original Note, you will most definitely want to engage an attorney to find out what liabilities you could inadvertently assume by buying such a note. IMHO, I would pass. If there are other notes I would look into those. In the military, we had a saying, "pursue the path of least resistance".

@Danielle Du Plooy I am not sure how the title is currently held or how you would like the title to be held on the refinance. If you're trying to refinance with an entity, rates are generally higher simply because it's considered commercial paper (even if the asset is a SFH 1-4 unit). If you're trying to refinance a personal residence or in your personal name I honestly could not say if this is normal, but it seems high to me. I have an investor that offers 30yr fixed-rate loans to entities (LLC or Corps) up to 80% LTV purchase/ 75% refi, and based on a credit score of 780, you would be looking at a rate of about 7.125% as of this past Monday, May 16th 2022. There are many factors that will determine the rate and first and foremost is how Title will be held. That really will determine which type of loan you're requesting if Title is held in your personal name = consumer, if Title is held in your business name = commercial.

@Ammar Ali I live in Tampa, and work here as a PL.  I have been a PL for over 7 years.  I'm not sure If I can attach my quarterly market report but I will try.  Its below.  Personally, I think the next "correction"/ "recession" will not be macro market-focused, yet micro market-focused.  Primarily this is due to technology and the ability for relocatees to determine which markets they want to live in all driven by data.  People may not want to talk politics but they do play a role in where people live.  Whether it's because of personal feelings one way or the other, or because big corporations are relocating to geographical areas that provide tax advantages, politics can influence these decisions, and as we have seen over the past couple of years, they influence no more than ever.  Florida as a whole is seeing more businesses and corporations relocate to this state, and with their allocation drives job growth and demand.  However, there are markets whose demand is being driven up beyond sustainable levels.  When the correction happens, and it's coming, those over-inflated markets will come down to reasonable demand levels.  Investors and leveraged homeowners will see this as a "recession" while in reality, it's simply a correction back to actual values.  INHO, markets in jeopardy of this correction most likely will be Tampa, Miami, Naples, and the stretch of MSA's between Tampa, and Naples.  I could very well be wrong, but those are my thoughts.  

@Bill Drutz great questions.  I'm not going to question you or your daughter's decision about where she wants to go to college, that's between you and her really.  Your questions did concern the strategies you are considering and some possible outcomes that will help you build a decision matrix.  If I may offer my humble and limited thoughts, as I do not have a child that is thinking of attending an out-of-state college, nor do I know all the ins and outs of you/ your family's financial decision.

1: Keep living in existing home, pay out of state FL college fees. (My thoughts) - Can you afford these expenses based on your household income?  More importantly, can these expenses be worked into your current budget without causing undue and unnecessary strain for you and the family?  Key considerations: Do you have more than one child that will be approaching the age that they will attend college within the next 4 to 5 years?  Can you provide for your other children the same way that you have provided for your daughter, again not placing undue or unnecessary strain on your finances?  What scholarships can she apply for/ work towards to reduce the financial strain, and can you make an agreement with her, that if you accomplish certain goals/ acquire scholarships then you would be able to support her decision?  I personally would think this is a great tool to teach goal setting as well you're letting her know you will work with her if she puts in the work herself.

2: Downsize in IL and purchase something very small in FL to take advantage of in state tuition. (My thoughts) - It sounds to me that you have $130K in equity in your property in IL. If you were to sell it that would leave you approximately $80K in NET profit. (closing fees and Agent commissions assumed at around 10%). Since it sounds like you have owned the property for more than 1 year, your gains would be taxed at long term cap gains, which is a lower tax bracket, but still, you would be taxed. I'm not sure what going rates and requirements are for a purchase of a primary residence in FL with your current DTI and credit score, so you should explore those options, and consult with a residential mortgage broker to find out what you could get. Side note, you do have 2 yrs to #1 reduce debt and #2 improve credit score. My belief is you will be in a much better position in 2yrs than where you are today, with a game plan in place. That being said if you are able to qualify for an FHA loan, with 3-5% down 9please do not take my word consult a mortgage broker for DP requirements) your $50K (after taxes and other things could get you a BIG home in FL, depending on where you move and how far from an MSA's city center you live. You could theoretically put 10% down on a $500K home ... that's nothing to sneeze at. Though anytime your discussing moving you have to consider career options for you and other earners in the family. I would also encourage you to consider a 1031 exchange. I know this is used by real estate investors, and I'm most positive it can be used even for a personal residence but you would want to have a conversation with a Qualified Intermediary, I have two here in FL I could recommend and you can strategize with them your plans.

3: Keep current home, see if I can get some type of loan and still purchase small property in FL to take advantage of in-state tuition. (My thoughts) - While this may seem like the best "investment" option, you're still faced with downpayment requirements for purchasing a new home, and now your DTI will heavily influence what you could purchase. In this case, you would more than likely be looking at a significant reduction in home size and location. Again I am not your financial planner nor do I know your financial state. If you go this route you will want to know what you could rent your property for in IL, and how much income that would add to your bottom line. Also you will definitely want to calculate what your DTI would be as you begin searching for a new home in FL.

Final thoughts.  Consult and ask for advice, which you have taken here, and with plenty of runway.  2yrs out is a long time, and will give you the ability to put a plan in place personally, as a family, and with your daughter.  Several professionals I would highly recommend you consult with; your CPA, a financial planner (if you have one) Qualified Intermediary (to discover the power of a 1031 exchange), RE Agents in IL and in FL (ID agents that work and live in the areas you currently have a property and would be considering a property), and a mortgage broker.  I believe that if you make a plan, you can work the plan, and you will begin to see some progress towards identifying your path forward.  The best to you and yours, and God bless your journey.

PS - As a side note, I never attended college and I have done OK with my life, and I would never change it.  Encourage your daughter to pursue what her passion is, if that passion involves and require college degree(s) then by all means, but it may not, and that's actually perfectly OK.  Much success to you and your journey!