All Forum Posts by: Gina Kim

I’m a syndicator & FoF manager based out of SoCal with an interest in impact investments & affordable housing.

Looking to connect with multifamily syndicators & investors in the greater LA area!

I spend a lot of time traveling to national conferences and getting to meet so many badass investors, but somehow my local reach is way more limited (even tho I know you guys are out there!), so writing this post for reach and networking opportunities.

Alternatively, I am hosting an event in Pasadena on 12/7 for multifamily syndicators if you guys have any interest in attending.

Aside from that, if there is interest, looking to setup local lunches/dinner/drink meetups in smaller group settings to facilitate meaningful connections all around.

Hope to connect soon 😊

@Zack DeRose the entire topic of deeding title from your personal name into LLC can be a hairy one because of one of the things you mentioned yourself - the "due on sale" clause.

Each loan has some form of due on sale clause which basically says that the bank can call the loan upon transfer of ownership of the property. From the lender's perspective, it's because the loan may be taken out under Zack DeRose's name, but the property itself is now owned by Investments LLC. If a tenant tries to sue you and you run the liability through Investments LLC, the property used as collateral for the loan against yourself may be worthless to the bank. Generally, if you call up a bank and ask if they'd be ok with you deeding the home to your LLC, it'll be a hard no for that reason and I'm sure a ton of other reasons their legal team can come up with.

There also could be some issues with your title insurance depending on how you setup the LLC and your share of ownership in it, but those particulars would be best left answered by a title officer.

But from a practical point of view, if the bank is getting their mortgage payments each month, are they really going to care if Investments LLC is the new owner of the home? If they call your loan and mandate that you must pay the balance in full and that doesn't happen, will a bank really want to shell out thousands of dollars (probably more like tens of thousands) to foreclose on your home? Realistically, I doubt it. I have clients that are determined to do it, and they do it all the time and I have never once been notified that their loan was called. Some deed to their LLC the very next day after the loan closes, and others will do it whenever they please. I've also never heard a client receive push back from escrow or title when they request that a deed be prepared to claim title in LLC post close.

I think the funny thing is that this LLC issue seems to create some controversy between different groups, but I don't think I've ever heard anyone pondering over the legal ramifications of a seller financed home purchase. I'd argue that it's worse in the scenario of a seller financed loan for the bank - the bank still owns the mortgage collateralized against a home that is now owned by a completely different individual, and is also now being paid for by this random stranger. At least in your scenario, the owner of the LLC is also the borrower of the mortgage that was qualified by the bank and granted the mortgage to begin with. But I digress..

There are a lot of fine print/legal that comes with getting a mortgage - I mean, the loan docs are going to be about 100 pages of legal documents. At the end of the day, I think it all comes down to your appetite for risk. Would you rather risk the bank calling your loan, or would you rather keep your investment under your personal name? What are the chances that the bank will call your loan, and what are the chances that your tenant will try to sue you over something? Would it be sufficient to take out a very large insurance policy to protect you against any potential lawsuit from a tenant in lieu of an LLC? Those questions may be best answered with a consult from an attorney on these options.

@Justin Messer Fannie Mae allows up to 10 financed properties when underwriting a loan for a second home or investment property. For a principal residence underwritten by DU and is NOT a HomeReady loan, there is no limit to the number of financed properties by a borrower.

Hey @Nina Granberry, you will be able to purchase another property immediately since the first property was purchased out of state (implying an investment property). Since you are only occupying your second property, you can take out a loan immediately, but you will be subject to qualifying for the full carrying costs of both properties.

Regarding taxes, I have some clients who prepare their own taxes since they are comfortable with tax law and their taxes aren't overly complicated, but I think that the majority of my clients with large real estate portfolios tend to hire a tax preparer. It all comes down to how well versed you are with the tax code. There is nothing wrong with doing your own taxes, but there is the chance that you may be missing out on some tax deductions that you may not have known you'd be eligible for.

One thing to keep in mind: I also get a lot of clients who come to me for a loan thinking that they will easily qualify for their next investment property. I notice that most times that the first year an investment property is listed on a tax return, there is a massive net loss to income (at least on the tax return) due to repairs and upgrades that are completed after purchasing. Your property may cash flow and generate good passive income for you, but since the tax code is favorable to real estate investors, you may be losing money on paper, making it more difficult for you to qualify for your next purchase.

Congratulations on your first purchase and glad to hear that you are already thinking of your second!

Hi @Zack DeRose, @Jed Haslam-Walker and @Corby Goade has provided some really great info, but I'd like to chime in and possibly add some clarification for your original post.

In the podcast, Josiah Smelser indicated that he has access to 40 Fannie/Freddie mortgages, and not 40 doors. There is a difference here. House hacking would allow you to access for up to 40 doors on 10 mortgages, assuming each property is a 4-plex. I believe that what Josiah was referencing was that each individual can hold up to 10 conventional mortgages. If Josiah and wife qualify for their mortgages individually and not jointly, then Josiah can have 10 mortgages, his wife can have 10 mortgages, and the partner couple can have access to a combined 20 of their own mortgages resulting in a total of 40. This, of course, requires you to make enough money to offset all of the PITIA (principal, interest, tax, insurance, HOA dues) on your own and not jointly with their spouse as many people do. I suppose in theory, if all of those 40 mortgages were 4-plexes then they would be able to hold 160 doors combined, but that would be (1) an underwriting nightmare, (2) require massive down payment funds, and (3) take a very long time to do. I figure that most people would prefer to get some experience under their belt and then venture into commercial properties (5+ units to a single property) or figure out a way to get into multifamily partnerships.

Also, 2-4 unit mortgages are allowed on conventional products and not just FHA products. You typically will need a greater down payment to do this. In either case, you should be able to use 75% of the income generated from the "other" units to offset your mortgage even for qualification purposes for your loan. However, if it is your first purchase and you do not have rental experience listed on your tax return (you only need one year of tax returns, not two - two years follows the old guideline), then your income will need to be sufficient to offset the full PITIA on the purchasing property.

If you want to refinance your property held in LLC, you will typically be required to fund the loan holding title in your personal name, and then will need to deed it back into the LLC after close. Your title company can help with you with that paperwork - it's minimal paperwork that needs to be filed and recorded. Even before COVID, it was tough to find a non-QM lender that was willing to fund your loan held in an LLC for title, but with most non-QM lenders gone (most of them literally stopped funding loans last month), you will be hard pressed to find a lender in the current environment that will allow you to keep your home in LLC at funding.

Good luck with your investing!

Hello everyone! Thank you so much for replying. My day job has been keeping me insanely busy the last week and a half and with some personal things preoccupying my time, I'm quite late to all of your very helpful posts and insights. Thank you all very much for your time.

@Lee Ripma I've seen you mention that to other newbies as well and it makes sense. I've actually been interested in focusing on 2-4 unit properties with 20-25% down like you have mentioned, but haven't looked much into KC (despite hearing so much about it on BP). I'll put it on my list of things to research and will likely be sending you a DM with some more questions if that's okay.

@Kyle Mccaw Thanks for the referral to the company. Dallas is another area that I am interested in taking a dive into and I did briefly browse their site and may reach out to see if I could get an intro call going. Do you think that your clients that you manage properties for (the ones that went through Marshall Reddick) are overall happy with their investments? It would streamline the process of having one company do the research and going through them, but also have some healthy skepticism with putting all my eggs in one basket.

@Lane Kawaoka Who have you used to purchase your turnkey properties? I reached out to one company, and I believe that they have the bells and whistles and service that help to ease the fears of OOS investors, but seems like the investors do pay a premium for that service. Since I feel like we're mostly at the top of the market, I have some reservations about paying for that premium. In 2012 I'd have happily paid for it since it'd have been minimal work for all the upside and appreciation up til now, but I clearly missed the boat on that one, haha. I will send you a DM - curious to see which markets you've invested in OOS.

@Pamela Sandberg Thank you - I had previously spoken with @Chris Risi about Phoenix and it was actually a place that I had initially considered when I first started daydreaming about Phoenix many moons ago, but I think I'd like to look into other markets for the time being. Who knows, maybe I will circle back to Phoenix at some point and I will be happy to reach out to you for more insights then. Out of curiosity, what kind of law do you practice?

@Donald E Appleberry Thanks for connecting. I agree with you there. When I was looking more locally for deals, I was definitely looking into SFR's in the normal/north park/university heights area with alley access to build an ADU. The thought was that we could live in the front unit (or the back), and house hack with the second unit on the property. Down the road, if I ever got to that point, I could consider developing row homes if the numbers made sense. Issue is that we decided that we'd be happier living in spaces with more space and greenery, so it's more likely that we'll settle down where we currently are in the Tierrasanta area rather than making the move to more congested areas. For OOS, I'll definitely be taking a harder look into KC since I've seen it mentioned so many times on BP now. Have you been focusing more on local or OOS investing?

@Alex Olson I will be doing some research into the KC market and if it seems like it would be a good fit for myself, then I'd be happy to reach out to you for some more insight. Thank you!

@Bruce P. where have you been investing OOS? I connected with @Collin Placke earlier and had picked his brain on what he does with his MF investing. It definitely seems like something I'd like to dive into at some point, but seems like most large-scale MFs require all of their investors to be accredited. We're around 350K in net worth and since I get paid through my S Corp, we're not quite at the annual income requirements either. Seems like it may be something that I could look into down the line. For now, I'd like to focus on 2-4 unit properties and see where it takes me. In the long run, passive investments seem like it'll definitely factor into the plan, but I'm presently more interested in learning and gaining experience with individual investments - assuming that having some more experience now may help to ascertain the quality of a MF investment down the road.

@Rachel S. I've also considered looking into the IE as well, but for other reasons than cash-flow. My parents will likely retire back to the states within the next decade and I've been considering purchasing property to hold for them until they are ready to make their move back home. Probably a completely different analysis since the objective is very different, but it'll be something to keep an out for.

Alex,

Not too far along :) Just starting off like yourself. I have one property that was obtained through inheritance, but I've never had to acquire a property before, so I still feel very new to the whole thing. Currently trying to network with different individuals and speak with them about their experiences and strategies, and hope to start putting offers on properties later this year. I'll be spending the next few months learning and researching as much as I can and will wait until there is a little more direction with the economy before pulling the trigger on any deal.

Gina

Hi @Al-Qumar Atkins! Welcome to BP 🙂 I’ve never done a house hack before, but I have sublet out rooms in a house that I’ve rented in order to reduce my overhead, while still enjoying the amenities that a house has to offer (mainly garage & backyard). I’m from San Diego and can chime in on the room rental market at least a little bit.

From what I’ve seen, it’s a mixed bag and depends on the area that you are in. I think a lot of people prefer long-term leases so you can prevent turnover, but I’d say a large portion of the renter market in SD are people looking to rent a room out of a house because it’s more economical than renting an entire apartment. I’ve seen higher/fixed room rates that include utilities, room rent + split utilities, room rent + fixed utilities, etc. Some people have month-to-month leases so they’re not stuck with a bad housemate, but will convert the month-to-month into a long term if the personality fit seems to be compatible.

Side note: if you are wanting to house hack in this way, you will not be able to use the rent on your primary residence in order to qualify for a loan. You can only use the rent to offset your mortgage (for qualification purposes) if you buy a duplex or some other multi-unit property. You will need to purchase a home that you can qualify 100% on your own current income for, and even for future refinances, you will not be able to use the income from your primary residence to qualify. There are a few cases where you can use the income, but house hacking would not qualify unfortunately 🙂

Good luck!

Thanks @Twana Rasoul - I have just sent you a message. Thanks for connecting!

Hey @Alex Mina and welcome to BP and real estate investing :) I'm fairly new myself, and don't have much knowledge to share, but I'd like to follow this thread so I can see who else chimes in on this. Are you only looking into out of state investments or are you open to local deals? It's been something I've been going back and forth about myself. I'm in San Diego and would love to invest locally to be more involved in the deal, but not sure if I'm up to bet 600K+ on my first deal, rather than something out of state for a fraction of the cost, lol.