All Forum Posts by: Graham Parham

Your best bet is to work with a Fannie Mae or Freddie Mac direct lender .  Banks have a tendency have additional guidelines over the Fannie Freddie guidelines which prohibits given you the necessary income for the subject property. Some banks require that to you are  a landlord for 2 yesrs,  which in my opinion is old school. 

Rates are low right now  and you can achieve  a much better rate  with a hybrid lender  than a small Bank. 75% loan to value is what you can expect, but you can achieve  it at market value, which means you don't have to have any seasoning requirements. Don't sell yourself short. look at all your options 

I have been doing loan in Texas for many years. I have never heard of them. You can to a 3.5% down on FHA up to 4 units as long as you are going to live in one of the units.

Beware in internet lenders

The Advantages and Disadvantages of titling your Rental Properties into anything other than your personal names

The main reason investors prefer to have their rental properties in an LLC is for asset protection. For many years, lawyers, financial advisors, and tax accountants have been teaching asset protection to rental property owners. The more novice investors are worried about losing everything if a tenant or someone gets injured on their rental property. Other investors like to think of their rental properties as a business, therefore putting it into an LLC legitimizes a business entity. In most cases rental properties will create a passive income. This income can be funneled through to your 1040 tax returns on schedule E as personal investment property or through the LLC that you set up. Both ways have tax advantages.

The primary reason to form an LLC is for legal protection. Legal counsel generally has a tough time breaking through the LLC wall. Should any tenets, their guest, or anyone on the property sustain any injuries and the property is owned in the investors name only; their personal assets are at risk.

From a tax perspective, and LLC formed with two or more members is classified as a “Pass-Through Company”. A “Pass-through” means the income is passed through to its owners and claimed on those owner’s individual tax returns. The LLC is subject only to capital gain rates on the ownership shares of the member, and not to the corporate capital gains taxes, therefore no double taxation. LLC’s with just one owned-member however, are taxed as a sole proprietor and no separate tax return is required. Actually tax dollars from holding real estate in an LLC opposed to personal holding the properties is zero. As of 2011, if you own income property and actively participate in the management of the property in your adjusted gross and less than $100,000, you can write off up to $25,000 of rent losses. The amount of the rent losses that you can write off is proportionately phased out between 100,000 and 150,000. Also remember that although the loss is disallowed for that particular tax year it is not completely lost. When you sell your income property, you can write-off any unused rental losses that have accumulated while you have owned the property.

When setting up an LLC there are costs involved that are generally charged by an attorney or tax accountant for the preparation of your LLC charter. Those fees can vary depending on the source, but is highly recommended versus doing it yourself online. Depending on what state you reside in even if your LLC is set up in another state, there could potentially be an annual fee that is paid to the state. Another fee would be the cost of filing separate tax returns for the LLC if you use an account, which I absolutely recommend if you're dealing with rental properties. In addition, the state franchise fees would also be another cost incurred depending on the gross profit of the LLC. The IRS has certain thresholds that they use for these franchise fees. Many investors starting off do not realize the reality of the impact of any fees against their bottom line until it's too late.

To me this is the biggest hurdle for most lenders to overcome. Many investors “Miss the forest for the trees” and don’t realize that owning properties in an LLC can create problems for future financing. Most 1 to 4 residential loans are delivered to Fannie Mae and Freddie Mac. Fannie Mae and Freddie Mac’s guidelines do not support “Entity Vesting”. Entity Vesting is when the rental property is titled in anything other than the individual borrower’s names i.e. LLC’s, S-Corps, or Partnership. First-time investors that have been educated to set up an LLC for their new real estate business do not realize that this can be a problem. In addition, the same investors will set up individual asset accounts in their LLC names to support future purchase transactions. These funds cannot be honored as personal assets because they are in a business. There are special circumstances that these funds can be honored, but this requires a complete 12 month analysis of the LLC’s profit and loss. This is totally up to an underwriter’s discretion.

I highly encourage any investor that is looking real estate investing to keep the bulk of their assets in their personal account for underwriting purposes.

Most Fannie Mae and Freddie Mac notes originated today will have a “Due on Sale” clause. Most “Due on Sale” clauses prohibits you from transferring the title of your property. What does that mean to the investor? It means that if the loan servicer has knowledge of the property being retitled into an LLC, they could potentially call the note due. At that point the investor would have to pay the loan off immediately or refinance it with another lender. Many investors will take the risk of retitling their properties into an LLC. The chances servicer finding this information out are quite small, but still possible. Please consider this before retitling your property into your personal LLC.

This will strictly depend on your situation and what you want accomplished by forming an LLC. Some investors will title their rental properties into their family trust. This is acceptable by all Fannie Mae and Freddie Mac lenders as long as the trust is a revocable trust. Typically the trust will have to be reviewed by each lender and their legal counsel to be able to finance the loan into a family trust. In addition to the trust, they will simply protect their assets by getting an umbrella insurance policy. These policies are very inexpensive and have a great coverage in case of any occurrences that happen on your property.

I'm not sure where you got the information that conventional rates are lower than FHA rates. FHA is more forgiving with their rates and their FICO scores more so than conventional financing. The type of rate adjustments that are made to Conventional Lending really starts to kill you when you drop below a 700 credit score. FHA doesn't do that as bad.

Yes, conventional does offer a 3% down but you still have to take into account the private mortgage insurance. FHA on the other hand requires three and a half percent down and also has mortgage insurance. You would have to wait both of them out plus the rate comparison. Keep in mind the FHA mortgage insurance stays with you for life and conventional does not.

As far as the big banks are concerned I used to work for one for several years back before the 2008 mortgage meltdown. In my opinion the banks actually focused on the consumer more so than the stockholder before then. These days your front end personnel, i.e. the loan originator at the bigger Banks don't have the seasoning and the knowledge base as well as the customer service practices that a loan officer from a hybrid lender would have. Bigger is not the best when it comes to mortgage lending. Just because you've been baking there for years and it gives you the warm and fuzzy you may not get the type of service that you would be expecting

If you're looking to do a cash out before the 6 months you can do so another week delayed financing  offered by Fannie Mae .  This allows you to capture 75%  loan to value  of the acquisition cost . You do not have to wait 6 months or 12 months like no other lenders require

welcome to BP. There's so much information currently on the internet to research the best TurnKey providers in the country. I think you're currently looking in the best markets. I personally do business in all those markets and I think you're going to get great Returns on your investment. Call me anytime if you want my opinion on who the players are in each of the markets

I disagree with the fact that Fannie Mae will not allow you to do  more loans in that neighborhood. Astro inspect that A lender that you've been dealing with  explain that they couldn't do it because our underwriter did not feel comfortable with doing that loan or loans. I've seen that in the past but that's 10 years ago. That's old school thinking. You should be able to get financing  on a Fannie Mae note for all three of those deals

Smaller Banks just don't have the terms that a traditional Fannie Mae and Freddie Mac lender would have. Many times they put you on a very short term loan with a prepayment penalty in addition to balloon at the end. I recommend that you look at companies that specialize in investment Lending that deliver their loans directly to Fannie Mae and Freddie Mac . You should be able to get a good fixed rate loan for 30 years with no adjustments . Yes your FHA rates are going to be lower than conventional rates, but they only offer to owner occupant borrowerso.

As far as having your name go on title, I have never seen a note call due unless you stop payment. I am an investor in you market and I have all my properties in an LLC. All of my investors that I work with will do the same. Building a portfolio can be tricky. Call me anytime to discuss.

We can help you with the refinancing of your property once you have completed any rehab. We can do 75% loan to value on the appraised value. if 75% does not pay off the hard money in full, you would have to make up the difference from your own money. No seasoning required.