All Forum Posts by: Gregory D Coburn

Yes its a new purchase, i have called 20-30 banks some are more friendly when it comes to seasoning and others state that if there is no mortgage associated with the property it can be seasoned quicker.  I am purchasing with a personal loan and cash so there will be no mortgage on the property.  

I have a call setup this afternoon to confirm what i was told by an assistant that worked for the mortgage group i am trying to work with.  They stated that I would qualify for 85% of the new appraisal value and that it would season immediately no need.  I am waiting to get quotes on the rates and fees and if there is any "gotchas" but it sounds promising . 

I have a property under contract and a bank lined up to give me up to 85% of the appraised value.  I anticipate a good appraisal based on comps in the area, so i would be in a position where i could get back all the money i have invested in the property + some. However, i am curious on your thoughts on whether or not to pull the Max out 85% vs a lower amount.  

House will rent for 1550

Scenario 1: Pull 85% out, This would leave me with $8,700 cash in my pocket - Mortgage +T+I+HOA = $1,276.

Scenario 2: Pull 80% out, I am left with $506 in my pocket - mortgage of $1,223

The house is on the newer side so repairs should be moderate, and I plan to property manage it myself for now, but will build that into the equations since i want to eventually get out of Property management.  

The area is growing and I anticipate rents going up as well as house prices, i don't want to bet on this but it does give me some comfort that equity will increase over the next few years.  

My hesitation on doing the 85% is that it would expose me to more risk if the market drops, San Antonio is somewhat insulated from this based on the last market drop.  That being said $8700 rolled into my next property would go a long way.  

I have been trying to explain to my wife that there is a "threshold" in real estate business where it takes a lot of effort, time, creativity, and will power to get to, but once you get there momentum takes over and your business really starts to take off.  Another way to think about it would be your pushing a bolder uphill, step by step you make progress but it can be exhausting, eventually you get to the top and the bolder starts rolling down the other side and things get much easier.  It doesn't mean stop doing what got you to this point, only that cash, experience, networking, marketing, are all operating more autonomously and things should feel easier.  

That being said, if you think back on your business, was there a specific time where you felt like this was the case?  Was a number of deals or cashflow number?  

I am looking for some advice on structuring a private loan.  

I have an interested party that would like to invest $100k into my business ( I have not yet created a LLC, but plan to). I have discussed some standard terms/structure that would work for both me and my investors.

To summarize I want to take the 100k and place it in an Ally or Discovery online savings account that will act as a holding account for the funds.  I would pass on the interest earned on the money to my investors.  This will basically satisfy the minimum IRS interest rate guidelines.  I would have access to these funds to purchase and rehab properties as needed.  When I withdraw funds from this account for a deal I would pay a higher interest rate (6-8%) for the duration of the loan and then upon refinancing the rehabbed property i would repay the loan which would stop the higher interest payment.  

My plan is to try and keep the money working for me so, there should not be long periods where the online saving account is siting with the full balance.  However, I would like to have an account setup for tracking all debits and credits to the loan account to make it easier for tax time.  

Questions:

Will I need to send a tax document to my investor stating the amount of interest earned in the calendar year?

Can the investor reinvest the interest earned into the account?  In other words can the interest be deposited back into the holding account (ally or discovery) to be used in future deals?  If so does this impact the taxation of the interest or will the IRS simply want the total interest earned for the calendar year?

Does the IRS require a flat rate of interest or can it be variable based how the money is being used? 

Will I have to claim the interest on the Online saving account as income even if its being passed through to the investor? 

With this type of loan structure, would this be considered a short term, mid term or long term investment?  Ideally this money would not sit in any one property longer than 6 months (seasoning period), but the investor would like to leave this money invested for the next few years. 

I am new to Bigger Pockets, and looking forward to building an awesome business. I am also interested in meeting like minded individuals in the San Antonio area and learn from their experiences.  Sorry for the long post.

My wife and I are excited about building our real estate business on the side and she will be taking on a majority of the day to day work and we could use some help filling in a few areas of our business plan. 

Background:

I have a solid job and earn enough to cover our month to month bill and while still being able to contribute to my 401K and savings for this business.   We currently own 1 home which we are renting out ( it was our primary home for 9 years) which is at a great 3.25% 30 year loan.  In addition this property has about 90k of equity in it. This provides us a solid cash-flow property to build our business upon and we are looking to add a new property this summer. 

In addition to this home, we have approx 30k in savings allocated for the business as well as access to about 115K in private funds (my parents recently sold a piece of land and are willing to invest in this business ( more details below).  In addition our current home has around 108k of equity because of a large 75K down payment (20%).  We also have solid credit of 760+. 

Strategy:

We are wanting to pursue the BRRRR method but focusing on multi tenant properties in the greater San Antonio Market. We are planning to do some direct marketing to try and secure a few great deals but also plan to network with some whole-sellers and investors in the area as well. In addition I have a bank that will lend up to 85% LTV in the area and plan to adjust how much cash i pull out based on how the economy and business is progressing.

If the right SFH drops in our lap we would jump on the opportunity, but we will have a specific set of criteria that would have to be met.

Ideally I would like to on-board approx 20 doors over the next 2-3 years using the above method. This will allow us time to build a history with our LLC and have a solid foundation to jump into larger commercial deals.

Questions:

I am still contemplating the best term structure for my parents loan. We have a great relationship and they have full confidence in my ability to build this business and handle their money responsibly. In addition they have had to help out my siblings over the last few years and i feel that they see this as a way to help me out without just writing me a check. That being said I am planning on success and want to reward my parents with a great ROI and something they can benefit from. I understand that there are minimum interest rates that need to be charged to prevent tax issues, but I am curious on how best to structure this loan. I have thought about making it a few different ways

• flat interest rate annually (basically a CD, look at CD rates from banks and give them a point or 2 higher)
• Success based profit sharing ( as deals are close they get a portion of the month cash flow of the rentals) 
• Line of credit ( money that can be used on demand, rates will be higher than option 1 but still competitive) 

When a bank appraises a multi-tenant property to determine cashout refi amount (for this example lets say a 4 plex) what are they using to determine the value. Its pretty straightforward for a SFH, but on a 4 plex you may other things to consider see below

• Property has 2 existing tenants that you don't want to displace, so you rehab the other 2 units and get them rented.  Will the bank want to view all units when building out its appraisal or will this be more indicative of combined rents for the building.  
• Are there any useful tools or websites that can be used to calculate what multi-tenant property will appraise for?
• If the bank is using cashflow as a lever on properties appraisal, do you find your self refinancing multiple times to pull additional equity out of properties as you are able to rehab all units and maximize rents. 

We are wanting to expand into commercial real estate in the future but wanted to get our feet wet with smaller units first to understand the ropes and to build our network and portfolio. I understand that in order to get favorable commercial terms you need to have an aged LLC that has a history of revenue associated to the business. We are looking to create an LLC this year and will be working to build our revenue over the next few years. Are there any targets or thresholds that we should strive for to get the best terms for these loans.

The other option would be to pursue owner financed deals.  How do you proposition this to the owners and what types of terms are usually agreed upon.  In most cases i would assume you would want to refinance this in a few years, so logically the lowest down payment and potentially interest only loans, would be your best bet until the larger commercial property can be rehabbed.  

I appreciate the help and I looking forward to meeting some of the local investors.  

@Brie Schmidt; I understand that can be difficult to find, i am in the greater San Antonio area and plan to network with a bunch of local banks to see whats available. 

Ideally i would like to be preapproved for a line of credit based on both my current primary home and my investment property so i know whats within my budget.  

Another question is if i am unable to group the investment property with my primary property can I purchase an investment with multiple lines of credit.  As i mentioned i have about 30k in cash so i can have skin in the game but would need to leverage both properties to get to the total target amount i am shooting for. 

I am looking for the best option to pursue my next rental property, I am pursuing the BRRRR method. I have done a lot of research but wanted to get some opinions of investors who have done this before. I plan to launch my real estate business on the side and build up properties until I am able to secure enough cash flow to potentially retire from my primary job.

My first rental was my primary residence so we have a decent amount of equity in the property (Current Market Value = $260K, loan $168K) and have a great 30 year fixed rate (3.25%). I currently have great tenants in the property and have a positive cashflow of $770 a month.

All in (purchase + rehab) my next property will cost me about $100k. I am looking for the best options to finance this, during the rehab process, prior to me refinancing after appraisal. I have a bank that will provide 80-85% LTV of the appraised value.

I currently have ~30K of liquid savings. The 1st rental property in my name, but plan to create LLC this year and transfer the asset, however I may delay that if i can benefit from using e HELOC or blanket loan to secure funding for my next property.

In addition my current home has a current market value of ~$420k with a loan of $297K. Assuming I get an 80% HELOC on both properties I would be just over $100K when combined with my savings. My credit score is 760+.

My Questions:

• How much should I expect to pay in fees for a HELOC or Home Equity Loan?
• Will a bank or Credit Union allow you to keep a line of credit open and allow it to go dormant between purchases?
• I could always go the hard money lender route but I am looking for ways to lower my costs getting into properties.
• Are there any other loans or whays that i can secure funding for my next property?
• Does my current investment property qualify for a HELOC?
• Would I be better of creating an LLC and applying for a BLOC loan? It looks like this requires a revenue history to qualify so this could be a deal breaker.