All Forum Posts by: Ivan Ng

We bought an industrial warehouse for ~$250k and is in the process of renovating it. The goal is to finish the renovation by November and then rent the warehouse to tenants. Our estimated ARV will be ~$850k. Currently the entire project is being funded by our own cash and we are looking for financing options to pull out our capital once our asset is stabilized.

I had one conversation with a CRE lender and she indicated that CRE cash-out refinance is not really available these days given market condition. Is this true?

2 Votes

Greensboro, North Carolina

Quote from @Account Closed:

@Ivan Ng

Transferring investment properties into an LLC and subsequently placing them into a revocable trust for estate planning purposes is a strategy that some individuals choose to pursue. However, you're right that it can potentially trigger the due-on-sale clause in your mortgage agreements.

The due-on-sale clause allows the lender to call the loan due in full when the property is transferred to a new owner. This is typically not an issue with a primary residence, especially if it's being transferred for estate planning purposes, as there are legal protections in place. However, investment properties may not have the same level of protection.

In practice, what I've seen some clients do is:

Consult with Their Lender: Before making any transfers, it's advisable to speak with your lender about your intentions. Some lenders may be willing to work with you, especially if the change in ownership doesn't affect the risk to the lender.
Check Mortgage Agreement: Review the terms of your mortgage agreements to see if there are any clauses or exceptions that might apply to your specific situation.
Consider the Risks: Be aware that some lenders might call the loan due or demand a higher interest rate if the property is transferred into an LLC or trust. This can impact your financial situation, so it's important to weigh the potential consequences.
Legal Counsel: Work with a qualified attorney who specializes in real estate and estate planning to ensure your strategy is implemented correctly, taking into account state laws and any potential risks.
Potential Refinancing: In some cases, refinancing the property under the LLC's name might be an option, but this would depend on your financial situation and the lender's policies.

Your specific circumstances, the terms of your mortgage, and state laws can all play a significant role in how this strategy is executed. It's essential to seek legal advice and possibly consult with a financial advisor to develop the most suitable plan for your estate planning needs while managing the potential implications of the due-on-sale clause for your investment properties.

thank you, Kislay!

0 Votes

Kislay,

I have a handful of investment properties that are currently under me and my wife's name. I'm looking to deed them into an LLC and have a revocable trust to own the LLC. My concern around this is the due-on-sale clause - my understanding is that if this is for estate planning purpose, the bank wouldn't legally be able to call them but I also heard from my lawyer this rule doesn't apply to investment properties.

Not looking for legal opinions but want to see what are you seeing from your clients.

0 Votes

Correct. a STR. I will be able to get an investment property loan no problem. The challenge here is to see if there's a lender that will be okay with a second home mortgage for the 1031 exchange ( if I'm staying at the property for exactly 14 days a year - meet the second home mortgage requirement, and make the 1031 investment property requirement)

I know this is a fine line but just trying to seek out all the options

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@Ned Carey - absolutely not committing any mortgage fraud. This is my understanding but could be wrong:

Second home mortgage requires the owner to stay in the property for at least 14 days a year and that is from a mortgage perspective. Form a 1031 perspective, the IRS doesn't care about how you fund the deal as long as the intent of the property is for investment purpose which in this case, 100%.

The challenge I have is that some lenders don't like 1031 proceeds as part of a second home mortgage but some don't mind. I'm trying to sort out those that don't mind.

again, not trying to break the rules...just asking for advise. Thank you!

0 Votes

Thanks Ned. it will be a investment home, just using a "second home" mortgage.

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BP Friends! Hope all is well.
I know this is a loaded question: Do you know if anyone does 15% down jumbo second home and okay with 1031 exchange?

0 Votes

All Forum Posts by: Ivan Ng

Ivan Ng has started 4 posts and replied 17 times.

Post: Is CRE cash out refi for income producing property still available?

Post: Is CRE cash out refi for income producing property still available?

Post: Is CRE cash out refi for income producing property still available?

Post: Is CRE cash out refi for income producing property still available?

Post: Ask me questions on Real Estate Tax Strategy or Investing

Post: Ask me questions on Real Estate Tax Strategy or Investing

Post: 15% down Jumbo Second Home with 1031

Post: 15% down Jumbo Second Home with 1031

Post: 15% down Jumbo Second Home with 1031

Post: 15% down Jumbo Second Home with 1031