All Forum Posts by: Matthew Mueller

Hi,

I have conducted a national search on getting an investor HELOC on a property I own that has doubled in value since I've bought it. It was once my primary residence but I've since rented it and am no longer living in the area. I am well past all tax-favorable primary residence dates. It happens to cashflow quite positively rental wise, and the interest rate I doubt we see again in our lifetimes (30 year fixed, 3.25%, with 23 years left on the note). So I have no incentive to sell it or refinance it. Maybe someday I will 1031 it if I cannot figure out any other strategy.

I have found a handful of firms that would do a HELOC on an investment property (PenFed, TD, Wells) but I am running into underwriting guideline roadblocks on the fact that I have four properties currently being financed. Regardless of the specifics, they are 'auto-rejects' in terms of process. Regardless of my personal situation or that of the properties themselves.

I am trying to work with local banks and credit unions; while that is much more difficult to navigate, and the fixed costs of doing so are high, we haven't even gotten to the point of the question of 4 properties or more - which I now need to start asking up front.

Problem is, at least in the case of TD, I am even being told they won't do a refinancing for me on this property because of '4 being financed', which seems crazy to me.

Does anybody have any ideas or guidance as to how I could proceed to try to pull some equity out of this place?

I am looking for anybody who has gone through this process for Boston and completed it.

There are a few community banks who will do it and a few local credit unions. My issue is I no longer live in the Boston area - the national ones who will do it (WF) are at 60% of LTV.

I am looking for any and all ideas!

The one caveat with PenFed is they cap you out and will not move forward if you already own 4 properties or more...

I am working on this exact dilemma... have called probably 100 institutions in the past month.  There are 3 local banks in Boston and several credit unions (I no longer live there so I cannot become a member) that offer this, and a few national ones.  

DM me and perhaps we can compare notes.

Hello all,

I've run numbers on what I think are fairly conservative possibilities regarding a property and the question comes down to this.

My CCR is almost 1.5% higher even after taking into account monthly PMI costs if I go with an 85% LTV vs an 80% conforming one.

The obvious tradeoff is lower nominal cashflows esp because of a higher P&I cost, and lower equity, with more 'dead' cashflow going to PMI. But should I care given the above information?

The swing is $50 less per month to have to put 5% less down; which in this market would be 25% of another down payment (due to fees for processing etc)!

So I own a triplex in York City, but I am wondering for the crowd here, who do you recommend for a property manager? I am trying to determine if my property manager is proficient given the difficulties of tenancy within the city proper.

The triplex has only had all 3 units and the garage rented and paid for about 4 months of the 24 months held - that said it has almost always had 2 renters and the garage rented out - like most cities parking is at a premium. This year the unit has cashflowed reasonably well after learning a lot from buying cheap (almost 1/2 price what the seller paid) but paying a lot to renovate and modernize the interior.

Was also able to successfully appeal the tax burden down some 20% after going to court over the issue.

Look forward to hearing your insight about property management!

Matt

@James Wootton

What are the Top 10 markets? In what ways are they the top 10?

Thanks,

Matt

Hello all,

I am currently considering up to three properties on which to make offers. They are all in the same metropolitan area. There is one property that is a definite, although the other ones are just slightly less attractive to me. I am not certain that I will go through with more than one, but at maximum will seek financing for no more than two of the three at this juncture.

My question: I have already spoken with the lender and asked about restrictions or issues in seeking financing for multiple properties on the same mortgage application. I can prove that with proper rehabbing and comps that these will generate cash flow (my strategy is long term accumulation and rent, not flipping), and do not feel that my credit profile would restrict the total amount to be considered, but would any seasoned veterans here have any tips or strategies to offer other than just putting the straight numbers on the application? Anything to consider with interest rates or financial considerations if there would be essentially two collateralizing properties?

This is my first time dealing with this lender so other than proving my assets and other modestly successful real estate deals, I don't have an established relationship with them as of yet.

Many thanks in advance.

Matt

Thank you for all the background research. I spoke with a RE attorney in TN and this is the response I received:

'A family owned LLC is exempt from Franchise and Excise tax in the state of Tennessee, so that would NOT be an issue. You would then be able to set up a TN LLC, with it having its own tax ID number, and having the additional security of the veil of protection between the LLC and you.

You can get insurance in the name of the LLC.'

Back to my interpretation:

From my understanding there are restrictions on what a Family Owned company can own, specifically in excess of I believe 4 units in a particular property, to be considered remaining as family owned. As long as it is SFHs, there should not be an issue.

Some other questions I asked:

1. Am I required to have/Do you provide registered agent services for out of state? What is your typical set up? How much is the annual charge?

2. What fees can I expect to pay on an annual basis to the state of TN? I understand I will have accounting statements separately such as the generation of an LLC income statement and a flow through K-1.

3. I spoke with a few lenders about getting financing, and they all said for the type of mortgage I am trying to get, there is no such thing as an entity getting one- they are all personal loans. Therefore I would have to purchase the property in my name and then either quitclaim or warranty deed the property to the LLC. From my understanding, state law dictates which one is a better strategy. I would be nervous about receiving a due on transfer notice from the lender even though I got the understanding that most look the other way- would not want to be an unlucky exception. I know that it is possible to set up land trusts and then name myself as the beneficiary, although that route seems a bit complicated. Can you tell me the way things NORMALLY go in your area? I am used to the litigiousness of New England, so I apologize for the depth of all the questions.

Answers:

1. Yes, you are required to have a registered agent.

2. The annual fee is $300.00. You can pay that online each April as well as file your annual report online. Yes, as far as the accounting is concerned. Your CPA should know how to prepare the proper forms.

3. As far as the LLC taking a loan, that's correct. It's not admissible under FNMA conforming guidelines. However, there is usually not an issue if it's your family owned LLC. So, after closing, we can quit claim to the LLC. The worst thing that could happen is you would have be asked to quit claim it back to yourselves individually. That has happened occasionally, but not often

I was able to locate this, which may imply an exemption under the FONCE statute:

On June 25, 2009, Governor Bredesen signed into law legislation changing the types of income that can be classified as passive income for purposes of determining whether a limited liability company, limited partnership or registered limited liability partnership can qualify as a FONCE (“family-owned non-corporate entity”) and therefore be exempt from the Tennessee F&E tax.

If you own or have a financial interest in a FONCE, such as a limited liability company, limited partnership or registered limited liability partnership, this change in the law may cause the Company to become subject to the F&E tax unless changes are made in the way the Company is organized.

To qualify as a FONCE for the F&E tax exemption, your Company must receive substantially all of its income from passive sources. Until the law was modified, rents from commercial property were included in the definition of passive income. However, with the enactment of the new legislation, rents from commercial property are no longer part of passive income. Additionally, the definition of commercial property is extended to include property with more than four residential units. Depending on the type of income generated by your Company, it may no longer qualify for the FONCE exemption.

http://www.state.tn.us/revenue/tntaxes/fonce/faqs.shtml