All Forum Posts by: Jeff Dulla

Eric - best thing you can do is meet with the attorney first. They will be the best person to properly prepare. I work in quite a few states, MN being one. In IL, we use attorneys on every transaction so you would never not have this person involved. So it is good that you already reached out to one. 

I would also reach out to a CPA. There is a good one who is a regular poster here. My guess is that you could benefit from starting an LLC. I am not qualified as a CPA or attorney to tell you that but I believe that is going to give you the structure and protection you all need.

Maurice - it depends on what kind of return you could get on other investments. I do not know your area but could you get a multi-unit for $175,000 to $200,000 (you could possibly go quite a bit higher on price but not sure what your market is like). 

If so, you could skip living with your brother, sell your current residence, buy a multi-unit as owner occupied, move in for a little, rent out the other spaces and then after the appropriate amount of time has passed, move out. That could get your a property that cash flows quite a bit on a monthly basis. 

Not sure what you are trying to put down on it but I do know of a lender that will disregard the amount of properties you own. Not local. Not the greatest rates when compared to residential. But from everything I have seen, a very competitive product. 

Most HELOCs are going to increase as PRIME does. PRIME will more than likely be 4.25% by the end of this year. Most high LTV HELOCs I have seen are at least 1% if not higher, margin added on to PRIME. As you approach 6%/7% rates on that HELOC, your return of potentially 6% to 10% is not going to be that great.

If you could find a fixed option around 5% to 6%, i like that a lot better.

I agree with you, you wouldn't want to give up the 3.50% for an aggregate rate of 5% or higher. What I am saying is that any debt you take on changes your aggregate interest rate. For instance, if you take on a HELOC at 6%, your rate isn't 3.500% on all your debt. It is higher. Whatever you choose to do, you need to weigh your AGGREGATE cost of debt.

Aryelle - what are the repairs for? If they are minor, you shouldn't need a hard money loan. There are a lot of people that seem to be overly dependent on "hard money loans" and I think it is based off a lot of misinformation on this website as well as others. 

If you can, please tell me exactly what needs to be fixed. 

Conforming, residential loan or are you looking for portfolio, hard money, construction? What are the details of the loan. Different lenders/banks are better at different situations. 

Drew

I think your question depends on a bunch of specifics. If I just isolated the question about student loans versus your mortgage, I would ask to clarify the following:

Are you saying you have about $65,000 in equity at this point? 

If that is the case, you could simply refinance. There are banks out there that will allow you to do another fixed first mortgage, with a fixed rate second mortgage behind it. The fixed rate seconds are around 5.125%/5.250%. I would be hesitant to pull a HELOC and payoff your student loan considering that PRIME rate is going to rise another .75% in 2017, more than likely.

You may ask why redo your first mortgage with that rate you have. But if you have a second mortgage and a student loan that are going to be around 6.00%+, then your aggregate interest rate on all debt is much higher than 3.500%. You would have nearly 40% of your debt on rates around 6.00% so your aggregate interest rate has to be in the mid 4's. And that only considers where PRIME rate will be this year. 

Your last question about doing the HELOC/second and investing it in another property would completely depend on what kind of return on your money you are forecasting (and really what you could forecast in the future). If you are talking about 12%+ annual returns for the foreseeable future, obviously that is something you would want to entertain.

Not typically but you could. The best, lowest cost mortgage options would allow you to use your LLC to qualify, but the loan needs to go under your name. Not the LLC. If you move title into the LLC after, that is up to you.

There are some lenders that will lend to LLCs and for that matter, may lend as well without you having income right now. I can tell you about one if you PM me. But the rates are much higher than what you would find normally. 

Augustine - that is a good question and funny you should ask. I just started posting on this site very recently and have been lamenting the amount people act like a hard money loan, private loan or commercial loan is just going to allow them to close with no issues. Like there are no negative aspects (aside from rates/costs). 

You can't really paint the scenario with one brush - lots of transactions are different. But when it comes down to any loan, start thinking like the creditor. If there are large issues - structural, safety issues with a home, you can pretty much bet a creditor is going to want to hold a repair escrow on top of everything. 

Think about it this way - your promise to pay your loan is pretty much worthless (exaggerating but slightly true). You could lose your job or worse. So ultimately, what matters the most to a creditor is that piece of collateral you are securing the loan with. What are the issues baring resale? What would a creditor need to do to a home before they had no issues selling it to a wide range of people? If the repairs needed greatly impact the marketability of the property, then you can bet the creditor would be asking for a repair escrow. 

Some properties certainly will not need this and there are plenty of hard money loans that will close without this. But they are very much so property specific and cannot be blanketed with a response otherwise. 

Even with banks that will sell to Fannie/Freddie, you can get up to ten properties financed. The only thing that  may change is flexibility with down payment and condition of the property that they are OK with. But again, there will be a trade off - less stable loan program, more uncertainty long term, more costs in a variety of ways. 

A lot of people seem to want to bank on commercial loans or private loans being an end all be all or some magic solution. But I have had the luck to work with a lot of solid real estate investors. The ultimate goal for everyone of them, aside from properly leveraging and receiving solid cash flow, is for them to end up in a Fannie/Freddie loan. If you plan to hold the loan long term, it is a no-brainer.