All Forum Posts by: Jerel Ehlert

Equity is expensive. Start with debt. Treat them like a HML with slightly better terms - 12%, interest only due monthly, 2 points, up to 70% of the ARV less repairs.

Close at a title company, with promissory note and deed of trust.

Appraisal, inspection, and scope of work.

No blue sky and no blowing smoke.

Most likely 1 reserved spot and 1 unreserved spot.

But, like everyone else said, your agent/broker should get you answers. Last week of the year is tough to get business done.  If there is no 2nd spot, ask what they will do to make it right.  You might be surprised.  As much as you don't want to walk away, they don't want you to walk either.

Treat PML just like a HML would require you to treat the HML: close at a title company, an attorney drafts the promissory note and lien, you name the PML as additional insured on the builder's risk policy, and give them a copy of the appraisal, inspection, and scope of work before close so they can do their due diligence. Monthly, interest-only, payments due on the 1st of each month.

Equity kicker is not typical.

Don't Expect Perfect.  Don't get judgy about their life choices.

What do you want?/What is your goal?  - any tenant who can pay rent on time, in full, and not destroy the property.  That's it.  No more. No less.

Someone who has perfect credit, 4x+ rent, and cash reserves can go buy any place they want.  These are not anywhere near your pool of applicants.  You won't get them, but if they do apply, it is likely false information or they can demand a reduced rent rate (perfect tenants don't pay top of the market rates).  The alternative explanation for why this unicorn applies is for some clandestine purpose.

Relying too heavily on credit reports and criminal background checks run afoul of the Fair Housing Act.  Credit reports have already been proven to be a poor indicator because the formulas don't correlate with future performance.  Both credit reports and criminal background checks have heavy racial bias against minorities.  Relying on tools with a strong racial bias makes your tenant selection process racially biased.

Do not go to the applicant's current residence or job.  First off, stalker much?  Second, likely a violation of your states consumer protection laws.  If that's what you need to feel good about leasing property, you are in the wrong business.  And what, exactly, are you googling them for?  What criteria are you using to evaluate the results in light of a decision to approve a rental application?  If I were to get you under oath at a deposition or on the stand, these are the kindest questions I would start with and get worse from there.  Likely nothing about this process will make you look good (assuming you can correctly identify which results really are your applicant).

Assume, for one moment, that somehow/someway your application process comes under the scrutiny of a highly motivated and adverse attorney (private suit or government agency).  You must rationally defend your entire application and review process to reach a legal and unbiased result: approved or not approved.

And....GO!

In Texas:

Federal regs have been updated to allow a borrower transfer to an asset to an LLC (as long as the borrowers are all members), without triggering the due on sale clause, so lender really doesn't get a vote. Use the phrase "for estate planning and asset protection" purposes. Just make sure you add the LLC and the original borrowers as additional insureds on the insurance policy.

Your issue is title policy may become void.  Talk to the original closing office to get an updated title commitment.  

You don't have to be an attorney to do these things for yourself or your company.  You cannot do them for others or represent your company in court (evictions excluded - anyone can represent anyone in an eviction in JP or CCL appeal).

See "Real Estate Securities" by Levine and Feigin for the issue "when is it a security under SEC?"

I don't practice Illinois law, but in Texas, a GP/LP, JV, and LLC can ALL be a security or not. There are lots of ways to split this particular hair. Some are compliant with SEC regs and some avoid. Some are not compliant.

Talk to a lawyer in your jurisdiction. 

There's no "typical" split.  Talk to syndicators in your area and your potential investors.  See what they are trying to accomplish.

Email is in my signature.

Drafting docs doesn't have to be locally sourced.  Just be aware of new laws going into effect January 1, 2022: https://capitol.texas.gov/tlod...

I can't speak for any lender and practice only in Texas, so YMMV.

The LLC issue is to prevent the borrower from claiming the transaction is a consumer loan. Consumer loans have A TON more restrictions and requirements, including licensing for lenders. Many states have relatively few restrictions and requirements on commercial loans. Loans to an LLC can ONLY be commercial loans.

You should start conversations with your long-term lender now to see how they handle the refi.  Conventional and HMLs have very different views.  Talk to more than one of each.

I'm located just north of Austin, in Georgetown and worked with clients located out of country.  Let me know if there's anything I can do to help.