All Forum Posts by: Jeremy D.

All units are occupied, purchased one SFH cash to be rehabbed over the next 2-3 months, and have 2 multi-families under contract for March closings.

BP has been a huge eye-opener regarding RE investing. I wish I had come across this site 4 years ago!

I'm wondering if anyone has had to give a personal guarantee on their existing debt in order to obtain more financing?

I currently have (1) FHA mortgage, (3) Freddie conforming mortgages and (5) portfolio loans through a local bank. The (1) FHA and (3) Freddie mortgages are on properties in one LLC, and the (5) portfolio loans are on properties in a second LLC. All mortgages were originated in my name, and then the properties were quit claimed into the LLC. 3 free and clear properties are also in these LLC's.

This local bank has been great to work with, but on my latest loan request they are asking for an unlimited personal guarantee of all outstanding debt held with the bank. I'm wondering if anyone has experience with these? The guarantee states that I personally will be held liable if I fall behind on one mortgage, or if they have to foreclose. I personally signed for these mortgages anyway, so I am thinking it's not that big of a deal.

It's my understanding that with the personal guarantee, the properties are basically cross collateralized. If one mortgages goes under, the bank can go after the equity in the others. It basically eliminates the LLC protection as far as what the bank can go after.

My loan agent has said that this type of guarantee is very common on commercial loans, or in my situation where i have about 800k in mortgages on 1-4 unit properties.

Any thoughts on this?

If I decide to proceed with the line i'll keep what you said in mind- i did not think that the bank calling the line prematurely was a risk. But what you said makes sense.

I figured with the line I would also no longer need to keep 20-30k of cash reserves sitting around, since I would have at least that much in the unused line.

This LOC is residential through a local bank that i've been working with for a few years now. They hold a few of my long term mortgages in house, and service the rest which are held by Freddie.

Long term financing is available but I'm tempted by the line because it would give me immediate access to cash in case I need to jump on a deal asap. I just wasn't sure if I was thinking of all of the risks associated with it.

Can anyone help analyze this refi scenario?

I am looking at refinancing 2 SFH properties which currently have 15 year amort, 5 year balloon, 6.625% interest, with just over 2 years left on the balloons. I have 10 properties in total, and these are the two which have the least favorable financing terms and also the lowest principal balances as $39k and $6k. Regardless of whether or not I refinance I am on track to have these mortgages paid off by June 2014, shortly before the balloons come due.

Now, I asked my local lender about refinancing these into an LOC since I am on track to pay them off in about 2 years anyway. My thought is that with an LOC I would have additional borrowing capacity to jump on cash deals if needed, as well as float some of my current renovation projects between construction loan draws.

They offered me a $140k interest only LOC, 2 year term, 5.75% interest. Out of the LOC $45k would pay off the 2 existing mortgages, $2.6k would be used for LOC closing costs, leaving me with $92.4k available on the LOC. They also asked that two of my free and clear properties be used as collateral on the LOC- making a total of 4 properties as collateral, roughly coming to a 50% LTV against the total LOC available.

Any thoughts on this financing scenario? Over the next two years I plan on using existing cash flows from my current portfolio to 1) continue the aggressive debt paydown on these two balloons and 2) purchase an additional 6 SFH or fewer multi-families totaling about $150,000 in total acquisition costs.

The options I see are:

1) current situation- continue paying off the two 6.625% mortgages over the next 28 months. total estimated interest = $4.7k
2) LOC refi- $2.6k in closing costs, plus $2.9k interest over the 24 month life of the LOC equals total cost of borrowing = $5.5k

So basically for the LOC i'm paying $800 in additional costs over the two year period to gain access to the remainder of the LOC ($92k) at 5.75% interest to be used to jump on cash deals, etc. if needed.

It seems like a decent deal- does anyone have any comments, or am i missing anything?!

Thanks!
Jeremy

I'm not sure on your question but I'm curious what you are doing for tax filings with your LLC and foreign investor? I have a MI LLC with a foreign investor as well...we formed it about 6 months ago and just recently purchased one property with a 60% LTV loan from a private investor. It's my understanding that we will need to file a partnership return and he'll also need to file a 1040-NR that will require quarterly filings on his RE earnings since he is a non-resident alien filer. This is going to be about $2k a year in professional fees from my understanding. What are you guys doing?

It's an LLC with two members. Thanks for the feedback, I'm just going to carry back one year and carry the rest forward. Ideally i would have liked to assign them to a non owner, but like you mentioend that is not possible. Thanks!

Does anyone know if form 3468 historic rehabilitation tax credits are assignable? I have a large credit this year but not enough of a federal liability to use the entire credit. So i would like to assign the credit to a friend if possible. Thanks!

It appears that HML's charge about 15-20% APR on lending. Is this a fair statement? What type of risk does a HML take on- do they record a mortgage?

I'm curious how one becomes a HML? Is there a common site where they advertise or do people recommend Craigslist, etc?

From Switzerland here

Thanks for the feedback! Typical acquisition cost is $85k which gives me $1550/mo in rent from responsible renters. I put 20-25% down and finance the rest (so a mortgage of $65k or so) at a 5 yr ARM, 5.75%, 30 yr amort. My first properties were 30 year fixed. I'd say of my total debt- 40% of my property mortgages are 30 yr fixed, 40% are 5 yr 5.75% ARM adjustable with a reasonable cap on a 30 yr amortization, the remaining 20% i have on short term private loans with 6-7% interest rates. These short term loans are on my cash cows- $40k purchase price with approx $1300/mo rent, but "less qualified" tenants.

Your comments make me think that I am paying too much for debt. I have 4 conforming loans, the remaining ones are non-conforming and the bank I use gives me the 5 yr ARMs for these.

Have you come across banks willing to do non-conforming fixed rate mortgages? I have yet to shop around but probably should soon. I've been hesitant thus far because of a strong relationship I've built with my lender- a small community bank.