All Forum Posts by: John Pauler

Any MA wholesalers looking to connect with investors? 

Interested in multi-family, in MA. Have the capital and experience to close deals. Looking for a couple of deals right now.

Let me know if you are interested in connecting.

@Chris Roche - no clue where your $128k limit came from, and I have never heard of a lender requiring more money down if your income is too high. You actually should be more likely to receive a loan with little money down if you have a larger income, because your debt to income ratio can support a larger loan. 

@Willie Mandrell comes with the right advice....talk to a local lender, and ask them to walk you through the options they can provide. Ask them to give you your main constraints... 1) minimum down payment % by property type (will vary for condo, SF, 2F, etc) and 2) the max loan amount you can carry. Ask them to walk you through how income from rental units will be counted and impact your max loan amount. Ask them about the implications of using an FHA loan, with 3.5% down (comes with a penalty) which can be done on up to 4F units. Ask them how applying for the loan together vs separately will change your options for properties today and ability to get a second property later.

Talking to a local lender is the best way to understand your lending options. These guys hold the keys to the money, and will let you know all of your options (they are incentivized to help you close a deal). 

Good luck!

@Bryan Wells

Here are two options for tapping that equity in your primary residence...

1) HELOC (home equity line of credit) - recent discussions with lenders have given me the understanding that if you do this you A) must have lived in the home for at least 6 months, and B) must keep at least 15% equity in the home (can pull out the rest). A HELOC is nice because you get approved for the line of credit, but you only pay interest if you tap that line of credit, and only on the amount you tap, which is flexible up to your approval amount.

2) Refinancing your primary residence with a low DP. If it's a condo, you can do conventional financing with 5% down. If it's a multi-family, you'll likely have to have a little more equity in the property than 5% on a refi. 

I'm not a lender, just another guy trying to get started. Talk to a lender about these things and figure out the implications for your specific situation. 

Good luck!

@David Krulac, @Dave Foster, very good information here from both of you. Thanks for the help! (...again)

@Dave Foster, @David Krulac, thanks a lot for your help on the 1031! It has been very helpful, and encouraged me to move forward. 

A couple of additional questions have come up as I have thought through this. Would love to hear your thoughts or anyone else's who consider themselves 1031 experts or at least 1031-educated. Here goes...

1) the 1031 exchange requires you to re-invest all cash proceeds from your sale into the next property. Are there any rules about refinancing to pull some cash out at some point in the future? 

2) what are the rules about exchanging into a single member (just me) LLC? I am at the point where I should start protecting my assets with these entities, but the property I am selling is the first 2F I ever bought, and was purchased in my name, not in an LLC.

Any help with these are greatly appreciated! 

@David Krulac, good to know you can do it as two IRC 1031s. I will speak with my CPA about that option. Thank you! 

RE: the complexity required in conversion, even for a small apartment - you are 100% correct. In Somerville, MA, where I am converting, the rules are very strict. They require everything you mentioned, and even have some additional requirements...separate water, electric, and heating systems and meters, and a structural engineer or architects "statement of condition" for all the systems in the building...not cheap. $10k total costs would be nice. My conversion costs going to run North of $12k all-in. 

@Dave Foster, this makes sense. Planning to have a conversation with my CPA later this week, and I will go over everything with him then to confirm the strategy. 

I really appreciate your perspective on this. Thank you!

@Dave Foster, I appreciate your response. I saw your name come up a number of times within the 1031 exchange forums when I started my research, and you really seem to have mastery of the subject matter. 

For some reason I had it in my head that the conversion to condos would make me ineligible for 1031 exchange on their sale. My understanding was that the creation of the two condo units is an event seen by the IRS as being done for a "resale" purpose (not for hold investing purposes) which makes it ineligible for the 1031, and that the actual sale of the units was a second event from the perspective of the IRS, only occurring after the "resale" event which triggers my tax liability. Is that not the case? Maybe I am making too much of this? 

Thanks for your thoughts!

Here's a 1031 challenge I am currently going through now...

In March 2014, I purchased a small two family owner occ with a tenant renting the other unit.   

In August 2014, I moved out and have been using it as an investment property ever since. 

Now both of my tenants are interested in purchasing their units, so I am thinking it is a good time to turn it into condos (was physically condo-ready when I bought it, so it is just legal/paperwork), create some value, and re-invest in a larger property. 

I would like to use the 1031 exchange (this would be my first time doing so, total novice here) to avoid paying capital gains and depreciation recapture, but I cannot figure out if this would apply to my situation since I am technically selling the property as two separate transactions. 

Does anyone have experience doing something similar? 

Any advice? 

Thanks! 

John

I am looking for a licensed engineer or architect who can help by providing a statement of condition for a condo conversion project I am working on in Somerville. 

Any recommendations? 

Thanks! 

John