All Forum Posts by: Ken Nyczaj

@James A. Thank you for your response. One of the assets that could be used as collateral would be a primary residence, but it doesn't have to be. Marketable securities, checking accounts, savings accounts could also be used as collateral to secure the LOC. I'm sure every business partner would have an issue putting their own house on the line.

Not having to put up any personal collateral on a LOC is great, we unfortunately weren't offered that.

The floating interest rate is unfortunate, but it is negotiable if financials are strong enough. All this being said, I see it as a huge advantage to close on deals faster with a LOC in a competitive market, IF us four business partners can agree on using other assets besides primary residences as collateral.

I'll keep you updated as we get our personal financials under review in the next two weeks.

Thanks

Try calling as many local lenders in your area as you can. There was an early Podcast episode where the guest called many different local lenders and finally found one within a Walmart. Like Bob said a portfolio lender is your best bet to finance a house in an LLC. In my area there are the big players- Wells Fargo, M and T, Bank of America, but I also found two local lenders that will loan to LLC’s. Maybe another option for your LLC is to use a LOC secure by real estate or investments. That’s what I’m debating right now.

Forgot to mention this will be a new LLC, no past credit history. It didn’t seem to be a problem for the banks as they will just dig into our personal financials. Anyone have experience in using these two financing methods for fix and flips? Trying to understand if I’m missing some advantages/ disadvantages.

Hello everyone,

Some of you may have seen my posts about a month ago looking to get into a Duplex in a Condo Association that had questionable financials. Decided to not go that route, and instead partner with a few friends and we are currently working on the Articles of Organization and Operating Agreement for the LLC. One partner is a lawyer which has helped significantly.

We are investing in Maryland , Baltimore to Annapolis Region. Will be house flipping properties at first, then eventually buy and holds.

We've vetted many banks in the area and are down to two local banks that have different philosophies on how we should do flips.

Bank 1:

Conventional financing- 20% down, interest only for 12 months with a fixed rate of 5 1/2%. Will fund 80% of home and 100% of improvements. Fund improvements on a draw schedule. For cosmetic repairs our local bank loan officer will inspect herself, which should keep costs down. Deals under $250k our lender only needs to go to committee after underwriting, which supposedly takes less time. We will only be borrowing less than this dollar amount.

Bank 2:

LOC secured by Real Estate, Investments or other type of liquid asset. Rate is prime + .5 to 1.5% depending on financial strength, floating interest rate, but that can be negotiated for a fixed rate if financials are strong enough. Interest only renewed annually.

I see advantages in the LOC to be able to close on houses faster, and be a "cash buyer". No underwriting necessary and no draw schedule with inspections after each rehab. Disadvantage is putting primary residence up as collateral, but we may have enough cash in checking accounts to use that instead. Also, having a floating interest rate isn't great if we sit on the house for some time.

Anyone have advice on which strategy to go? Any guidance is appreciated. Thank You.

Decided to not pursue the deal. Talked to one of the majority investors in the neighborhood and his answers conflicted with what the financials said.

Thanks to all those who offered advice. Saved me time and money.

Originally posted by @Russell Brazil:

Why would you want to be on it is the question? Thankless job. Attend a few meetings of a condo or hoa and you will likely change your mind.

Also, you are probably overestimating the school. I dont think anne arundel has a high school that cracks the top 25 in any of the ranking systems.

@Russell Brazil

To have more say in the operations, decisions and future visions of the community. The properties have potential to cash flow after accounting for every expense, and being in such a close proximity to where I live makes it that much more feasible.

I should have mentioned the school is in Queen Anne's County- Kent Island High School.

Hello all,

Fairly new to investing and bigger pockets, so right away maybe the answer is no.... you're not ready to be the president of an HOA. But, I figured it can't hurt to ask...

Here's the scenario, I'm an investor looking to invest in the Annapolis to Baltimore region of Maryland. I stumbled across a condo community of Duplexes less than a mile away with one of them being for sale. The condo communities financials aren't great, hear are the specifics: Income $21,600, Collections $5,000, Expenses $26,077 with some of those being Attorneys fees. Reserve's at $8,000. Legal fees have not been figured into the anticipated expenses for the upcoming year since the association has been able to recover legal fees and interest as noted above resulting in net positive income for the last two fiscal years. In all cases of delinquent dues, the court has ruled in the association's favor, so it is anticipated that any future legal fees will be recovered in the collections process. Two owners out of the 18 total properties are delinquent in dues and are setting up a payment plan. If you'd like a PDF of a more detailed explanation I can provide, it is not formal, just something the HOA manager sent to me.

Basing the community on a class A - D grading scale, it is a C+ duplex community/ houses , but it is not government housing, it is in a great school district, especially the high school, I'd have to argue top ten public in the state. C+ condo community but in a B+, possibly even A area. All units are two bed, one bath, single story, approx. 900 sq ft. Built starting in 1987, runs off county sewer and each duplex shares a well.

Many motivated sellers in this neighborhood and at the right price they will cash flow nicely. Plus, the current President is looking to step down for 2018 and is looking for a replacement. I see being President has its advantages to vote on what money should be saved for, and helping to keep it an investor friendly neighborhood. Since I live so close, and am highly motivated, and have the capital for 20% down payments (No FHA/VA accepted) I would be up for the job and would be ecstatic to help bring the community back in to great standards.

I have not been able to obtain the CC&R's, Bylaws, Rules and Regulations. After I make an offer I'll ask the seller to pay for a resale package to receive all updated information. In Maryland the contract has an HOA addendum that gives you a chance to review and back out if not acceptable. Review period is 5 days.

Honestly I just don't know what it entails to be on the board of directors and an HOA president.

Any guidance is appreciated. Thank you

@Beth H. @Sam Shueh @Russell Brazil

Thanks for the advice. Financials were sent over, but it was not a formal copy, just something that the HOA manager put together. The HOA has an income of $26,000 ($25,000 in expenses, net income around $1,000) per year with 20% owed in collections (around $5,000), two homeowners are delinquent on dues. In all cases of delinquent dues, the court has ruled in the association's favor, so it is anticipated that any future legal fees will be recovered in the collections process. There is $8,000 in reserves.

Few days away from putting my offer in if all checks out, offer will be .50 cents on the dollar, just waiting to hear back from one of the main investment holders in the neighborhood. Will review resale package and update the thread.

@Calvin Douglass Welcome. I'm new to Bigger Pockets as well and am looking to invest in the Annapolis to Baltimore region. Within a month of being a member I've had many questions answered. Ask anything on here, the community support is incredible.

@Beth H. @Steve Racicot @Andrew Hemminger @Sam Shueh @Jon Johnson @Ryan Scott Isacksen

Reaching out to everyone who gave a response on my post.

The lender and listing agent are saying that an offer must be made before I get additional info on the Condo. Such as: CC&R's, Rules and Regulations, Bylaws, financials, reserve study, history of special assessments and planned future special assessments.

Is this typical? If I do make an offer, and there is a discrepancy or something I don't like, I think I can get my earnest money deposit back and get out of the purchase...? To my knowledge, I have five to seven days to review.

Thank you