All Forum Posts by: Kevin Amolsch

No. With hard money you will be signing loan docs and the loan will appear on the settlement statement. That is essential since many underwriters will verify that the money they are paying off was actually used to purchase the home. You can right your offer for cash if you want but be sure add a provision that says you can change to financing if you choose. That way you will have some options when it comes time to close. It could read as simple as “Buyer reserves the right to change to financing as long as it does not change the seller’s net proceeds”

A good hard money lender can be ready in a week which is probably faster than the seller and the title company will be ready. That is especially true if you are buying REOs or HUDs. I recorded a video and wrote a report you can have for free on how this works if you want it. It is on our website.

Right but at least that way it is arms length and legal :-)

Great questions Jeff but the answer is absolutely not. You cannot buy a property and sell it to yourself to get cash out. Clouding it with different entities is just misleading which you do not want to do. It would be a very difficult conversation to have when you are at closing by yourself signing the deed and the loan docs. I just would not do it. The bottom line is that paying cash upfront could be a big mistake.

The C-Corporation brings up a good point though. It is possible and a great strategy once you have a lot of home to use a C-Corp because as you said it does not show on your personal tax returns. The draws you take from the company will but nothing else. Also loans to C-Corps are commercial loans even if they are on residential property so they do not show up on your credit report (although you will personally guarantee them). Since the corporation owns the homes (not your personally) it is ok in my opinion the say you don’t own them on loan applications. You would simply state the equity in the corporation itself.

This is a pretty advanced way to do it so I apologize in advance to anyone I confused ?

I think it is important to clarify what Monica is doing because it sounds a little different than your plan Jeff. Monica is using a loan to buy and rehab the house and refinancing the loan. That makes the refinance a rate and term refinance and not a cash-out refinance. Cash-out refinance (paying cash and trying to get it back with a refinance) is going to be very difficult or impossible. They are classified as riskier loans and have tougher guidelines. One being you will need to season the title for 6 to 12 month OR you will only be able to get 70-75% of your initial investment back. With a rate and term refinance there is no title seasoning requirements as Monica has mentioned. I would be very careful and talk to the end lender before you buy so you are taking the correct steps to be successful.

I cannot recomend an entity structure for you but what I can say is the LLC is the most common that I see.

I 100% agree with what has been said. As a hard money lender I would not want to see a junior lien. Another idea is to form a company and detail this in the Operating Agreement. If you qualify with your lender already they should be ok letting you take title in the company and having you personal guarantee the note. That way everyone is protected and the HML is happy.

I probably should also say that it might be a good idea to run this by an attorney :-)

I bought my first house when I was 21 and owned rentals and was doing flips when I was 23. If age is stopping you it is because you are letting it.

Hard money lenders do loan 100% but it wont be the national ones. Too risky. You need local hard money lenders that know the area and are not afraid of taking a house back. We loan 100% in CO because we understand the business and have been very successful with houses we have had to take back. To clarify, if you are using my money to rehab but you exit strategy is to refinance and keep the house I want to be sure you qualify for the refinance. If you are going to flip I am most concerned with a quality deal, experience or that you are working with someone with experience and you have enough reserves to hand problems. I don’t care too much about credit or income. I think other quality hard money lenders are similar.

If the hard money lender does want down payment don’t be greedy and find a partner to provide the down payment. If you do it right you will only share profit on one or two deals and you will be off and running on your own.

I think it is great you are doing this young and have no doubt want you get past the mindset that it is holding you back you will have a lot of success.

Banks can do cash out refinances just like Fannie and Freddie. With no title seasoning you are going to get a percent of your costs. It will most likely be 60% to 70% of your costs. If you are trying to appraised value to get all of your money back you will need to season it, even with small banks. The FDIC has really come down on banks and this is one of the areas the are trying to be careful with. I am not sure about credit unions since the FDIC has no control over them.

With all that said if might not make since to pay cash. If you need to have 30% of your own money in the deal anyway you might as well use the bank to finance the purchase. It is a less risky appearing loan so it is easier to get and normally will have a better rate. Cash out refinances are risky loans so they are hard to get and carry more fees and a higher rate.

Another strategy which has been mentioned is to use hard money or private money to buy the property and than refinance that loan. This way it is a rate and term refinance and not a cash out refinance so it is much easier to get in without tying up you own cash.

If you are looking at this from an investment perspective it HAS to be about the numbers. You are worried that you might sell the house for a big payday and would have wasted the closing costs on a refinance. Good point but what do the numbers say? How much will the costs actually be and what would you do with the money? If you had the money free could you buy another property or invest in something else that would do better than the money you lost on the closing costs over two years? Also, it is possible to get no closing cost loans if you are willing to pay a little more in interest.

One final thought is I would also view getting a quality loan now as an insurance policy. If you decide to keep the home you already have great financing in place so there is no need to worry about what interest rates have done over the last two years.

Sounds like you are in a good position and needing to make decisions like this is a very positive thing. Good luck with everything.

When did you purchase them? If it was recently you might be best to wait but if you have had them a while you should be able to refinance using conventional loans. The LLC thing is not a deal killer but a land trust might be. DO NOT title it in a land trust until you have your final loan in place. Many lenders, including banks, will not loan on a house that is or has been in a land trust. Trusts are very cloudy so there is a lot of fraud around them so lenders hate them. From a financing view you are always best to leave everything in your personal name until your final loan is in place. At that time you can title the property into one of your entities for asset protection.