All Forum Posts by: Kiley N.

@Pat Jackson

Regarding the original post, there are as many answers to the question as there are strategies for investment.  The answer depends on what the investor plans to do next.  

Say the mortgage in this example is a 30 year conventional fixed rate mortgage at 4%.  

Is there a use for the cash that is of greater risk-adjusted benefit to the investor than a guaranteed 4% return?  If so, it may be advantageous to keep the mortgage debt and put the cash to work elsewhere.  

If not, then paying down the debt could be the best return that the investor has available at the moment.  

In 1997 (20 years ago), the 10-year treasury rate was 6.58%.  What if the rate is also 6.58% in 2037 (20 years from now)?  Quickly paying off the 10 years remaining on the 30 year mortgage at 4% may not be as simple of a decision.  

One thing about debt instruments:

Both a HELOC (when drawn) and a mortgage are loans secured by your property. What makes one advantageous over the other is the intended/proper use of the funds.

The saying goes that "time is money".  What should also be understood is that money is time.  Interest paid to the big bad banks is just a fee for the purchase of time.  It's all about how we use it.  

Great discussion!

@Jason Hodges

A loan to a business for the purpose of acquiring RE can be referred to as a commercial real estate loan. Having multiple members in an LLC is not uncommon.

To take a step back a bit, there are different types of institutions that specialize in different types of lending.  Perhaps that bank does not offer your specific type of loan.  There are also varying degrees of experience and acumen among individual lenders within the same institution.  Perhaps the lender you met is new and doesn't realize that their bank does offer your type of loan.  This is why it is often advantageous to keep searching (even if it's to try another branch or lender within the same bank you were at).  I imagine that @Jon Holdman had similar reasons for recommending the same.  Don't be discouraged by being turned down by any one lender. 

Remember, it is their job to lend money.  Approach them, respectfully, knowing you have an opportunity to share.  You get your loan, they make progress in their lending goals.  Win-win.  

When you find a lender who takes the time to listen to you, explains and provides you a plan with options, and then executes the plan you decide upon, keep them.  

@Warren Buffett (can I do that?) says he looks for three things when hiring an employee:  Someone who is ethical, smart, and energetic.  Those can be considered qualities of a good lender as well.  

Best of luck and let us know how it goes!

@Michael J. Curious to hear about your progress with this.  Did you have any luck finding a lender open to expats without PR?

@Bill Baldwin I would be interested in learning about the options for expats as well!  Would it be ok to PM you for some details?

@Jason Hodges I agree with @Jon Holdman - keep searching for other banks.

@Dave Van Horn Appreciate you taking the time to find these links.  Great discussions!  I have searched before but most mentions of Japan seem to be people referencing the 80s bubble.  Maybe my searching skills need some work.  Interesting to read about your business in notes!  I only have experience with origination.  Looking forward to finding more of your wisdom around the forums.  Thanks again!

@David Gotsill Thank you for reaching out.  I am very interested in learning more about the Japan RE market from people on the ground.  If there is a group or community forum for that I'd love to put out a Jikoshoukai to everyone.  Appreciate your honest advice and would love to run some ideas by you offline.  Will shoot you a message.  Yoroshiku!

@Naftali Tolibas Congrats to your Dad!  If only I'd been more RE-minded from a younger age... Let's definitely hook up when you're in town.  My brother lives up in Gilbert and I saw some interesting development when I was up there visiting.  Best of luck to you in AZ!  

@Lane Kawaoka Yo Lane!  Small world indeed!  

@Christian Drake All good points above.  When looking for a lender, approach the meeting with the mindset that you are looking for a partner.  Someone who understands your business/goals and will represent your interests to their approving authority.  

Every lending institution has good lenders and less good lenders.  Find a good one (or two), and hold on to them.  They may end up changing institutions over the course of their careers so their individual acumen is often more important than the business name on their card.  

A great lender at an institution with little resources will get you access to everything they have to offer.  

A bad lender at a great institution will only prevent you from enjoying the full use of their resources or worse:  Sell you things that hinder your progress.  

Hope you find a good one!

Hi @John M.,

There's quite a lot to unpack here and @Chris Mason is correct that no one can make a determination without all of the relevant details.  

With that said we can take a look at more of the thought process side of things rather than the particulars.  What kind of real estate are you looking to buy?  If you will be seeking residential financing vs commercial financing, then your strategy in terms of strengthening your business financials vs your personal side may help to guide your decision.  

From the commercial side, shutting down a profitable business to open a brand new one adds some uncertainty to the equation.  A new business will not have a history of financials to offer a lender confidence of repayment on the loan.  

Is there a way to keep your existing business running while opening the new one?  Could the new business be opened as a new division of the existing business?  Would you be willing to put up the equity in your properties as collateral for the new loan?  

With the limited information we have, it sounds like you have a track record of business profitability, assets that can support further indebtedness, and an openness to structuring your profile in an appropriate strategic manner.  Hopefully you are able to find a lender that will take the time to understand where you're coming from and look at your situation holistically.  Preferably one with a problem-solver mindset.  

Best of luck to you!

**Note:  I am not an attorney or a CPA and the above should not be misconstrued as legal or financial advice.  Please consult with your professional advisor(s).  

@Ryan Robinson:  There are separate credit scores for your business and your personal credit.  Guaranteeing  your commercial loan is essentially putting your personal credit up to strengthen the case for someone to lend to your business (which I assume is new).  This is considered an indirect liability and the act of guaranteeing does not affect your personal credit score.  

Regarding your second question, if we are looking exclusively at the effect on your credit scores, then the commercial loan will apply to the credit score of your business.  The residential loan will apply to your personal credit score.  Successfully taking these loans and repaying them will improve either score depending on which one you choose.  On the other hand, inability to repay will affect them negatively.    

Again, if we are only considering the affect on credit scores, and with all the caveats about speaking to the experts in your specific area:  If your business is new, it may be beneficial to go that route and establish a business credit profile for future business transactions.  This, however, does not address the differences in loan structure/rate/etc. that come with commercial vs. residential loans.  

Note:  I am not an attorney or a CPA, and the above opinion should not be misconstrued as legal or financial advice.

@Duc Ong:  Sounds great!  I'll shoot you a message.

Wow Zack, very inspiring!  Thanks for sharing!