All Forum Posts by: Account Closed

Jason- the simplest approach here might work best. Establish a business plan with objectives and goals and formally sign the document with your kinfolk (notarized?). Some moderate approach between a handshake and a LLC with multiple members (triggering partnership filing requirements and K-1's for members) might work best. Good luck!

Research as much as you can on BP about business entities and various structures. You will find a wealth of information and possibly some additional direction. These inquiries are what brought me to the forum.

I can answer your question(s) based on my research—you should however seek additional help from a professional and tap into other resources here on BP (e.g. threads, articles, blog posts, podcasts, etc.).

Answers:
Traditional banks likely won't lend to an LLC without a personal guarantee and if they do, it would unlikely be a conventional product or eligible for delivery to Fannie Mae (read find a portfolio lender).

Selling your property for $1 to your LLC might trigger a due on sale clause in your mortgage agreement. You can key word search these various topics and probably get more information. Happy searching!

I am evaluating a prospective build of a custom home.

My wife and I purchased a tear-down for a rather deep discount to the market value. It was an REO and both the bank and listing agent understated the GLA by around 200 square feet. At prices of $200/sq. foot in my area for these small homes (new construction nears $300/sq. foot) I can't help but wonder how $40,000 of value appeared out of thin air ($200/foot X 200 feet). In addition to the extra square footage, it was purchased for a discount of about $10,000. In total we have a home that we could net $50,000tomorrow if we sold (excluding transaction costs).

Construction Costs (150/sq. foot): 3,000 sq. foot home- $450,000

Land costs: Historical- $300,000; Fair Value- $350,000

Total cost- ?????

Tearing the house down effectively eliminates my new found $50k in equity. Even though it’s only on paper, doesn’t tearing the house down represent an opportunity cost of not selling and finding another lot (in the amount of $50,000)?

How should I be thinking about my land costs given the scenario?

Martin- I did not mean to minimize the effectiveness of working with a realtor in a general sense. I'm sorry if it offended you as maybe your personal preference differs than mine. I was just relaying my experience in my search for land, and tried to frame my realtor experience in a personal context. In fact, I would advocate for networking with as many realtors as possible! But as the other poster pointed out, the usefulness of the MLS system in finding a building site was marginal in my target area.
To the OP- you really do have to hit the pavement as mentioned! If you can find a realtor to canvass the neighborhood, cold call, and develop direct mail campaigns, then by all means let them earn their commission! In my case it required a full year of effort and the possibility a realtor could sustain the level of effort for a couple points in commission on a lot was remote. In fact, many realtors in my area planned to earn their commission by setting up automatic email alerts and occasionally checking in. MLS alerts are not going to find you a building site in a competitive market.

How about a conventional loan? You can get any conforming loan product up to 80 percent loan to value-- you don't need a home equity loan to tap into paper equity on a house you own free and clear.

if it appreciates a lot in year one and you go below 80 LTV then go ahead an refinance to elim PMI

piggy back loans- otherwise known as and 80/10

Mitch - if the area you are prospecting is competitive for new construction and there is a lot of investment happening the MLS might not be a great resource. I didn't marry myself to a single realtor b/c the only assistance they could provide in my search was MLS listings (which incidentally i already had). You will find some brokerage firms don't push data to realtor.com albeit a small amount. Your best approach is to get familiar with the agents working in your target area and reach out to them letting them know your needs. The more agents you talk to the more likely they would be to contact you with a listing pre MLS. The agent who brings you a tear-down can earn their fee by helping you draft an offer- in short, don't marry yourself to any single agent. Work for yourself in the search and you don't have to worry about other peoples agendas. Knock on doors or write letters.

If you can own instead of rent I would say excellent. Unless you can find better terms on a rental skip this ambition.

I notice now 60 percent interest for rental financing. Any consorcio products for real-estate or other finance modalities besides big banks?