All Forum Posts by: Mike Garland

I work with several real estate attorneys in San Antonio.  Feel free to PM me as well.

Anna,

First off, kudos for thinking well ahead of most students your age.   My recommendation would be to vet anyone willing to "mentor" you.   Think there are a lot of shady folks out there.   Are you going to be taking real estate related classes at UTSA?  You may want to reach out to some of the professors and ask them for recommendations.

Another good place to start is interning at some of the larger commercial real estate brokerages here in town.  This will get you familiar with the town and see where the growth is happening and who the major players are.   I would also look up CREW  (commercial real estate women) in San Antonio.  Reach out to that organization for direction.  They would be happy to help.

Best of Luck!

Terms are about standard.  I would negotiate the 5 year balloon to 5 year adjustments maturing in 20 years.   This will save you renewal costs.  Also, from the lender standpoint, he/she will not have to spend time going through the renewal process in 5 years.  As a lender, this sucks.   Also, tell them that if it balloons in five years, it incentives you to shop for a better deal and why would they want that if you have been a good borrower?

I will say that one of the above posts said to negotiate on the guarantee.  My recommendation is to not do that, unless you are a A+++ borrower with tons of liquidity and a high net worth and banks are banging down your door to give you money.

When someone starts asking for a non recourse loan from me (no guarantee), the first thing that goes through my mind is "so you want me (the bank) to finance 75-80% of your deal, hence taking 75-80% of the risk and you, the borrower, are not even willing to personally guarantee the loan?  Do you not have any faith in the deal?   Plus loan committees do not like hearing the the borrower does not want to guarantee the loan...

I would also ask them to finance 80% of the cost or 75% of the value, whichever is less.   Hopefully, the cost will be less and you will end up putting down only 20% vs 25%.

The rate is very good btw.

Good luck.

So, typically what happens with your community bank type portfolio lender is that they really do not have a problem if you move your properties into an LLC. It actually makes sense. You are right to inform your lender as your loan documentation addresses ownership changes and the consequences of it.

So what those attorney fees are for are to draft up the loan modification paperwork which will reference the original deed of trust and will get recorded. Also your lender will want the personal guarantees of the members of the LLC (typically those with 20%+ ownership), so guarantee agreements will be drafted by the attorney as well. If your LLC has a member that was not on the original loan, there may be additional underwriting involved on the new guarantor.

Also, you will need to talk to your title company to see how the ownership change will affect the title policy.

Don't forget to get your property insurance updated as well - some insurance carriers will consider the LLC owned policy as commercial which may cost more.

There are many posts about financing property in your own name or in an LLC on Biggerpockets. Check out those posts. With an LLC, you will typically have to get bank financing through what is called a portfolio lender (they keep their loans - they don't sell them), such as a community bank. Terms are shorter with adjusting rates. Typically require more money down.

Sounds like you are a good candidate for house-hacking. Again, lots of info here on this method of getting into REI.

When looking at local banks, make sure to check their appetite for residential investment lending.  Some are still gun shy after 2008.

You can get some good deals with credit unions, but their level of sophistication is sub-par to a bank (typically).

If you move into commercial real estate investing - go to a bank first.

Feel free to reach out to me if you have any further questions.

At the end of the day, the numbers have to work out.   I find the best way to determine if a commercial deal is worth doing is to analyze it as a commercial banker would.   Look to see if it cash flows with a debt service coverage ratio of at least 1.25x or more based on realistic rental rates on an 80% loan to cost.

If it does, it probably is a good deal - assuming the property is in good shape.    Make sure when determining the "cost" you include closing costs and any improvement costs.

Thanks for the feedback.   It is disappointing to see some of these larger projects running into slowdowns...

The Promise Zone monies seem more geared towards owner-operations vs investor projects.  Would like to see more incentive for investors as they are the ones taking a large risk in the real properties of these areas.

No kidding Ian.  Thanks for your input.

Would like to get people familiar with the area's take on properties east of N New Braunfels Ave on the East side of San Antonio.  Right now it is a rough area.  With all the activity in Dignowity I was wondering if it is migrating east and at what pace?

I am asking because I have an opportunity to pick up a house in this area for what I think is a good price.