All Forum Posts by: Matthew Saskin

Generally the way this would work is that title would be held in the name of, and the loan would be to, the LLC. In turn, you would personally guarantee the loan. Regardless of your desires, essentially any bank is going to require some form of personal guarantee from at least one of the LLC members in the case of a newer LLC (eg; one that doesn't have a track record, existing cash/cash flow, etc.)

 Handful of reasons which are all related.  First, we're in the process of formalizing our business (more-so than it has been) and as part of that, we've gone through entity setup in the states where we operate (North Carolina and New York) and as part of that, had a desire to move ownership of our properties over to the commercial entities, the right way (eg; a commercial loan, not just transferring ownership and crossing our fingers).  As a byproduct of that, we'll benefit from moving them to commercial loans and no longer having the various loans on our personal credit/credit report - a nice side effect as we're in the midst of moving our primary residence as well as it's a lot easier to deal with now that we have 6 mortgages gone from our credit report and are down to just our primary residence.  Third, although not really important, we're able in all cases to lower our interest rates by moving to commercial paper (from 4.25% to 4% for one group of properties, from 5.375% to 4.375% for another group).  Truthfully, we'd do this even if we were paying a slightly higher rate, but the decrease made it all the more palatable.

Where is the property and what are the unit details (eg; bed/bath, sqft, recently renovated)?  Borough and neighborhood?  I'm happy to give a stab at my analysis (based on buying and selling several 2-4 family properties in NYC).

 Nope, can have up to 10 loans.  Not too long ago I made a purchase of 5 duplexes on a single street that was a package sale.  Bank wrote it as 5 x residential loans (on top of my primary residence) - I recently consolidated/refinanced them to a single commercial loan.

 Make sure you're crystal clear on the DHCR regulations for destabilization of a previously rent stabilized unit.  The amount you can increase rent on vacancy is a function of both current rent as well as the length of time it has been since the last new lease was issued, plus of course getting the current tenants to vacate/not-renew.  I haven't looked at the numbers on the post in detail yet, but it's a fairly risky move and you need to be sure you understand and are funded for potential costs (time and real money) of getting those units converted.

Your question doesn't make a ton of sense, as it appears you're blending together concepts related to wholesaling, buying & flipping, and buying & holding for rental purposes.

So, to start, clarify a bit what your goals are; Are you looking to identify properties to wholesale?  To flip?  To hold & rent?

 Fair enough - my point was not about being negative, more to make sure you're covering all the bases.

Personally speaking, it's still a weak deal for me for two reasons. First, I don't invest in SFH. That decision aside however, if my conservative analysis of a deal doesn't look like it will result in $100/door/month, I pass. Maybe (almost certainly) I've passed on some great opportunities as a result of this, but that's just my own criteria.

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...and to answer a few specific questions, while it's entirely possible to work with a commercial lender to have this viewed as a portfolio, they're still going to require skin in the game from you, plus (typically) some proven track record of profitably managing a real estate investment business.  For all the deals I've done with commercial lenders, it's a combination of my down payment plus the track record (or potential) of the investment that's worked together to get things qualified.

Unless the seller carries a second mortgage, and your primary lender is OK with that (doubtful) I don't see a way to make this work without having the standard 20% give or take down.

Financing aside, you should consider whether this is actually a worthwhile deal or not.

Your Gross/NOI is off as you didn't account for vacancy, so given that (be conservative, use 10%) you're at an NOI of $28,500.00. Assuming you had cash for a down payment (20% with some of the commercial lenders I've used) you'd be looking at say, 4.25% for 20 years, so $1362/mo in principal & interest, we're now down to $12,156 in annual cash flow. With that many small properties I'd be personally putting at least $100/door/month aside for future repairs, now we're down to $2500 in annual cash flow.

I'd pass on this deal personally.