All Forum Posts by: Patrick Roberts

Residential multifamily or CRE multifamily?

Wholesaling via contract assignments on residential real estate is basically illegal in SC now and the state regulators are actively looking for this. I personally know of several RE agents who are reporting wholesalers to the REC/state out of spite. There are varying opinions on this, but I recommend extreme caution with arms-length assignments. 

My speculative opinion is that you're likely better off with insurance. The general legal advice I have received on this topic is that the corporate veil is very easily pierced in many states in circumstances such as these. That being said, I am not an attorney, so if you want an answer that is definitive to your situation, you'll have to get an opinion from a lawyer.

What I can say with certainty is that if you transfer title to an LLC, you risk the due on sale clause being used to call the loan. All VA loans have a provision to accelerate if there is a transfer of the property that is not an approved assumption or an unrestricted transfer. This doesnt mean the note holder will call the loan, but it means that they absolutely can if they elect to do so. Anecdotally, I'm seeing more and more instances of this provision being used in Subto and other similar investment-oriented transactions.

2-3 points and 12-13% were the two deals I saw. 6-9 month terms with points to extend. The borrower was also on the sketchier side of credit quality, so that probably had an impact. Pretty standard HML. Theyre based here in CHS.

 They effectively balance sheet these - I believe they have 506c debt fund. 

Theyre a legit group, but they do not offer the kind of 100% financing that you're thinking of. Some partners and I lend privately in SC in select deals, but we do not offer 100% financing, nor do we offer delayed payments. That's a recipe for disaster in my experience. 

My experience with Rehab has been the opposite of what youre asking for - they stay conservative on the LTVs and (until recently) only lent to experienced investors. They just rolled out a program this week for first time investors, but I dont know the specs on it. 

I dont know of anyone offering total financing with no payments. This wouldnt really make sense to any serious lender. It's all of the downside risk of a flip with none of the upside. It would make more sense for the lender to take the deal themselves and just hire a contractor to do the management/work than to take on all the risk for a capped return and limited control. If anything, I've seen the opposite - in riskier scenarios, lenders tend to escrow the payments out of the loan amount at funding, effectively reducing the LTV and juicing the yield.

With your setup, private lending will be a gold mine. You could easily use your personal brand to be a marketing juggernaut in the PML space. Stick with it. 

 Agree

Absolutely cannot do this. You will have to occupy the property as your primary residence, meaning you physically reside there for the majority of the year. The rule of thumb is that you need to do this for at least a year before converting the entire property to a rental. The actual guidelines dont mandate one full year, but in the scenario you're describing, it would need to be your primary residence for at least one year. 

Also, why FHA?

This is conventional? Yeah, you definitely need to get another quote. This would be reasonable for a DSCR with a short PPP and FICO below 700. If this is conventional, the lender fees are ridiculous.

This loan should be somewhere around 7.125 - 7.375 at worst with a decent FICO while going borrower-paid. I could see this quote being realistic if it was lender-paid and you werent having to pay the broker out of pocket. Total loan fees (not including broker commission) should be at or under $2,500; maybe $2,700 at worst. Even below 700 FICO, you should be at or under par at 7.5% on borrower-paid and under 75% LTV, not paying points.