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All Forum Posts by: Derrick S.

Derrick S. has started 12 posts and replied 55 times.

Post: Why would I ever become a HML?

Derrick S.Posted
  • Soldotna / Kenai, AK
  • Posts 57
  • Votes 10

I know that HML is a lose term, but I'd define it as loaning money for interest plus points once a deal has been verified. It seems like I could make a lot more as a professional JV, partnering in the profits 50/50 and having a say in how the property is handled to make sure profits are there. If the deal goes bad I didn't do my homework, but the money I put in is still owed me...

Maybe it's not one person that becomes a HML, it's the funds and groups, and in that case it makes a little more sense. But as an individual, is there a reason to pursue the HML model?

@Wayne Brooks Thank you, I feel the same were I in the seller's seat, but if they will let me buy this way it saves me a down-payment, a lot of fees, and time. 

@Account Closed I agree, it is probably just salesmanship. Just a way for the broker to get the seller to go for it and get the property off their table. 

Anyone else have input?

Post: Financing for New Properties in a Seperate Newly-Formed LLC

Derrick S.Posted
  • Soldotna / Kenai, AK
  • Posts 57
  • Votes 10
Originally posted by @Kerry Baird:

A different way...

Our CPA advised us to set up a C-Corp which is the "manager" for a Texas series LLC. The C-Corp has the funds and the credit report, and the longevity. Each cell in the LLC holds one property. The C-Corp "lends" money to each cell to buy a property. Each series books a loan from the C-Corp that it pays off. These are more paper transactions than actual loans. We file K-1s for each cell at tax time.

Talk with *your* CPA and see what they advise!

 I like this. Am I understanding correctly that the C-Corp has the credit history and borrowing power, and them further lends to the LLCs to buy? 

Post: Flipping: Systems and Scalability

Derrick S.Posted
  • Soldotna / Kenai, AK
  • Posts 57
  • Votes 10

I'm huge on systems. I love building them and tweaking them, and plan to be in your position 24 months from now, if not next year. Here's where I see simple solutions to scale up:

Great contractors - find them and make them love you. Give them parameters and preferences, grow in trust and make them as autonomous as possible. 

Deal network - whatever kind of deals you want, there are people who will see them first. Pay them, make them love you too, and be their go-to investor. Either help them out-grow you, or grow with you. Now deals come to you. 

Money network - report all successes in grand style to those who you may want to borrow from in the future. Build the reputation of Midas. 

Awesome broker - You'll lose whatever % you negotiate, but they can free up massive amounts of time, do staging if you want, and sell faster than you can (potentially) with their network. Just give them good houses at fair prices, fire-and-forget. 

All of this will cost you money, but I expect you will make much more in volume. If you have these elements then your business is now: weekly status reports from contractors + periodic inspections, daily review of deals from your network, and reporting success to networks. You go to a deal, check the numbers, and green-light it or don't. 

Added to these I would take on an assistant that wants to learn the business, and get them to view properties and run numbers, run errands, and generally make life easier on you. Maybe even do signings to close so you're not running all over and waiting on those. Later they graduate to wholesaling to you? 

I wrote all this as an exercise for myself, but I hope it's a high-view help to you. I plan to build my business up through relationships, because people are the key in every market. 

Post: Doing Wrap Mortgage

Derrick S.Posted
  • Soldotna / Kenai, AK
  • Posts 57
  • Votes 10

@Bill Gulley & @Brian Gibbons , you guys seem to know what you're talking about - could you weigh in on my weird question over here?

Post: Wrapping a FHA Mortgage

Derrick S.Posted
  • Soldotna / Kenai, AK
  • Posts 57
  • Votes 10

@Rick H.

You folks seem knowledgeable about Wraps, could you perhaps answer my odd question over here?

Post: Wrap Mortgage

Derrick S.Posted
  • Soldotna / Kenai, AK
  • Posts 57
  • Votes 10
Originally posted by @Jon Holdman:

A wrap can be for the same amount as the underlying mortgage. No need for it to be different.

If you're trying to do a subject to or wrap and you send that contract to the bank they're going to reject it. They won't agree to either approach.

What you're trying to do won't involve the lender at all in the purchase process. Your only involvement with them is to send them the money to bring the loan current. I've never done a deal like this, and I do believe there is significant risk to you. The lender is going to want to see the money and then they will decide if they will accept that money and cancel the foreclosure. I suspect that may take some time and they may say no. So, you would want to do that first and then only close on the house once they cancel the foreclosure. If they don't, you get your money back and the deal is over. If they do, then you can close on the subject to purchase.

The risk is that the seller reneges after the lender cancels the foreclosure. Your recourse is then limited to suing them to force the sale.

You might be able to structure the deal as a loan to the seller with a lien attached to the house. So, step 1 is to loan the seller the money and record a deed of trust for the loan. Now the seller brings the loan current. Now you buy the house from them, subject to the existing mortgage and you forgive your loan to them.

That does have tax consequences for them because forgiven debt is income and is taxable.

Ideally what you want is to do a single closing where you give some cash to the seller and some to the lender and the lender agrees to cancel the foreclosure. Trouble is that would be part of your purchase of the house and there's no way the lender is going to be OK with you buying it.

Perhaps someone who's actually done such a transaction will chime in. @Bill Gulley maybe?

 You seem really experienced, perhaps you might have an answer to my weird question over here on BP? 

Post: Wrap mortgages

Derrick S.Posted
  • Soldotna / Kenai, AK
  • Posts 57
  • Votes 10
Originally posted by @Anthony Aguillard:

Gm bro. Check out Lonestarlandlaw.com, they explain it pretty good. Good luck.

 That's a great site, and maybe with your experience you could answer my question over here

I'm not sure about the suggestion of the broker that is selling this property. 

I requested a Sub2 agreement with the seller (It's in probate, they're just trying to get out without losing money), and the broker said that a simultaneous closing won't work (because it's an FHA loan, I'm guessing?). She did suggest that we do a Wrap, and asked if I was interested in that. I'm thinking "same difference?"

The only benefit I can think of to doing the wrap is that the loan will season while we repair and sell the property, I think? 

Do you see a good reason for the Wrap? I am asking her today, but I also know that she is not MY broker, she is the seller's. So I thought I'd reach out to the wisdom of BP. 

Thank you in advance!

Post: Another Turn Key Post (sorry!) But..

Derrick S.Posted
  • Soldotna / Kenai, AK
  • Posts 57
  • Votes 10
Originally posted by @Ralph R.:

@Account Closed I have been buying real estate several years now. I don't have a lot but it takes time to build a portfolio in RE. From scratch. I dunno Wat you call how I'm doing it but it's turnkey SORT of. I set up a network of people in a city in Colorado. I had 1 rental and used a PM as I live in alaska. From that I used my loan person to expand to another city. Then the pm found me 2 more rentals in the first city. Last spring I started looking in yet another city in Colorado. I called realtors and PM's and found a duplex. It closes this Thursday. The only property I have bought off the MLS is the one the loan officer found. I buy rentals that have tennants already. There hasn't been any hitches yet but I'm cautious what and where I buy I don't use a turnkey company per say but I create my own network of pple. THAT said I have been looking at some regular turn key company's. It appears to Be a lot faster. I have picked up some equity at closing in the properties I have bought using my method. I don't see much equity left for the buyer at closing when buying from a turnkey company. Good luck. RR

 That sounds like a great system, and I never thought of networking with PMs to find properties. Great idea. I'm hoping to get out to Bethel again this year. We were there winter before last, and caught over 100 pike in 4 hours! Our group had never seen ice-fishing like that before. You're in a special place.