All Forum Posts by: Adam Petterson

@Andrew Galeano 

As long as your debt to income ratio is able to qualify you should be able to purchase investment properties and then buy a primary residence with an FHA loan. Just remember that FHA has MIP that stays for the life of the loan. I would find a lender who is good with investment properties in your area and consult them as well before buying any properties. Let them know your long term plan

@Kevin Hassold @Allen Chaney

Yes, after 5 years the loan will "balloon" and technically the loan can be called due. As long as you are paying on time and are keeping all the loan covenants your bank will usually charge you a small fee and will renew your loan for another 5 years at the new fixed rate.

@Kevin Hassold 

I would consult an attorney or accountant in order to figure out the tax/legal advantages with owning property in a LLC vs personal name. However, I can help you with the funding part.

The main reason people buy property in their personal name is to qualify for conventional financing. This financing offers 30 year fixed interest rates, and if you plan to live in the property you will need as little as 3.5% down (15-25% down for investment properties)

Financing a property with a bank is different when the property is in an LLC. Banks will tend to hold on to these loans and each bank has different requirements for qualification. A standard commercial loan will require 20-25% down and will have a 5 year fixed rate on a 20 year amortization. I would recommend calling local banks and credit unions as they will be more lenient than the big banks like Wells Fargo. Qualification for a commercial loan will be a little different, but with smaller commercial deals you will still usually see a personal guarantee from the owners of the LLC and the bank will still be relying on your credit, income, assets, etc.

@Cody Z. Local banks can be friendly with investors that are coming in and improving the cities buildings, neighborhoods, etc. However, @Dan Mackin is correct, some banks will not lend to out of state investors. Some credit unions may even have restrictions on who can become a member and therefore receive a loan

@Kennedy Wambui When you say full investment do you mean 100% financing? And what are you trying to accomplish? Is your goal to flip the property or to buy and hold?

@Matthew Ladner correct. Contract for deed can be appealing as you can negotiate the amount of money down, the interest rate, etc. It also gives you a great opportunity to get the rent and expenses on a tax return so a bank is able to effectively value your property. If you are able to increase the rents or decrease your expenses the value of your property will increase

Matthew Ladner I would recommend looking at local banks and credit unions in your area. Call any bank or CU that you have seen locally and ask to talk with a commercial lender or banker. Each bank will operate differently, but most will want multiple years of tax returns and a personal financial statement. Typical structure for a commercial loan is 25-30% down with a 5 year term on a 20 year amortization. A contract for deed may be another option for you to look at told it is tough to secure financing with a bank. If you can purchase on a contract you can season the property for a few years and then obtaining financing and pay off the contact. Best of luck

Kennedy Wambui I would look into conventional financing. With 4 units or less you are able to secure a 30 yr fixed rate if you own the property in your personal name. Your down payment % will depend upon how you plan to use the property. If it is going to be your residence you are able to get in with as little as 3.5% down however if it is an investment you are usually required to put down 15-25%. If you plan on taking title in a business name or llc you will be unable to get conventional financing. You should look into commercial loans. Usually the rate is fixed anywhere from 5-10 years and is amortized over 15-25 years. Typical structure is a 5 year fixed rate on a 20 year amortization. Hope this helps

@Josh Brosius

Without seeing the numbers its tough to say if the strategy will be able to cash flow. If you don't want to use a partner and want to complete the transaction by yourself, you should look into a hard money loan. many HML's will lend 100% of the purchase and rehab costs if that is less than 70% of the ARV (after repair value).

The two big things to remember when getting involved with Hard Money is to make sure you are qualified to refinance out of the HML loan (some hard money lenders will require a pre approval) and that Hard Money lenders will charge you huge fees including:

-Origination fees of up to 5%

-12-15% annual interest

-Appraisal and underwriting fees

It seems like your numbers are a little tight to use hard money for this opportunity, but many investors are using hard money to buy homes with no money down.

I also wouldn't recommend buying a house that needs a new roof, siding, etc for your first rehab property. These items can be very expensive and don't always lead to a higher resale or appraisal value for the property.

Hope this helps

@Jeremy Coleman If you keep the property in your business name you are ineligible to qualify for a 30 yr fixed product. Many people buy using hard money with an llc and then will refinance with a 30 year loan by quit claiming the property into their personal name.

You are able to keep the property in your business name and refinance into a commercial loan if you have enough equity. Many banks or lenders that keep the loans on their books will require a seasoning period if you "forced" equity on a quick rehab and refinance.

Hope this helps

@Fyzl Atmar

Thanks for the response!

@Harjeet Bhatti

Im not sure why I haven't received any disclosures, and they haven't returned my calls

@Sean Cassidy

Thats what I fear in the future. I need a lender that wants to get my deals done quickly

@Brian Garrett

I am currently looking into other lenders and will be reaching out to them this week. Thanks for the response!