All Forum Posts by: Peter Kottwitz

Hi Jenn!

I'll throw another recommendation in for Land Title Guaranty as well as Stewart Title, both are terrific! If your looking at purchasing in South Sioux Falls (Lincoln County), and want title insurance, First Dakota Title I believe is the only game in town.

As far as the seasoning, I don't think you would have a problem refinancing at any time after the repairs have been completed, so long as the institution offers portfolio loans on those types of property's. 80% of appraised value is pretty typical when getting cash out.

Good luck!

@Christopher B., the rates I have been seeing in this area for cash out on 1-4 family investment properties is, in my opinion really aggressive. Around 4.25% - 4.5% for 75% LTV with a 10 year fixed term, payments amortizing over 25 years. I would also be curious to see what others are getting. Is anyone financing secondary market?

Hi Michael, 

Welcome to Real Estate Investing Mecca here at BP!

I think what you have listed is a good comprehensive list of the traditional ways of financing a purchase like this. If it were me, I would look mostly into option 1 and 3. Option 1 will give you the flexibility of a low monthly payment as well as significantly less fee's than option 3 in respect to getting the initial money. Option 3 would be more expensive to obtain, but at a significantly lower interest rate than 1. **Here comes my disclaimer**, I'm not a CPA, but I do believe if you borrow the money against your primary residence, that money would be tax deductible whether it was a HELOC or a cash out.

Short of putting up real estate as collateral, and depending on your retirement account balances, there are ways to hold retirement money in a self directed IRA that you may be able to use for the financing. I don't have any particular company recommendations, but Google should come up with a number of options.

Best,

Hi Alex, welcome to the Midwest!

Typically lenders will required a 25% down payment on any non-owner occupied property, however you may find some willing to only take 20% down in a strong market like Minneapolis.

One thing I didn't didn't see you mention your post, do you plan to live in part of the multifamily home? If so, you may be able to get away with a 3-5% down payment since Duplex's, Tri-plex's and 4-plex's are typically eligible for FHA financing as long as they're all on the same lot/parcel.

If you're not planning to live in any part of the property, you may be able to convince the seller to do a CFD, or at least carry back some of the financing. So in your example, the seller would get $187,500 at closing, and would accept payments for the remainder over a certain time frame. This isn't all that uncommon now-days, you should be able to find sellers willing to do this pretty easily.

Best,

@Ryan Wede I'm not a tax pro, but no, you would not have to pay MN State Tax on everything you made, just everything you made in the state of Minnesota. Your SD wages would be free of state tax.

@Joe Splitrock, I only have experience with Pipestone County, I know there the tax rate is a little less than 0.90% of assessed value. I found this calculator online to try and figure out what the taxes are by each individual county.

I assume its outputs are for non-owner occupied, since the primary residence tax exemption is subtracted from the advertised mill rate. I don't know if its different as a resident of another state entirely.

http://www.tax-rates.org/minnesota/property-tax

Hi Ryan, what kind of differences are you looking for specifically?

I think your main difference is going to be that Minnesota has a state income tax which South Dakota does not. You would have to look at your exact tax bracket to figure out where you stand, but depending on income, its between 5% and 10%. Where are you planning on buying in Minnesota? On average, property taxes there are quite a bit cheaper than they are here in Sioux Falls. It would probably end up being a wash overall.

Hi Beth, great to hear from a fellow SouthDakotan!

You'll find tons of great information from extremely smart people here on BP.

Are you looking for flipping opportunities or more buy and hold?

I would agree with @Josh Anderson, the SBA 504 program only requires 10-20% down (depending on how long the business has been around, and if they consider storage units as "Special Purpose" ( I don't believe they do)). While the SBA has pretty lax requirements, you would still need to find a lender willing to go to those terms. You may have better luck asking for a 20% or so carry-back from the sellers, that's not uncommon or unreasonable in the commercial world. 

A lot of lenders like that idea because it gives the former owners some incentive to not "burn the business" when it changes hands. if they have $100,000 on the line, they are going to do everything they can to make sure it is successful for you.

Something else to consider, (I'm not a CPA and don't claim to be) :)

If you rent out your current primary residence and decide to sell a few years down the road, the profits become taxable at whatever the capital gains rate is, whereas if you sell today, the gains would be tax exempt.

If I were in your shoes, I would refinance the entire mortgage and pull cash out like you said, Vs. getting a HELOC as the rate will be much better.

Hi All,

I'm a commercial lender in Sioux Falls, but I grew up in Rapid City. I couldn't agree more with the inflated prices in that market. I've heard that a lot of people from California have been buying up the real-estate due to the low tax in South Dakota and really inflating prices. Investors in nearby towns such as Summerset, Blackhawk, and Piedmont have all but been priced out of the area.

That said, I think there's some good deals, the rental market is incredibly strong. They do play some political games with Ellsworth AFB, but closing it would force them to relocate all the B1's down to Texas, and I just don't think they are willing to put all their eggs in one basket.

If you're looking to pick something up with solid cash flow, have you looked just on either side of Haines Ave? You're going to be renting to a lower income demographic, but there are always people looking to rent in that neighborhood,  I know a lot of people have had good luck in the Valley as well, such as the Twilight and E 53rd area. the houses are relatively modern, and go for pretty fair prices.

@Mark Gruetzmacher, a lot of financial institutions will go 25 years, maybe even 30 on single family, up to 4-plex as long as the structure is in good shape. That may help your numbers, if you're having trouble making a 20 year work.