All Forum Posts by: Rivers Plowden

@Lee Ripma Thanks for the reply. So, I need to refresh myself on the LLC stuff as far as pass through goes. I didn't know if you had a loan in the LLC, that they don't look at you personally. That's great to know.

Is a residential mortgage under an LLC handled the same way?

Other than for tax purposes, are there any other pass-through issues? 

** I know, I know... seek a lawyer. This isn't legal advice, etc. I'm just trying to figure out how you guys handle this. **

Long time since I've been on here due to a recent move and job change or sorts. 

To start off, we bought a house in 2010, lived in it for 3 years and moved. We have been renting it out successfully ever since. Most recently, we refinanced out of the VA loan that it was initially under in order to purchase our current residence. I'm covering expenses at this point and letting the tenants increase my equity. My initial plan was to just hold it and sell it in approximately 10 years to help pay for kid's college expenses. However, in the last couple of years I have replaced all the major systems and renovated the master bath and feel like now would be a good time to sell while all those pieces of the puzzle are new.

I would like to roll the profits into a small multifamily BRRRR strategy. I have a few questions as to the nuances of the financing:

How do you get around the debt/income ratios when your portfolio gets past the first few properties and you need to finance the next or if you need to go out and purchase something else on credit?

I would most likely put these properties under an LLC, but since it's a pass-through entity, it won't save me from the above. Is a commercial non-recourse loan an option? How hard is that to find?

I would imagine all the debt doesn't do your credit score wonders... 

Any insight into this would be greatly appreciated.

Because that first part, the $14,400(.15)-14,400 gives your a large negative and everything after that isn't enough to get you positive.  What exactly are you trying to accomplish here?  Give me some more details and I can help.  If you just want to make this number positive, then make it a double negative by putting the whole formula inside, ie =-(formula).

You need to buy something at the right price in order to offset the no money down approach. I actually did the same thing you're planning to do. Bought a house in New Bern while I was stationed at Cherry Point with a no down VA loan. Never really intended to rent it, but wasn't in a position to sell when we moved. It has been rented for almost 3 years now. While it doesn't cash flow, it covers the costs and we plan to hold it and sell in about 15 years. Letting the tenants build the equity for us as we go. It's basically our kid's college fund (part of it at least).

Have you thought about buying a multifamily property and living in one of the units while renting out the other?  Or find a single family that needs some rehab?  How handy are you?  It shouldn't be too hard to find something that can cash flow $100 in that area.  If I were you, I would seriously look at a multifamily property, but I don't know of your personal situation.

S/F,

Rivers Plowden

Yes, your best bet would be call around to your local banks (not nationwide banks).  Most of them have in-house products that they offer for this type of thing.  I have a local bank that is willing to fund an interest only loan for 9 months, with 20% down, to include the rehab costs. 

These are a good deal if you have the time to close on it. The rates are usually way better than you will find on a private/HML.

They do lend on ARV, but also require a down payment. They usually word their criteria as follows, "70% of ARV or 90% of cost (purchase price + renovation budget combined), the lesser of the two."

I have seen as high as 85% ARV, but it's all dependent on the lender and your credentials. Look under the "Marketplace" tab above and go to the hard money lenders section to see who lends in your area and then you can shop around.

They are more lenient as far as where the down payment comes from versus most banks.  I think they will usually allow a borrowed down payment whereas your typical bank doesn't like the down payment financed in any way.

Hope this helps.

@Kahntineta Ford  If by oversaturated you mean excess supply, then no, I do not believe so.  At least not yet.  There are a lot of apartments going up here and it could play into excess supply in the future, but for the moment demand seems good and time on the market in some areas is very good.

This goes back to the multiple strategy approach.  I think you can succeed in real estate in almost any market.  It all depends on your toolbox and what you are able to execute.  Become an expert on multiple strategies and all the nuances. 

@Jona Leu I'm saying if you have a CPA or attorney set up and file your LLC rather than doing it yourself, you will spend more money, but you will know that it was done right. It would be a bad day to set it up yourself and then down the road find yourself in court only to find out that your "business" isn't a "business" and you aren't protected.

It all depends on your individual situation as far as experience/education, financials, etc.  I would say keep reading and studying until you are very familiar with what each strategy entails.  Then, you will be able to make a decision on what fits your situation the best. 

Having multiple purchase and exit strategies is your best option.  Not all situations are going to fit one strategy the best.  Learn how to acquire a property using different finance vehicles and then learn how to have different options on the backside.

Purchase options can include conventional mortgage, private/hard money lender, seller financing, subject to, and lease options.

Exit strategies may include rehabbing and selling, wholesaling, wholetailing, lease option, seller finance, or holding for rent. 

Each option has its own implications. However, the options are endless and putting as many tools in your toolbox will be the best way you can go.  All of the books put out by BP are excellent and I would suggest reading all of them if you are serious.  The forums are another great source of information as there are countless others here doing just what you want to do.

Best of luck!

All great questions and I'm sure some will chime in. However, I would highly recommend sitting down with a local CPA or attorney.  They can give you the best advice for your state and specific situation.

In addition, if you do decide to go with the LLC, they can do it all and it is money well spent in the case that you need to actually use it in court.