All Forum Posts by: Sean H.

All of the units I have (17) have been under $30k. Great cash flow going through section 8. I sort of hit a wall with using my own cash to buy them though.

@Account Closed While I feel like the indemnity agreement is a good idea (and I will definitely be speaking with my personal attorney to make sure that is included in the company's bylaws), I think Adam is correct in that I really want to limit my exposure to the bank. I mean, the assumption is that we are getting the loan to grow the company and I stand to benefit from that growth so to the extent that I can benefit, I should be at risk. Unfortunately it does not seem to be that way.

For right now, it sounds like my best course of action is to review the loan documents to see if they are pro-rata or joint and several. Assuming the worst case, that I would be on the hook for the full amount, what are my options? @David T. suggested restructuring the debt, what would this look like? @Bill Gulley I do not think our company is large enough or we would have enough clout to make those demands. We actually just switched to this bank because our old lender was maxed out.

I am currently a 33% owner in a S-Corp that has loans on several properties. My partners and I have agreed to a stock issuance to allow an additional partner to join the company that will dilute me personally to about 17-18%.

The banks loan covenants state that any person with a greater than 20% ownership interest in the company will have to sign a personal guarantee, which as a 33% owner, I did. Now, being diluted down, how difficult will it be to have that personal guarantee removed? Has anyone gone through a similar situation?

@Antonio Bodley I use RocketLawyer with no issues. Why do you think it is a scam?

@Dion DePaoli Hopefully my explanation lets you see a bit better what I was talking about.

@Bill Gulley The way I had envisioned it was I would buy, rehab, and rent out a property. I would then sell it turnkey with my company providing the management. I would sell it with a low down payment, but double the price and make a covenant that my company would have to be the property manager. I would hold the paper for a year, then sell at a discount and realize the gain. A typical deal might look like this:

I am all in and the property is worth $50k. I sell to an investor for $100k, the terms of the sale are 3% down, the balance payable over 30 years. I would be the property manager and retain mortgage reserves from the rent, allowing me to offer a guarantee to the note investor. After a year, the note balance would be $93,767. I would discount it 20% and sell it to an investor for about $75k, leaving me with a gain of about $25k, along with the recurring property management income.

This is not an actual note deal or anything I had considered seriously. I had been looking at the buy here, pay here car dealership model and I was wondering if that model had been applied to REI, specifically with turnkey properties. Instead of taking advantage of the lower end of the population like the BHPH model does, it would help them eventually own income producing assets, I would earn a nice profit, and the note investor would make a nice return.

Obviously, its quite flawed I won't pursue it, but I do appreciate the reality check. :)

@Bill Gulley @Duncan Taylor I appreciate your feedback. At what % of UPB does this become attractive, if at all? Would any amount of seasoning, say performance for one year, have any affect at all on your decision to purchase?

@Duncan Taylor I did mention it in the original post ("The note would be for 30 yrs, performing and guaranteed at a 20% discount."), but it wasn't as pronounced as it needed to be given the importance to the decision. My apologies.

There would be no other collateral. It would be baked into the note that I would offer a loan guarantee as long as I was managing the property. The owner of the property would be required to use my property management services until he owned the property free and clear. Hence, I would manage the property for the full 30 year term and be able to offer a guarantee for loan payments.

Thanks for the followup questions.

@Bill Gulley

@Duncan Taylor Does the idea of guaranteed payments entice you at 80% of UPB? What % of UPB would? @Account Closed

I am a bit curious if there are any paper investors out there who would buy a note that is secured by a property roughly at 50-60% of the note's value (ex: note for $100k, property value at $50k). The note would be for 30 yrs, performing and guaranteed at a 20% discount.

How long would you want to see it perform before you were interested?