All Forum Posts by: Mike Neubauer

The banks probably do not mind when someone is added to title after closing because they are added via quit claim deed, not warranty deed. And a quit claim really has no standing if they had to foreclose on you.

Simply doing a quit claim deed after close to the LLC should be fine. As far as the due on sale clause, a bank won't look twice at it as long as he lets the bank know it is an investment property. Transferring a property to an LLC is common practice now a days and doesn't effect their rights given in the mortgage at all. I would just make sure both of you are on the LLC prior to close and prior to transfer. If not, the continuation of obligation won't meet requirements and May effect options for refinancing or obtaining other credit in the future. When we use someone else's credit for a property (they take out the mortgage) we simply use them as a straw buyer, close it in their personal name, and then quit claim to LLC. We pay a flat fee for someone doing this. Straw buyers are a legal practice as long as it is disclosed with a conventional loan. FHA won't allow it because FHA is for owner occupants and there really isn't a reason for an OO to need a straw buyer. There are of course other, more complex ways to do it but just make sure all the JV and operating agreements are spelled out and signed/notarized prior to entering into a contract.

You can use an FHA in the situation you described, they will just want an affidavit explaining why you have investment properties and no primary property. You will also have to sign documentation that you plan to live in the new house for a year minimum. If you have the credit, conventional may be a better option with some PMI. Conventional lenders are becoming more lenient with that now. As far as qualifying income wise, the bank will not count your new income until you have received payments for 12 consecutive months, and then they will only count 75% of it as income. I'm a mortgage originator so this up to date as of today per Fannie Mae and FHA guidelines.

You can use an FHA in the situation you described, they will just want an affidavit explaining why you have investment properties and no primary property. You will also have to sign documentation that you plan to live in the new house for a year minimum. If you have the credit, conventional may be a better option with some PMI. Conventional lenders are becoming more lenient with that now. As far as qualifying income wise, the bank will not count your new income until you have received payments for 12 consecutive months, and then they will only count 75% of it as income.

Hi Nate, I'm from Beecher. Feel free to contact me if you have any questions come up. We do mostly flips, moving towards some more long term stuff now.

I know many people say to find the deal and the money will come, but you still have to have a gameplan ready before you find a deal. For investment properties, at least line up some potential partners or hard money lenders before you find a deal. If you are looking for a property to live in, which I'm guessing you are because you mentioned first time home buyer incentives, you definitely need to be preapproved first. A good realtor won't even show you houses if you aren't, and most sellers will require a preapproval letter to take your offer seriously.

Curious why no one suggested a "Lonnie Deal" on it when the park said no rentals.

Conventional financing will use there matrix for front end DTI. Plan on around 30%, but they will go higher if you have little to no back end debt (ie credit card payments, auto payments, student loans). They will allow you to finance properties based on your income up to that front end ratio. Remember this includes your primary home residence as well. So for example, if you make $20,000 gross per month, they will allow you to have around $6,000 in PITI payments among any real estate you own. In the price range you are looking, that'll be around 3-4 houses. They will also require 80% LTV max, some will be 75%. Your received income from rentals will not be counted towards your gross monthly income until you show at least 12 months of on time payments from your renters. After 12 months, they will let you count 75% of that as income. For example, you have a house that rents for $2000 for 1 year, you can now add $1500 to your monthly gross. That would bring you to $23,500 monthly gross income using our previous example. But because you can only have a 30% DTI, that extra $1500 only qualifies you for $450 in additional mortgage payments. Hope that helps. I am a licensed mortgage broker in Illinois and Indiana.

And, if set up as an S-corp, you can take a reasonable salary and only pay the SE tax on that amount with the rest passing through... correct?

You have them right the checks to the LLC and keep all finances directly through the company. This gives you the asset protection of an LLC. Otherwise it is pointless. Your LLC operating agreement should state that the LLC has the right hold property in any nominee's name (business or personal). That is what protects an attorney from saying you co-mingled personal and business by having a mortgage in your personal name.