All Forum Posts by: Summer Shelton

@Summer Shelton

Unless you are using commercial financing, you cannot buy a property through a Fannie Mae lender in the name of an LLC. Most mortgage brokers / companies sell their loans to Fannie Mae who then packages them up as securities. Portfolio lenders (who hold their own loans) probably have more flexibility there... but for the vast majority of 'typical' home loans, you will need to buy the property in your own name, and then deed them to the LLC after the fact. Commercial loans can be in the name of an LLC from the get go... but will usually require personal guarantees by the borrower themselves. There is constant discussion of how deeding the property to the LLC can sometimes trigger clauses that will have the lender demand full payment of the loan, but I see few that say that happened to them. I would think that as long as the LLC is owned by the same person / people on the note, you will be fine.

All the best!

Randy

Quote from @Summer Shelton:

I am on the hunt for my first real estate investment. Would you say it's necessary to create an LLC to purchase the property?

located in Missouri,  St.Louis area

Hey Summer,

Great time and market to be investing, are you looking at more of a BRRR strategy or buy and hold? My clients up in STL are mainly focusing on BRRR as there are ALOT of opportunities.

Generally speaking, it is very easy to setup an LLC in MO, so honestly it never hurts to have one as there might be some deals and lenders that would prefer it. You won't be able to do conventional lending with it, but if you do Private money/DSCR deals through an LLC, then it would stay off of your personal credit and not impact your DTI as you are starting out. 

Plus, there are benefits to the flexibility that LLCs provide. You can add a partner to bolster 'experience' on rehab loans, to adding a credit partner to get optimal rate and terms. Not to mention the liability coverage that an LLC provides as a landlord (varying thoughts on that). Overall, I would say that it is easier to have one and not need it than to need it and not have one.

Hope that helps, TLDR, not necessary, but could be helpful.

Hi folks, just sharing some tips I got from a @Dave Meyer video a few months back. It really helped me to identify a market to invest in, starting zoomed out and then honing in on shortlisted markets to pick the one you want. (Thanks Dave). 

Deal analysis in 3 steps:

1. Macro indicators for the market

2. Housing market

3. Individual deal analysis

Macro indicators for the market:

Population growth

- Find data for market - ‘Resident Population in , ’

- Compare to US average (by adding a line - ‘Population, Total for US’)

- Compare over last 10 years

- Compare as ‘Percentage Change From Year Ago’

- Data from FRED - https://fred.stlouisfed.org/

- You’re looking for the market to be keeping pace or exceeding the US average

Average hourly earnings

- Find data for market - ‘Average Hourly Earnings of All Employees: Total Private in , ’

- Compare to US average (by adding a line - ‘Average Hourly Earnings of All Employees: Total Private’)

- Compare over last 10 years

- Compare as ‘Dollars Per Hour’

- Data from FRED - https://fred.stlouisfed.org/

- You’re looking for the market to be keeping pace or exceeding the US average

Unemployment rate

- Find data for market - ‘Unemployment Rate in , ’

- Compare to US average (by adding a line - 'Unemployment Rate’)

- Compare over last 10 years

- Compare as ‘Percent’

- Data from FRED - https://fred.stlouisfed.org/

- You’re looking for the market to be keeping pace or less than the US average

Housing market:

Look at these in totality:

- Median sale price (lag indicator - growth indicates high demand)

- Inventory (lead indicator - low rate indicates it’s a seller’s market)

- Average sale to list price (lag indicator - can you offer below asking?)

- Median sale price YoY

- Inventory YoY

- Data can be sourced from Zillow, Realtor, RedFin, and so on.

Individual deal analysis:

Use the BiggerPockets calculators:

- ‘Rental Property’ calculator

- ‘Rent Estimator’ calculator

Some tips for data input:

- Input the asking price as purchase price

- Input annual growth as ‘2 per cent’ (this is the long-term US average)

- Input vacancy, maintenance and capital works as ‘5 per cent’

- Input property management as ‘8 per cent’

- If you’re planning to have the tenant cover all utilities, input ‘0’ for utilities

- Input ‘$20 per month’ for garbage disposal

- For duplex rent estimation, estimate each unit individually and combine the totals to get a complete estimate

- If the property looks to have been recently renovated to a high standard, you can increase the total rent estimation by 20 per cent

- The cash flow and cash-on-cash calculations should be assessed to meet your individual needs.

Hope this is helpful.