All Forum Posts by: Account Closed

Where exactly did I say you aren't going to disclose it on your loan application? Of course you do.

Conventional underwriters are only concerned about financed properties that report to your personal credit report when administering the max financed properties rule.

:roll:

First Financial Network and DebtX are the two big FDIC asset disposition specialists. I'd suggest aligning with them to cut out any daisy chains (hefty deposit but worth it for direct access.)

The most common misconception about real estate development is that the developer is the guy with the money. He's not. He's the guy with the idea. The sponsor is the guy with the money. 3 main players: developer, sponsor and builder.

Tax credits are something to consider but if you're doing a multimillion dollar water front deal then I doubt you want to waste your time learning about low income housing tax credits.

Sketch out your executive summary. Then start researching WHO in your area has experience with that type of development. I've researched LLC filings with my Secretary of State to get names to contact. You can do the same.

That's not a debt partner, that's an equity partner. Debt partners make the loans only in exchange for a set return of interest. Equity partners share in the profits.

If my equity partner doesn't want to be part of the LLC, then they don't get to be an equity partner.

When Freddie Mac and Fannie Mae announced their new lending rules last August, I started telling everyone who would listen that they need to start using portfolio loans to finance their investments. That generated hundreds of questions from investors who want to know more about portfolio loans and some seem to be a little confused. So, let’s break it down.

A portfolio loan is just a loan that is made by a lender that does NOT get sold into the secondary market i.e. Fannie Mae and Freddie Mac. These lenders are typically small banks and credit unions. Because they don’t sell the loan off to Freddie or Fannie, they don’t have to follow any of the stupid new rules such as a maximum number of 4 financed properties and no unseasoned cash out. There are portfolio lenders out there that allow an unlimited number of financed properties and unseasoned cash out.

I spoke with an investor a few days ago who has 7 financed properties with Wells Fargo and he was certain they are a portfolio lender because he sends his payment to them every month. He was surprised that they refused to refinance any of the loans because of the “max 4 financed property rule.â€

Well, Wells Fargo is NOT a portfolio lender. They are a conventional lender. They sell their residential loans to Freddie Mac which means they have to follow the Freddie rules (bad). They have retained the servicing rights which is why the payment still goes to them every month but make no mistake, they will not do anything cool.

So, what kind of loans do portfolio lenders make? Lots, but the ones we are concerned with are LLC loans, blanket loans and master loan commitments. Let’s look at each one individually.

LLC Loans
Portfolio lenders will originate and close a loan in the name of your LLC. That means it doesn’t report to your personal credit report. The LLC does not have to be two years old and does not have to have any assets or cash flow. You are still personally guaranteeing the loan, it just won’t show up on your personal credit which means if you want to get a Fannie or Freddie loan you can.

The credit report is what tells the conventional lender’s underwriter how many properties you have financed so if you have 25 LLC loans but none are on your personal credit, then the underwriter at Wells will write ZERO in the box that asks for the number of financed properties you have.

Blanket Loans
A blanket loan means one loan that “wraps†many individual loans into one loan. If you have 25 LLC loans, you make 25 checks out each month, pay 25 tax bills and pay 25 insurance bills. Plus you have 25 different rates. And if they are adjustable rates, good luck trying to keep up with when they need to be refinanced.

A blanket loan will take all 25 of those loans to make one big loan requiring one payment each month at one rate. This is a cool strategy for people that are buying or refinancing in bulk since its one loan that goes through underwriting; not 25.

One thing to watch out for on these loans is the release policy which is what happens when you want to sell or refinance one property that is in the blanket. Some lenders will allow it with a fee, some won’t allow it at all and will call the whole blanket loan due and others will require a substitution of collateral. That means you’ll have to put another property of equal or greater value in the blanket to take the place of the property you’re taking out.

Master Loan Commitments
Once you establish a good relationship with a portfolio lender, you can take your business to a whole new level with a master loan commitment. Let’s say you are a rehabber that likes to keep properties long-term as rentals. You buy them with hard or private money, fix them up and then you refinance them. If you are using conventional lenders, you can only have three rentals TOTAL because that maximum 4 financed properties rule includes your primary residence.

Well, you can negotiate a deal with the portfolio lender where they agree to refinance all your FUTURE deals up to $1, $2, $3 even $5 million dollars over a 12 month period. That way you’ll never have to worry about where the refinance will come from or IF it will actually go through.

That’s just a few of the cool loans you can do with portfolio lenders.

My favorite way to find them is to go to the FDIC site at http://www2.fdic.gov/idasp/index.asp

Then click Find Institutions to search the database by state. Remember you'll need a lender in the same state where your property is located.

It depends on the deal. If it's commercial it'll be easier; residential tougher.

If they have cash but can't be on the loan app, then make them a debt partner to fund down payment, rehab, etc.

If they have deal "know how" just pay 'em a couple of bucks to teach you and keep them out of your deal. :-)

Here’s my 6 easy steps to a million dollar business line of credit.

A business line of credit is tricky if you’re a real estate investor. The first problem is that you can’t actually say that you’re a real estate investor when you apply. Banks hate real estate investors. They think we’re all evil flippers. Darn you, evil flippers for ruining it for us.

I remember last year when I still had my mortgage company an account rep from a local bank came in with all these flyers about getting a business line of credit. I was really excited thinking this may be a great solution for my real estate investor clients. But then I read the fine print.

*No applications will be accepted from strip clubs or real estate investors.

Wow. Now we’re lumped in there with the poor guy that wants to buy a new stripper pole. And if you need a new stripper pole, that’s a purchase you shouldn’t delay.

The second problem is that you really must have a seasoned company that has documented cash flow. It’s not as easy as the scammers say it is. You can’t just form an LLC online and then start applying (and getting) business lines of credit all over the place. Like anything, it’s a process.

And even though you won’t walk into a bank and walk out with a million dollar line to buy a big package of properties, there is a way you can build up to that. Here’s the process in a nutshell:

Form a Corporation.
I have LLC’s some guys favor C corps and still others like S corps. Check with your accountant to see which is best for you. There are some companies out there that will sell you seasoned “shelf-corporations†for several thousand dollars. That’s fine if you want to go that way but it won’t get you big lines off the bat because they aren’t cash-flowing corporations. I personally think they’re a rip.

Get a Tax ID
Also known as an Employer Identification Number of EIN you can get this online for free from the IRS website.

Get a DUNS number from Dun & Bradstreet
D&B is to business credit like FICO is to personal credit. They rate your company and your vendors report to them. Get signed up at http://www.dnb.com

Your goal is to build your “Paydex†number. Your goal should be a Paydex of 80.

Get a Few 30-Day Business Credit Accounts
The easiest way to start building your business credit is with 30-day accounts. Places like FedEx, Office Depot, Home Depot and Kinko’s will give you a business credit account. It’s a like a charge account. Charge something each month and pay it off each month.

Get a Business Credit Card
Once you have a few months of this under your belt, apply for a business credit card such as Discover or American Express.

Get a Small Line of Credit
Then after a year or so when your Paydex is close to 80, and your business has some positive, cash-flowing financials that you can show the banker, you have a good shot at an unsecured line of credit of $25,000 – $50,000.

Get a Big Line of Credit
Behave responsibly with that and the bank will continue to increase your line.

And there you have it – my 6 easy steps to a million dollar business line of credit. Is this as easy as it sounds? Kinda. Is it guaranteed? No. Nothing in life really is. But if you show that you have cash flow in your corporation, you’re head and shoulders above the rest. Cash flow is key.

So, get out there and start building your business credit. And for God’s sake if there’s a strip club owner that needs a new pole, help him out. It’s the least you can do.

Brian, you got it right. You can accomplish that with a fractionalized trust deed.

Here's a sample: http://theinvestorinsights.com/fractionalized-trust-deed-sample/