All Forum Posts by: Account Closed

Just means that he is a partner in the deal and you split the proceeds accordingly.

If I can't qualify to buy a prop on my own I bring in a money partner that can qualify and have an outside agreement that stipulates who gets what when you sell the property or who gets what % of the cash flow if you keep as a rental.

Often you can form an LLC with your partner and spell it all out in your operating agreement.

Remember everything is negotiable but if he's bringing the cash he'll want a pretty big chunk of the profits.

The biggest mistake you can make right now is paying cash for props if you want that cash back within 6 mos.

Even after 6 mos you will be limited to the amount of cash you can get AND the LTV will be a lot lower than you are expecting often leaving 30-40% of your cash locked in that house.

Always have a note and deed of trust on a prop when you purchase - not one of your companies but maybe a friend or colleague - so that when you are refinancing you are paying off debt.

We did a free teleclass in July called private money magnet and the replay is at http://theinvestorinsights.com/?p=47

It's long (2 hrs) but it answers a lot of questions. Hope that helps!

Getting investor loans done with conventional lenders is tough and will get tougher.

Local indy banks as you say are a great alternative. they are called portfolio lenders and they can help because they do not sell their loans to Freddie and Fannie.

These small banks and credit unions don't work with brokers so brokers are not your best bet here.

If you go to my blog (in my sig) there's a link there to my Portfolio Loan Blueprint that will help.

Always start with friends and family. Then branch out to your network. We've raised more than $5mm in our market in the last year just by networking and referrals.

Hope that helps!

You're smart to get under the max 4 financed properties limit going into effect Dec 1st with Fannie.

Go with a portfolio lender. They can do refinances and wipe those loans off your personal credit freeing up more conventional lending "capacity".

They will underwrite the loans on your residential properties like commercial loans so make sure your props are cash flowing according to commercial DCR mins of 1.20.

Thanks for the compliment, Jon. :D

Back in the day (1999 - 2004) we loaned to 80% ARV but the max we will do is 70% and that appears to be serving us well. Our program is very specific - for rehabbers only and it is a private loan not a hard money loan. Meaning I underwrite it exactly as a conventional underwriter would in terms of income, assets, DTI and the borrower's credit. In addition, we are very careful with values. I work with one appraiser and one appraiser only. No exceptions.

I am proud to say that I've been brokering and personally underwriting this program in CO since 2002 and we have never had a foreclosure. We have had 3 deeds in lieu that we turned for a small profit and have had several note extensions but so far no foreclosure so I think we make good decisions.

We charge 4 points and 15% interest only and that seems to price us a tad out of the market here but it is on purpose since we have limited capacity.

I have a friend that runs a rehab fund in CA and he gets 6 points and 10% interest. My borrowers would laugh me out of town if I charged 6 points and my lenders would laugh me out of town if I only charged 10%, so every market is truly unique.

I could loan at 70% as-is all day long but that would put me in the foreclosure bail out business and I have NO interest in that business. I like investors and I love being able to provide the strong ones with maximum leverage with our 100% loan to cost (LTC) loan.

Understand the differences between residential LLC loans and commercial. On commercial you are right - no seasoning required. LLC's are often formed right at the closing table. If you bought 11 props in a blanket, that's a commercial loan.

And, yes, banks can decline you based on your business. Lenders look unfavorably upon real estate investors. Name your LLC Real Investment Services, LLC and state that your title is Real Estate Investor on a residential loan and see how fast it takes for your denial to come in.

On biz lines of credit, the account execs training brokers to sell these programs will state up front that they will not make loans to real estate investors.

Conventional lenders will cap your residential holdings at a max of 10 mortgages. Dumb, I agree, but that's the world according to Fannie Mae and right now no one is doing anything outside of the box.

Collateralizing just means that you are pledging the collateral in one property to guarantee performance on the subject property. We do this occasionally when we make a private loan if the deal is too "thin" we will also tie up another property in the investor's portfolio to ensure performance.

And having the props "owned" by your LLC is not the same as having the financing originated and vested in the LLC. Maybe I need some clarification here...

Typically, you have a couple of options -

1) Refinance your props into a loan in the name of your LLC. You'll need 30% equity but it will come off your personal credit.

2) Refinance your props into a commercial blanket loan. This is tougher but it means you'll consolidate 10 loans into 1. They must have 25% equity and cash flow.

OR, if you are looking for a line of credit using the equity in your holdings as collateral, you'll need a good equity %. Many people think that if they are at 80% LTV, a bank will give them a LOC equal to the remaining 20% to theoretically leverage the prop to 100% - this is not the case.

For both options many of my clients are having good luck with portfolio lenders such as credit unions.

You want to get your LLC set up ASAP. Lenders will require that it is seasoned for 2 years before they will do loans either for REI or lines of credit in the name of your entity. Also, try not to name it anything having to do with REI - you will get declined just on the basisi of the name...