All Forum Posts by: Tanner Barnes

 I did one loan for the end-buyer on a wholesale deal a few years ago to prove it could be done. 

Took 10x as much work to get done. Overall not worth it, for me. Because it was wonky, I had to deal with answering questions from BOTH of the couple's parents and one of their siblings. Had to repeat myself about 20 times, ever single thing I said.

Wholesaler is code for "broke a joke and can't get a mortgage," and working with a retail end buyer is code for "not well networked, has zero cash buyers," so not even any referrals in it for me.

I wouldn't do it again unless the wholesaler set it up such that I only had two points of contact, and I'm not taking calls from anyone else.

- Wholesaler.

- One of the buyers.

That's it. Not talking to the primary buyer's wife's father, their cousin who was a realtor, none of that. And never repeating myself more than a 3rd time.

Overall I think I've found the reason why everyone says it "must" go to a cash buyer. Too many things feel wonky/sketchy to the end-buyer. These end-buyers were reasonably intelligent smart people, so it's not on them that I had to explain the same thing 20x, it's because it was so wonky and weird.

Welcome to BP, Darren! Sounds like you're off to a good start. 

A HELOC is how I started and I still use it regularly. I have a similar deal to yours, so it's a good deal but totally believable. That's why it's so important to check around.

You could structure the LLC a couple of different ways. The biggest question is how you intend to hold your properties. If you are thinking of buying properties in your LLC with money from your HELOC, you are at risk of co-mingling funds which pierces the corporate veil provided by the LLC and renders it useless for liability protection.

The most straightforward way to solve this would be to ask the bank if you can put the HELOC in the LLC's name with the same collateral and a personal guarantee from you. You could set up the LLC's operating account at that bank to build your relationship with them and for convenience for you. If you can use the HELOC to pay for an entire property, you can put the properties in the name of your LLC and you're good to go.

Another option would be to set up the LLC and try to get a commercial line of credit with your home as collateral. When you are ready to buy a property, this makes it possible to put the property in the LLC's name. Some people try to buy the property in their personal name and quitclaim it to the LLC, and that's a bad idea, especially if they are using a HELOC that is also in their personal name.

The important thing with an LLC is to treat it like a completely separate business and document anything going into or out of the LLC, otherwise it's a thin corporate veil that won't offer you any protection. You don't want to have an LLC holding properties and a HELOC in your personal name that you use for the downpayment, or the LLC is a waste of time.

I hope this helps,

@Tanner Barnes

If the house is livable (meaning house can be outdated but things are functional); then regular conventional loan can be approved as a primary residence.  You can get this through banks or credit unions.

If you have to fix missing kitchen or missing toilets etc; then things might take longer as you have to with special loans.

The appraisal would still need to come in considering any needed fix up. Also, you would need to sign that you intend to stay in the property as your primary residence, If you don't actually do that, it could actually be a fraud if it's found out about.

The option you might want to consider, is an FHA 203k loan. That will allow you to stay in the home conventionally and get the funds needed to fix up any issues with the house, AND it's your primary residence..

@Tanner Barnes welcome to BiggerPockets!

Finding a good 1% deal can be difficult sometimes. Maybe look for properties where you can add value that will bring the cashflow up to at least 1% (e.g. adding additional rooms). I often look for 2/1 properties with unfinished basements that I can convert into 3/2s. 

Other suggestions for learning more: