All Forum Posts by: Thomas Sulz

I am looking for investor friendly GCs in the Tampa Bay area (More specifically Pinellas County). MUST be licesned and insured with ability to pull permits. My concentration is in flipping SFH residential homes. Medium to Advanced level rehabs.

Please reach out with any local reccomendations. Thanks!

0 Votes

Tampa, Florida

Quote from @John Morelli:

Quote from @Thomas Sulz:

Quote from @John Morelli:

Quote from @Thomas Sulz:

Hi All,

I am looking to fund some RE investments via private financing and had some general questions I was hoping the community could give me some feedback on.

Obviously, the terms around a private loan could be structured many different ways and ultimately be decided between both parties in the transaction. That being said, are there any guidelines that need to be followed? IRS reporting requirements? Minimum interest rates or maximum borrowing thresholds?

I was looking to borrow approximately $150,000. I've structured an agreement with the other party to allow me to borrow this via an unsecured promissory note. Interest would be paid monthly to the other party for 6 months until the loan would be "due" where I would then pay the original principal back in full in a lump-sum payment.

My questions are as follows:

1. Do I need to have a minimum interest % applied to the loan? I've seen some mentions about applying the "applicable federal rate" established monthly by the IRS to the loan. The other party has verbally agreed to a lessor rate but we want to make sure we are being compliant. https://www.irs.gov/applicable...

2. Is there a proper channel that the money should be "disbursed"? Could this be sent as a wire to a checking account or business account? I want to make sure this does not raise any "red flags" even though the funds are legit and sourceable.

3. Does this need to be recorded anywhere? For example, does this need to be made public and will impact by DTI as it appears to lenders or could this be strictly structured "offline" between me and the other party?

4. Any other details I should know about going with this method of financing?

Thanks in advance for the feedback!

Thomas, you are so far in the weeds on this topic, I won't even bother to address specific concerns, other than the fact that private lending is far more complex than most understand from a distance, and completely devastating to an investment when done improperly.

There are many institutional private lenders that will lend your money, manage the entire process, provide you the return you are seeking and create their own margin through arbitrage, origination fees, and other tools of the trade.

Partner with an experienced lender via their 506(c) registered debt funds and enjoy a safe, passive, and worry-free return on your investment.

Hi John, I think you've misread the post. I am not the lender in this scenario, I would be the borrower.

You also mention that I am too far in the weeds and that I should shy away from private lending becase it is "more complex than people understand". However, the entire point of my post is to get a better understanding of how the private lending process works.

Appreciate the response though!

You are absolutely right; somehow I misread or skipped the "I was looking to borrow approximately $150,000." paragraph of your post. That makes me a shmuck. My apologies.

Hahaha, no problem!

0 Votes

Saint Petersburg, Florida

Quote from @Ned Carey:

@Thomas Sulz My point about the IRS rates were that generally they are well below current rates for consumer loans. I would have expected them to be higher. It is worth checking with an attorney or CPA familiar with these things to confim that this is the correct chart. It is possible that there are multiple charts with specific purposes. There may ba another chart that appllies. However this is speculation on may part. Which is why to check with a legal or accounting professional.

Yes if you apply for another loan. You specifically aksed if it would affect your DTI. The only time that is an issue is if you are applying for another loan. If the bank asks on an aplication to list all your debts, you have to list them ALL, not just the ones they can find easily.

However it would not affect your credit score, because it would not be reported to credit reporting agencies. You have no obbligation to report to them.

I hope this clarifies it a bit.

@Ned Carey Ahhhh, yes now we are on the same page. Got it. Appreciate the feedback that was helpful.

1 Vote

Saint Petersburg, Florida

Quote from @Ned Carey:

@Thomas Sulz the rates you published see awfuly high for min rates for IRS concerns. I would use the IRS charts unless you check with a Lawyer.

As along as you have a legitimate promisory note I don't think how it is disubursed is important. No unless secured it does not need to be recorded. However it still affects you r DTI. Not disclosing debt is bank fraud. (prsuming the bank asks which is a given) The fact they may not catch it because it is not recorded doesn't make it legal to lie on a bank application.

Keep in mind if it goes bad, you may have legal trouble if you don't follow all of the rules. It maybe perceived you took advantage of the lender it you don't use a secured note or don't pay the legal min rate etc. This is particulaly a problen in more liberal states.

One issue of compliance is the lender needs to send you a 1099 at the end of the year to report the interest you paid.

I am not an attorney so The above is my laypersons understanding. You should contact an attorney for a transaction this big since you are not already familiar with the legalities of how to handle it. It will cost a few hundred bucks maybe. That is simply the cost of doing business.

Hi @Ned Carey, the rates I provided are directly from the IRS website.

Could you elaborate what you mean as to "not disclosing it" to a bank? In what scenario would I have to disclose a private loan from a private party to a bank? Do you mean if I funded a purchase/rehab in cash from the private lender and then went to go apply for a cash out refinance with another bank/lender?

Sorry just a bit confused on that part.

0 Votes

Saint Petersburg, Florida

Quote from @John Morelli:

Quote from @Thomas Sulz:

Hi All,

I am looking to fund some RE investments via private financing and had some general questions I was hoping the community could give me some feedback on.

My questions are as follows:

4. Any other details I should know about going with this method of financing?

Thanks in advance for the feedback!

Hi John, I think you've misread the post. I am not the lender in this scenario, I would be the borrower.

Appreciate the response though!

0 Votes

Saint Petersburg, Florida

Hi All,

I am looking to fund some RE investments via private financing and had some general questions I was hoping the community could give me some feedback on.

My questions are as follows:

4. Any other details I should know about going with this method of financing?

Thanks in advance for the feedback!

0 Votes

Saint Petersburg, Florida

@Doug Smith That's actually very helpful. Thanks Doug!

I'd be interested in exploring distressed SFH or duplexes in that area as well. Please let me know if your wife works with investors. I'd love the opportunity to talk to you and/or her in more detail.

My DMs are open!

1 Vote

Hi All,

I'm posting to see if anyone is familar with the Lehigh Acres, FL area. I am looking to diversify my real estate portfolio and was looking at purchasing land. I am familiar with the Naples area and I witnessed the mass development of housing and the sharp appreciation in home prices over the past decade. I'm thinking that this could happen at a lesser scale to neighboring areas in the future (i.e. Lehigh Acres).

Was hoping to gain some insight or connect with someone who is familiar with the area.

Thanks!

0 Votes

Hi Leonard,

Congrats on the properties! I also moved to Saint Pete from New York about 6 months ago and am looking to buy a few investment properties in the area. I would love to connect and pick your brain.

Also looking for some fix and flips in Pinellas or some of the surrounding counties down here.

Sending you a PM as well!

0 Votes

Saint Petersburg, Florida

Hi Tony, Congrats! I recently moved to the St Petersburg area around 6 months ago and I am looking to purchase something similar in the upcoming months. Would love to connect if you have any recommendations/advice!

0 Votes

All Forum Posts by: Thomas Sulz

Thomas Sulz has started 9 posts and replied 20 times.

Post: Looking for Investor Friendly GC's in the Tampa Area

Post: Interest on a Promissory Note?

Post: Interest on a Promissory Note?

Post: Interest on a Promissory Note?

Post: Interest on a Promissory Note?

Post: Interest on a Promissory Note?

Post: Lehigh Acres, FL - Land Investing

Post: Lehigh Acres, FL - Land Investing

Post: Beginner investor in St. Petersburg, FL - Anyone want to meet up?

Post: Airbnb in St. Petersburg!