All Forum Posts by: Derek Dombeck

The age of your corporation is not that crucial with many lenders. We look at other factors such as credit, the asset, ability to repay, etc.

Yes, and depending upon your loan to values and purchase price, a bank may or may not allow the private money to be used at all. It is also challenging to find private money that is willing to be in 2nd lein position behind a bank or a professional lender, as the possibility of getting wiped out in a foreclosure action is high if you default. 

We do some deals similarly to what you are describing. I've structured them either with a participating promissory note/ mortgage or by giving the partner an Option. Here's an example 

I bought a house with, seller financing, that needed 10k in rehab and the end goal was to place a tenant in the property on a rent to own contract for 2 years. So I brought in a financial friend who had some IRA money to fund the rehab. Her IRA holds a note that gives her 20% of the Net cashflow and 20% of the equity/profit when we sell. She has zero ownership or control in the real estate. If my financial friend wanted to, she could sell or trade her note for cash or other assets at anytime in the event her needs change. This would not affect my deal, I just have to pay someone else. I could have used an Option contract in a very similar way as well.

False. I don't require an entity. I highly recommend it for other reasons, but it won't disqualify someone from getting a loan with us.

Of course it's possible to leverage 100%. It's just not likely that you will find a lender willing to take the risk with you if there isn't some additional value there

You can have multiple leins on a property, but the PML will be in a 2nd or junior lein position. This carries a certain amount of risk which is why many PML's won't lend this way.

It is not impossible to find this lender, but the deal has to be able to support both loans and have some room to increase the value or monthly cash flow quickly in order to make that lender secure.

@David M.

I agree with 99% of your points above with 1 exception. The entity that pays the mortgage can legally claim that as an expense for the business and the lender doesn't care who or where the payment comes from.

Example.....

I buy a house from Mary subject to her existing note/ mortgage. As soon as the deed transfers, my company starts to depreciate the property, claim mortgage interest deductions, and all other tax advantages because it was a sale. It does not matter if the debt is in another person's name, it's the person who pays the expenses that has the right to claim it.

You had not referenced a business line of credit in your original post. That said, it only builds your business credit if the lender is reporting to the proper credit agency, like Dun and Bradstreet for example. Many business lines are still based on your personal credit score and don't get reported anywhere unless you default on the loan. At that point they may report on your personal credit. 

This doesn't build business credit at all, because it is still a personal loan.

Yes, it will provide a liability shield for you personally to have it titled in an entity. You will need to adjust your insurance policy though. Ask your agent, but most likely you will need to switch to a commercial policy and then list yourself personally as an additional insured.

Sell the house with seller financing terms. He could carry a wrap around mortgage in 2nd position which would give him income over and above the existing debt payment and as part of the deal, he can stipulate a lease to live in the Granny Flat for a set amount of time.