Stated income investment loan refi?

Question

Anyone have such a thing?   I need to refi one of my investments that is currently in an ARM... Since then I have purchased other property included my primary residence which I own with my husband.  I want to keep the investment in my name only, however with our primary mortgage being both myself and my husband (and being a sizeable amount) I will not be approved to refi the investment on my own, but do not want to add my husbands name to it.   So in other words, I need his income to qualify for the refi - but can't use it..

Eric Jeanette · Answer

Kim, for stated income investment it will most likely be a lot more than 30% down.

Kim Rock · Answer

Eric - How big of a down payment?  I can probably swing up to 30%

Eric Jeanette · Answer

Kim, there are a few lenders who will do a stated income no-owner occupied loan but the down payment will be significant. If the property is located in a vacation type of area then it can be considered a second home and not an investment which would help you. As far as the LLC thing is concerned, you can always transfer it into an LLC afterwards if you want. There are also lenders willing to loan to an LLC but maybe not with the stated income feature. [LINK REMOVED]

Steve Babiak · Answer

Even if she transferred this into an LLC, if the property is located in PA like she is, the PA Dept of Revenue will want to collect a transfer tax amount based on a formula they use to impute a value for the property.  RTT in PA is at least 2%, but it is higher than that in certain places (such as in Phila it's 4%).  The property value can approach and even exceed actual market values based on their formula.  I laughed when I saw the amount of RTT that the bank had to pay for the QCD transfer from Freddie Mac to JP Morgan for the REO I just bought; the transaction value was declared at $1, but they paid about two times the transfer taxes that I ended up paying for my end of the purchase.

So maybe not such a good option.

Kim Rock · Answer

I was informed before that since the investment is my name, and the primary residence is both my husband and myself - they can never take something from you that you co-own with someone else.  I do want to go to a professional to discuss these matters with.  Do you suggest a CPA, or a tax attorney or a general financial planner?  I am putting that on my list of to-do's this week to find someone recommended in my area to discuss all of these topics with.

Kim Rock · Answer

Okay so, to take this off topic... What are your thoughts about refi'ing in both my name and my husbands to use his income?   I had been keeping our investments separate and always in my name, so that if anything would ever happen above and beyond my umbrella insurance policy that they legally could not take our personal home from us (since it's in his name too).    If I put his name on the investment property just to refi, am I hurting myself by having both of our names on it and therefore subjecting our primary residence to issues if we were sued in the future?

Mark Updegraff · Answer

What tax benifits would you loose?
My insurance broker hasn't mentioned that there will be a change in rates & they're also advising the switch.
Why would the PM be personally liable?

My attorney advises seperating into LLCs the number of which are determined by your risk tollerance.  I'll ask him about your questions...

Jon Holdman · Answer

I'd suggest you need to discuss asset protection strategy with a lawyer.  Its a complicated mess and depends on a lot of factors.
          
          Putting a property into an LLC should have no effect whatsoever on your taxes.  That's because (unless you elect otherwise) an LLC is a pass through entity.  So, all the expenses and writeoffs flow directly to your personal taxes.
          
          May well be more expensive for insurance.
          
          There is no entity that gives perfect protection.  With enough effort, someone can always come after your personal assets.  Even corporate officers sometimes go to jail for things the company does.
          
          I don't really think your personal home is protected by the fact the investment property is only in your name.  There may be laws that prevent a creditor from kicking you out of your residence, but its still an asset that could be attached.
          
          Bill Bronchick's "Wealth Protection Secrets of a Millionaire Real Estate Investor" is a pretty good intro to this topic.  But no substitute for detailed planning with a knowledgeable attorney.

Jon Holdman · Answer

Tax strategy with your CPA, asset protection with your attorney.  Investment strategy with a financial planner, though I'm pretty skeptical you can find anyone who's not biased toward some particular asset class.

"Never take away" doesn't mean its fully protected.  A creditor may be unable to kick you out of that house, but they can still place a lien on it.  When you sell that lien would have to be paid off.

Kim Rock · Answer

From what Ive read about moving them to an LLC, it typically backfires 1) you lose tax write offs 2) you incur more costs from insurance standpoints 3) if youre managing the property and it's an LLC they can still come after you personally so it defeats the purpose in the long run?  No?