Creative Real Estate Financing

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Brett Kristensen
  • Rental Property Investor
  • Batavia, IL
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Newbie questions before getting started

Brett Kristensen
  • Rental Property Investor
  • Batavia, IL
Posted Oct 1 2019, 13:01

Hi everyone...this is my first post. I feel like I've been doing research and trying to educate myself forever, but now I'm ready to pull the trigger. This is what I've got. I just sold one of my businesses, and with those funds paid off our farm where I operate a tree nursery. I have a $150,000 line of credit on that farm and about $65,000 in a money market account. My plan is to purchase small to medium SFR with the line of credit, then use the money market funds to do the improvements/rehab, get the property rented, then obtain a conventional mortgage to pay off the line of credit and pay back the money market account. My tree nursery produces enough income to cover my family's monthly living expenses, but I'd like to build a portfolio that produces $7,500-$10,000/mo in passive income.

Questions-#1- Am I better to go with a 30 year loan for higher cashflow or 15 year and pay off the property faster?

#2- I will be selling the farm from the nursery to the new real estate company. I assume I can do that for $1. Should that new company be an S Corp or LLC? What are the benefits/disadvantages of each?

#3-Once these houses are rehabbed and rented I plan on paying all out of pocket expenses back from the refinance. If I can max out the loan at 80% LTV and there is still room in that for cash out...can I/should I pay off personal debt with that? For example, If the house appraises at $100K and I take a mortgage for $80K, but only have $75K into the deal...should I put the additional $5K towards...say...my student loans?

#4- What kind of liability insurance limits should I carry for the company?...for each house? I'm sure anyone who slips and falls will be looking to take advantage of me...how does one protect themselves?

***Thank you in advance for your help. This is a nerve-racking yet exciting experience!***  

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