How to use this $400,000 unit?

14 Replies

Hello everyone, i am posting in hopes that someone will be able to assist. My father and i are both owners of 1 unit. He owns his outright. We are trying to use his property with a heloc; however, his financial situation is hard to explain to a bank not allowing him to get approval. We were told we could get a commercial loan with the property being in an LLC. However, we run into the financial situation again. We thought about a 1031-exchange. But he would like to keep in the family if possible. The only other option that we could come up with is sell it to me and get a heloc once everything happens. If anyone has any advice on this we would greatly appreciate it.

Thank you! 

Sorry if any spelling or grammatical errors! 

Originally posted by @Joshua Slatton :

Hello everyone, i am posting in hopes that someone will be able to assist. My father and i are both owners of 1 unit. He owns his outright. We are trying to use his property with a heloc; however, his financial situation is hard to explain to a bank not allowing him to get approval. We were told we could get a commercial loan with the property being in an LLC. However, we run into the financial situation again. We thought about a 1031-exchange. But he would like to keep in the family if possible. The only other option that we could come up with is sell it to me and get a heloc once everything happens. If anyone has any advice on this we would greatly appreciate it.

Thank you! 

Sorry if any spelling or grammatical errors! 

 Is the home an investment property?

Originally posted by @Shaun Weekes :
Originally posted by @Joshua Slatton:

Hello everyone, i am posting in hopes that someone will be able to assist. My father and i are both owners of 1 unit. He owns his outright. We are trying to use his property with a heloc; however, his financial situation is hard to explain to a bank not allowing him to get approval. We were told we could get a commercial loan with the property being in an LLC. However, we run into the financial situation again. We thought about a 1031-exchange. But he would like to keep in the family if possible. The only other option that we could come up with is sell it to me and get a heloc once everything happens. If anyone has any advice on this we would greatly appreciate it.

Thank you! 

Sorry if any spelling or grammatical errors! 

 Is the home an investment property?

Yes, its an investment property 

 

There’s a lot that depends in your statement.  

Is it a single family home?  If so what’s the rents?  Is it a commercial space?  Multi family less than 5 or more than 5?

Hard to give advice without actual information.  

So what do you actually want out of the money from it? Is it in a LLC currently? How much money do you need. Financial situations are Never truly complex just different. Does your father have income? If you want a commercial property it's based on the property not your income.

Honestly your statement needs about three additional pages of information. 


Originally posted by @Eric C. :

There’s a lot that depends in your statement.  

Is it a single family home?  If so what’s the rents?  Is it a commercial space?  Multi family less than 5 or more than 5?

Hard to give advice without actual information.  

So what do you actually want out of the money from it? Is it in a LLC currently? How much money do you need. Financial situations are Never truly complex just different. Does your father have income? If you want a commercial property it's based on the property not your income.

Honestly your statement needs about three additional pages of information. 


The property is a condo in St. Pete, Florida. Yes the property is in an LLC. We are trying to use the asset gain more properties. The financial situation is complex. It is kinda gifted to him! Really difficult to show a bank. With family situations they wont just cut him a check to make it easier! No we dont want commercial.

 

He should just do a cash out refinance or sell it to you and keep it simple. Typically, HELOCs are not offered on investment property, only your primary residence. Cash our refinance funds are seasoned and not taxable, so no need to 1031 unless he sells.

Originally posted by @Anthony Dooley :

He should just do a cash out refinance or sell it to you and keep it simple. Typically, HELOCs are not offered on investment property, only your primary residence. Cash our refinance funds are seasoned and not taxable, so no need to 1031 unless he sells.

Yeah, we were thinking about just selling it to me.

 

Originally posted by @Joshua Slatton:

Hello everyone, i am posting in hopes that someone will be able to assist. My father and i are both owners of 1 unit. He owns his outright. We are trying to use his property with a heloc; however, his financial situation is hard to explain to a bank not allowing him to get approval. We were told we could get a commercial loan with the property being its in a LLC. However, we run into the financial situation again. We thought about a 1031-exchange. But he would like to keep in the family if possible. The only other option that we could come up with is sell it to me and get a heloc once everything happens. If anyone has any advice on this we would greatly appreciate it.

Thank you! 

Sorry if any spelling or grammatical errors! 

 

@Joshua Slatton If he sells it to you, he will need to either 1031 his gain or be prepared to pay 15% cap gains on his profit. Unless he needs some quick cash, he could owner finance it to you and it would lessen the impact of the taxes on the gain. You would need tax advice on this, especially concerning your state taxes.

Originally posted by @Anthony Dooley :

@Joshua Slatton If he sells it to you, he will need to either 1031 his gain or be prepared to pay 15% cap gains on his profit. Unless he needs some quick cash, he could owner finance it to you and it would lessen the impact of the taxes on the gain. You would need tax advice on this, especially concerning your state taxes.

Thank you for your advice! We are really trying to find a strategy that allows us to use the property. The property is in a LLC. My father receives income thru a gift/fund. Difficult to show to a bank because they dont trust the stability of it.

 

@Joshua Slatton

Although every loan is unique and each lender varies with their requirements, one would find that these items are consistently what make up a comprehensive loan package. As a professional lender I will guide you based on the information provided.

You mentioned you ran into the “financial situation again” it’s vague statement and for us to give you useful advise we need more information. It’s a red flag that twice you where denied for financial issues ...

You mentioned it was a gift form family and hard to proof (ownership?) it it under a family trust?

please elaborate or PM if you want to keep it private.

For the sake of this post here for what you shared and what could be available:

Condo, owned clear and free appraised value of 400k

Investment property under LLC

Vacancy status. Unknown

Monthly rent. Unknown

Market rent comp. Unknown

Years owned. Unknown

Purchase price. Unknown

Taxes current. Unknown

HOA property. Unknown

Borrowers experience in RE. One property owned (subject property)

Borrower credit Poor

Financials unknown

Loan request cash out refinance 75%

You’re going to have to go the commercial loan origination route and let me give you pease of mind on this and for all future investor reading this.

Commercial mortgages are lenders (banks, private equity etc) that offer mortgages for specific time of properties that are not owner occupied primary residence witch are under strict legislation.

This could be why you where denied. You must approach a specific lender who’s niche is Investment properties.

Rates are higher the a conventional owner occupied mortgages and that a fact of life for all investors. (Unique for each individual and deal)

Even if your dad's financials are bad as long as his Fico is around 620 title is clear, LLC is in good standing there are lenders with a product that fits.

Rates will vary depending on Fico, location, DCR, vacancy etc ... LTV 75 and lower, is a matter of checking off boxes and see what fits your scenario.

Little hard to give you a good faith direction to follow with out having all the info.

As for your question. I'm not a fan of HELOC for one reason. It hits your personal credit. Adds debt, monthly payment commitments and is a large balance loan so banks and lenders will see that you are a riskier borrower because you can get your self in trouble by over extending credit use. It's my personal view and there will be other who successful have used them in RE.

Originally posted by @Guifre Mora :

@Joshua Slatton

Although every loan is unique and each lender varies with their requirements, one would find that these items are consistently what make up a comprehensive loan package. As a professional lender I will guide you based on the information provided.

You mentioned you ran into the “financial situation again” it’s vague statement and for us to give you useful advise we need more information. It’s a red flag that twice you where denied for financial issues ...

You mentioned it was a gift form family and hard to proof (ownership?) it it under a family trust?

please elaborate or PM if you want to keep it private.

For the sake of this post here for what you shared and what could be available:

Condo, owned clear and free appraised value of 400k

Investment property under LLC

Vacancy status. Unknown

Monthly rent. Unknown

Market rent comp. Unknown

Years owned. Unknown

Purchase price. Unknown

Taxes current. Unknown

HOA property. Unknown

Borrowers experience in RE. One property owned (subject property)

Borrower credit Poor

Financials unknown

Loan request cash out refinance 75%

You’re going to have to go the commercial loan origination route and let me give you pease of mind on this and for all future investor reading this.

Commercial mortgages are lenders (banks, private equity etc) that offer mortgages for specific time of properties that are not owner occupied primary residence witch are under strict legislation.

This could be why you where denied. You must approach a specific lender who’s niche is Investment properties.

Rates are higher the a conventional owner occupied mortgages and that a fact of life for all investors. (Unique for each individual and deal)

Even if your dad's financials are bad as long as his Fico is around 620 title is clear, LLC is in good standing there are lenders with a product that fits.

Rates will vary depending on Fico, location, DCR, vacancy etc ... LTV 75 and lower, is a matter of checking off boxes and see what fits your scenario.

Little hard to give you a good faith direction to follow with out having all the info.

As for your question. I'm not a fan of HELOC for one reason. It hits your personal credit. Adds debt, monthly payment commitments and is a large balance loan so banks and lenders will see that you are a riskier borrower because you can get your self in trouble by over extending credit use. It's my personal view and there will be other who successful have used them in RE.

I appreciate your insight! I know i am missing details. I dont know all the info about his property! But i do know some info.


Purchase price- 200,000

Vacancy status- no vacancy last 3-4 yrs

Rent-$1800

Rent comp -$1700-$1900

Years owned- 7-8 yrs

Taxes-$5,000-6,000

Yes his financial situation is complicated. I believe its a family trust. I know my aunts receive the money thru the business and they transfer it to him. He can only show his bank account that he receives money. Other then that no income.

Experience- yes just this property. I also have my but dont outright own it. 


thats about all i know. Im not sure if that helps.  

 

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