All Forum Posts by: Alan Nelson

I assume we can make recommendations on this forum.  I have done business (not as a borrower but in connection with loans) with Morgan at makedeallending.com.  He has been reputable in my dealings with him, and he's in South Carolina.  Not sure if the deal fits his criteria but worth a try.

@Jay Hinrichs...thanks for your comments.  Could you recap the couple things you saw in doing your due diligence that are the red flags you saw within 2 minutes of reading the documents?  This would be super helpful for the rest of us.  "

YUP for me its was clear in 2 minutes of reading the documents the equitybulder investor sent me.. but I can see where those who are not experienced in investing and mortgages would find themselves in this situation.. there are very simple ways to protect yourself when doing an investment loan..."

Hi @Nandish Parmar, I use 522190 (This industry comprises establishments primarily engaged in accepting deposits and lending funds (except commercial banking, savings institutions, and credit unions) and had no issues.  Hope that helps.

@Christina Fleet Lending can be a great business or "side thing" where you can make money and play a part in helping others.  That said, mistakes can be very costly and "learn on your own" tuition can be expensive (ask me how I know).  Having a good foundation is critical.  

As a starting point, I highly recommend a course by Dyches Boddiford...i think it's simply called "Hard Money Lending" and his website is assets101.com.  DISCLAIMER: I have no business relationship with Dyches, but I did take the course and found it to be a great A-to-Z primer with useful information to actually do deals properly.  Of course, after the class, you will find local counsel to make sure you are in compliance with the laws of the state in which you make the loans.  Good luck!

Alan

I am using Elizabeth Moira-Sickels for a short-term rental and happy so far...she specializes in AirBNB: www.elizabethmaoraLLC.com

If it is serviced, I de-board after FC. In fact, I make sure proceeds go to the management company so they can do whatever processing they need to do and make sure it's all kosher.  Plus, at least once, I needed updated numbers, so they were easy to get.  The downside, I guess, is servicing fees, but in the big picture of things, I guess it's just a cost of doing business.

On loans that I self-service (i.e., self-originated), they don't go to "inactive" status until final resolution.

Agree with Basit. 

Tax planning is important if you plan to lend in any significant amount.  Generally, the income is interest income taxed at ordinary income rates.  So, without tax planning, your after-tax rate of return will get slashed and therefore, so will your ability to "compound" your interest income year over year.

To prepare for a talk with the CPA, the best thing you can do is to determine some lending goals  for yourself (i.e., approximately how much interest income you project each year for the next couple of years).   That will help your CPA help you determine a plan.

First choice (by far): talk to your CPA about creating and funding a self-directed IRA or 401K to make loans from those accounts.

Second choice: talk to your CPA about setting up a regular (i.e., not a retirement plan) entity from which to lend as an active trade of business (and whether to elect s-corp status).  This will probably hinge on how much interest income you expect to make each year over the next few years.  Whether or not you elect s-corp status, you will at least get to take some deductions if they are eligible (e.g., travel for continuing ed, business meals with borrowers, phone/internet expenses).  If you plan to have significant interest income, your CPA might recommend electing S-corp status to save on self-employment income.  Also, the income earned from an active trade or business will provide you "earned income" from which you can contribute to your retirement accounts to grow your "tax sheltered money pot".

Short answer is that a real estate attorney probably needs to review the documents between the current owner and tenant to determine what rights the tenant has and whether the agreement affects the owner's right to freely sell or transfer the property.

Depending on what exactly the lease/purchase agreement says, the agreement with the tenant could have conferred certain rights to that tenant and might be a "cloud" on the title.  As a starting point, I would assume that a buyer would be stepping into the shoes of the current owner and would buying the property subject to the preexisting lease/land contract and the tenant's rights related to the preexisting arrangement.  If the preexisting agreement prohibits the owner from selling the property to anyone else during the "lease to buy" period, then--at a minimum--I would require tenant consent.  No one wants to buy their way into a headache.

Since we know that many tenants never actually purchase their rented property, you might consider finding out the tenant's current intentions.  Perhaps they are willing to sign a new "clean" lease (without "lease to buy" provisions) or would release their "right to buy" and consent to the sale.  

It all starts with a review of the agreements and understanding the intent of all parties. 

and, here is the disclaimer...this is just one guy's opinion.  This isn't legal advice, and you should talk to your own attorney.

Jon,

It is possible that the Town (village) of Merrillville requires residential rentals to have permits.  This is a relatively new thing in Indianapolis, but the idea is that if you have a rental, you have to "register" with the local authority.

Check out Chapter9, Title VI of the local code:

https://library.municode.com/i...

If that link doesn't work, try going to municode.com and search for Merrillville, IN.

If you have a nice, fixed, low-rate, 30-year loan, I wouldn't want to give that up.