All Forum Posts by: Casity Kao

@Jeff P.  If the bank threatens it then switch it back to your personal name, but I have never seen it happen, only heard of it happening from a person who heard of it happen.  But in general I doubt the last thing the bank wants is to take over a home with renters that is a performing note on their books.

@Alex Witte  I would start by asking them what type of interest they would be happy with, and then break down what that number looks like.  So for example with my family, we did not bring them into investing with us until we have done quite few flips but when we asked my sister in law what type of return she wanted he said 6%. So we broke the numbers down and showed her what it was and she said "that's it?."  Knowing what we made off the deal she thought that was small so we then showed her what the interest in her savings account was making her and she realized it was a lot better return, so then we decided to give her 10%.  It's hard money loan rates but for the hassle of no junk fees which really is the biggest expense and no issues on underwriting it was a no brainer.  Lastly, if you do really well on a deal, don't be greedy and share in some of the profits with the family.  I will not tell you how easy it is to get a loan from family now when they want it because we have always paid them our more than what they were asking, or if you don't want to 1099 them maybe pay for their family vacation or get all the kids the gifts they wanted for Christmas.  With our family surprisingly we don't have a predrafted contract but we only bring them into no brainer deals.  If you think you may need one I honestly would question whether you should do it or not because there is no reason to ruin the relationship with close friends and family, and we would never risk that.

@Jonathan Pflueger My husband @Charles Kao is the numbers guy but this was a number he came up with because it keeps the banks far way from many of the Dodd Frank restrictions (which could go away), as well as it makes each loan very important.  He and I both worked at 3 very large banks between the both of us at one point and what we were horrified to see was that the banks we worked at called many performing loans on balloons because they had pressure to unload debt, and just write them off of the books.  A smaller lender with assets under $250 million cannot do that without going completely under and they would not get federal assistance or a bailout because they are not needed, so they would just be sold off to another large financial institution if they took writeoffs like that.  The other aspect is that banks with lending portfolios of $250 million or less do not have a lot of layers of underwriting.  So for example a bank that we use, the loan literally went to the CFO of a company that saw fundamentally the loan did not meet their requirements but with our credit quality and history they knew it was a good loan so they approved it.  Working in commercial lending, it would happen a lot at the larger banks where you'd see loan request comes through that just made sense but the computer would deny, that doesn't happen at smaller institutions.  Now there are times where I would be use a large bank as well but I would say the 100-250 million in lending portfolio is a solid number from what we have seen.

@Hoai T.  I would ask the question a different way to this city by asking under what circumstance could I rent out this level.  So for example can I rent it out to relatives or a family friend.  What is I separated the utilities of the unit?  If you give the impression you want to be as compliant as possible they will work with you.  For example, we wanted to build a two stall garage with an accessory building on a property close to a lake that my in laws could stay in when visiting separate from house as well as an office area away from our loud kids.  The city has a law that an accessory building in a residential neighborhood can not be occupied for overnight sleeping arrangements.  (exact wording I forget).  So I asked what would constitute overnight sleeping and it turned out as long as it did not have a kitchen it would not be considered a dwelling for overnight sleeping arrangements.  So we could get our office with a bath, and an area my in-laws can stay when we are out of town, and potentially rental income for somebody not looking to cook. 

@Aaron Phillips  Keep hustling but right off the bat I think you need to upgrade your day jobs income and lower your expenses to get ahead.  I would recommend a sales job or something in real estate.  If you want to wholesale then you have to be good at sales.  A lot of people that are successful at real estate are successful at everything they do because they know they go hand in hand.  My father-in-law who is a retired real estate millionaire came to this country not speaking a word of English, got stabbed his first week in America and robbed, and was hired as a part-time handyman for a group of restaurants.  One day one of the chefs did not showup, but my father in law had watched and learned how they did their job and asked the manager if he could cook.  He stepped in and less than a decade later he owned that restaurant, a decade after that he owned multiple types of commercial real estate.  You need money to fund real estate, so if that takes you hustling at something else to fund it then you need to do whatever it takes.

@Cameron C.  If you are in this game for the long haul, little white lies, just become bigger lies.  Just tell your lender the situation, and if they don't refinance it then find somebody else that would.  There is going to be different terms but it also sounds like you do not have a landlords policy on your home and you should because insurance company can state you mislead them on the type of coverage you needed.  I can appreciate the honesty, but why not get ahead by working harder instead of cutting corners.  I think fraud is a harsh word but if you look at the definition of the word, that is exactly what it is.  Look at this as a chance to find a good investor friendly lender and you may even find a lender that does it with the same or better terms

@Cara Lonsdale  Will they not answer these questions for you?  I find this post difficult to follow because you can't explain it that well, so my response is I would not invest in something I don't understand nor should you.  Pictures are only a fraction of the story and that's the only thing so far this deal has going for it.

@Jeff P. I would transfer it back into your name with a quit claim deed, get the financing and transfer it back. If you do it in your LLC you are going be doing it on the commercial side with some type of a balloon. I could be wrong on that, but my team calls on banks all the time to constantly find the best financing possible. We have a private lender that will lend on an LLC fixed 30 but they are lending on a but at 7% so you there is going to be trade off on terms or rate to keep it in your LLC. But you can also do a blanket loan for all of them to pull cash out if you go commercial.

@Neil Hauger I personally don't like the rent units by the bedroom because if there is damage to common space it's going to be really hard to figure out what to do next, so if you do that figure in a higher CAPEX. I don't think you will have a problem with discrimination as you did not place the tenants in the first place, so your argument would be that you just managed the existing tenants by incrementally raising rents to keep a good renter. If you are renting by the bedroom on one side it is also a completely different situation because effectively you are renting out 2 one bedrooms versus a 2 bedroom. Most markets, a 1 bedroom is not 50% of the cost of a 2 bedroom.

@Neelakandan Prasad You are asking the wrong question.  Your question should be how do you vet a good investor friendly realtor.  A good investor friendly realtor if you are investing out of state should have investments of their own, and also discuss the process and all the fees the charge in addition to helping you manage your investments.  Their strategy should align with yours as well.  Do you help you find turnkey?  Are you going to help you find value add, and handle project management?  If they do project management how much do they charge and how they justify it?  Always keep one thing in mind, you are going to have to trust your realtor.  This is such a competitive market that if an agent tells you a deal is a deal, you need to have the trust to act ASAP.  Don't rush that trust, but I have investors that tell me all the time they want these super high returns and from my standpoint if I have an investor that has done business with me multiple times that I know that will buy a deal just on my say so, you can only turn down so many deals that I send you before I move on.  You may have to take a good deal on your first deal to get a great deal on the next one.  That doesn't mean take a loss or bad return but trust and loyalty is a two way street.