All Forum Posts by: Chris Reyes

@Chris Reyes - One of my lenders in DC has a similar requirement for clients. It's certainly not a blanket step required by the states. I'd consider working with other lenders if it's an impediment to progress.

Chris,

Not all lenders are requiring this, or at least not as formal of a process. We are not requiring the employer letter on our portfolio products at FirstBank, but generally need it for 30 year fixed agency loans. Hope this helps and good luck!

Chris, first thing I would do is call around and confirm other lenders are doing the same. 

I know of a hard money companies here in town that do a 30 year long term financing obviously the interest rate is higher but could be a temporary situation to get you into the property if you really want that duplex. Happy to put you in contact with my person over there. 

I have a feeling 12-18 months from now the lending restrictions wont be as strict. 

@Chris Reyes

I think @Thomas Franklin is giving you limited info.

If you are occupying the property, you can get a conventional loan with 5% or even sometime 3% down. Otherwise, non-owner occupied (ie investment) conventional loans are 20% down. Meanwhile, FHA loans (well, really any Gov't backed loan) requires owner occupation. Its not clear what you intentions are with this duplex so its tough to give you any advice. Which loan product applies starts with what are you intentions for owner-occupation, then which product is the cheapest or best option for YOU.

Other than the fact your are investing with a non-spousal partner, there are no tax benefits to using a LLC. That is a commonly presented concept. Regardless of whether you use a legal entity, the deductions allowed are all the same. In your case, you would want the legal entity to handle all the "what-ifs" and to also portion out the profit/losses.

The "LLC or not" issue is discussed in BP daily. Whether you use a LLC or not, you'll need insurance. Neither insurance nor a LLC is foolproof measure to protect your assets. Its a matter of how much "defenses" do you want to setup in case something should happen. As I alluded to in my first post on your thread, you need to maintain/protect your corporate veil otherwise all your effort is useless. At a minimum, this mean no co-mingling of funds and not treating it as your alter-ego. The entity must stand alone as its own separate, entity.

The Due on Sale clause is almost the least of you worries... "Everybody" seems to do it, but nobody seems to address the multiple issues quit claim deeding to your LLC creates with your corporate veil. Furthermore, you really need to have everything, including the mortgage, under the name of the LLC.

Again, make sure you consult with a few qualified professionals (mix of legal and accounting).  Good luck.

@Chris Reyes many people will suggest purchasing a property using a FHA Loan, to reduce your out of pocket money. The other option is a Conventional Loan requiring a 20% Down Payment.

Assuming you have a respectable FICO you can buy, with a FHA Loan (3-5% down, a 30 year amortization schedule, and a residential loan rate). You live in one unit and let your tenants pay the mortgage and other property expenses. This will give you experience as both a Landlord and Property Manager. The downside is you will need to live there, for a minimum of one year (to satisfy FHA Requirements); AND because you closed personally, you will not have Asset Protection, in the form of closing in the name of a LLC. What happens if one of your tenants has a slip and fall, on your property, or something else happens to them? You are on the hook and can be personally sued, for everything you own. Some people will say, "Take out a quality Insurance Policy and you will be protected." Ambulance chasing attorneys know their way around and can legally navigate around Insurance Policies. Another downside is you loose on the advantages, of the Federal Tax Code, by not closing in the name of a LLC.

If you want to close in the name of a LLC, Mortgage Lenders will offer you Commercial Loan Terms (25-30% down, a 15-25 year amortization, and a ballon due in 5-7 years). This is what I am encountering, in the current Mortgage Industry.

If you think you will go FHA or Conventional; and then Quit Claim the property, to a LLC, or a Land Trust you run the risk of the lender discovering a Title Transfer occurred and activating the "Acceleration Clause" or "Due on Sale Clause" that requires the loan to be paid in full, within 'x' number of days. These clauses are contained, in all Promissory Notes nowadays.

You may be asking yourself what can I do? My suggestion is you consider Seller Financing. You may have to put more money down (10-15%), but you can close, in a LLC, with no worries about banks. I have a lengthy Legal Opinion, from my seasoned Legal Team regarding this matter.

Always have the possibility of loan being called in. I have an umbrella through my car insurance provider.