All Forum Posts by: Account Closed

@Michael Lopez

An alternative option to get into real estate is to loan funds with a promissory notes collateralize by real estate. Makes any nest egg into a NNN lease.  I've been doing for quite a while with my savings and retirement accounts.

Another reason why promissory notes collateralize by real estate is a strong option. Makes any nest egg into a NNN lease.

I looked at several business bank account options for self-directed accounts. US Bank had the best business checking account as far as fees go. However, if you plan on having a high balance then there are higher interest yielding options but cost more in the end. I considered paying more in fees for a local credit union but I didn't see much of a benefit considering the likelihood I'd use them for a loan.

@John Teachout,

I hear you but this is not the case.  It's retail condition now and could use some new windows.  This buyer literally wanted me to pay to rehab the whole house with a the price reduction he wanted.  He already signed a purchase agreement to a lower price that would have easily paid to get that stuff done.  He was just learning on everyone else time.

I'm really surprised the deal fell through considering it has a full basement that is bone dry and could be easily finished. Also, the garage would be an ideal site for a new build ADU with all the utilities easily available. Roof is in great shape, has a brand new gas furnace, and sewer lateral replaced. Let me know if you or someone you know is interested and have a great weekend. It would be a great house hack or live in flip.

@Robert J.

Good stuff.  I'll definitely exercise these options on the next buyer.

Need to vent... 

I am selling a rental and had the deal fall through due to an amateur/poser investor.  My agent was upfront with the need of a flexible closing date in January and had many interested parties but going with the first one was a mistake.  The house is in a very desirable location in downtown Vancouver, WA near PDX and the listing had a TON of interest.  He came in a little low but in good faith I met him in the middle because the house needs a bit of work but nothing scary.  The needed work is obvious and his inspection only showed obvious things.  He dragged his feet and ended up asking for WAY more off the accepted counter even though he saw the needed repairs on day one.  The deal is dead and lost a lot of time.  Updated the listing indicating it's being sold as is and it's priced accordingly.  Is there anything else I can do to deter the poser investors?  Thanks for reading.

Update:  Fannie Mae was directly asked concerning this scenario, which is ultimately a “No” for either scenario as a primary residence duplex or purchasing the property as two separate homes, one primary, one rental.  It doesn’t seem to matter that the county is ok conveying it as one property. The one lot is still illegal, which makes it ineligible for financing. 

@Jay Hinrichs

Wanted to share what I received from the Senior Policy Analyst for Oregon Department of Consumer and Business Services.

"Good morning Joe –

The first question is whether the property securing the loan is “residential real estate” as that term is defined in Oregon Revised Statutes (ORS) chapter 86A, The mortgage lender licensing requirements contained in ORS chapter 86A are triggered by the character of the property rather than the nature of the loan (i.e., the real estate transaction involves "a mortgage, deed of trust, purchase money security interest arising under an installment sales contract, or equivalent consensual security interest . . . upon which four or fewer residential dwelling units are planned or situated, including but not limited to individual units or condominiums and cooperatives. As used in this subsection, ‘residential dwelling unit’ means an improvement designed for residential occupancy.").

You may be eligible for the “private money lender” exemption. If the investor is an individual (i.e., natural person) as opposed to a corporation or limited liability company, then the individual may be exempt from the licensing requirements contained in ORS 86A. Oregon Administrative Rule (OAR) provides that: "An individual is not engaged in the business of making loans secured by an interest in real estate as used in ORS 86A (3)(a)(C) and (5)(a)(F) if the individual is making a loan from their own funds and does not make more than 10 loans secured by an interest in residential real estate during any consecutive twelve month period if they do not advertise or otherwise hold themselves out as being in the business of making mortgage loans." Please note that the correct references for the statutory exemptions are: ORS 86A (3)(b)(C) and 86A (5)(b)(F). You should also note that the statutory references contained in the rule will be fixed in a future rulemaking governing technical corrections. Even if you are eligible for the exemption, you will need to obtain the services of an Oregon licensed mortgage loan originator unless the loan is for construction or rehabilitation of the property.

A "private money lender" who is eligible for the licensing exemption contained in OAR does not need to obtain the services of a licensed mortgage loan originator to document a transaction under OAR. Specifically, it states:

(1) An individual need not obtain a mortgage loan originator license under ORS 86A.200 to 86A.239 to make a residential mortgage loan in which the borrower will use the funds to construct, alter, move, enlarge, replace, repair, or develop land for one to four dwelling units designed or suitable for residential occupancy subject to the following conditions:

(a) The borrower does not intend to reside in the completed dwelling;

(b) The lender verifies that the borrower is licensed by the Construction Contractors Board as a contractor and holds an endorsement as a:

(A) Residential general contractor;

(B) Residential specialty contractor;

(C) Residential limited contractor; or

(D) Residential developer.

(c) The lender determines that the loan is not for personal, family, or household purposes. In making this determination, the lender shall consider:

(A) The borrower's relationship between her primary occupation and the acquisition;

(B) The degree to which the borrower will personally manage the acquisition;

(C) The ratio of income from the acquisition to the total income of borrower;

(D) The size of the transaction;

(E) The borrower's stated purpose of the loan; and

(F) Other relevant factors that would indicate the loan is for commercial purposes.

(d) The lender does not collect a consumer's financial information that would require the lender to provide a loan estimate under 12 C.F.R. § 1026.19(e);

(e) The lender does not advertise that, or otherwise suggest by statements or conduct that, the limited liability company engages in the business of making residential mortgage loans;

(f) Neither the borrower nor the lender structures a transaction as to evade licensing requirements for mortgage bankers, mortgage brokers, or mortgage loan originators;

(g) The lender does not engage in prohibited conduct or activities under ORS 86A;

(h) The individual does not engage in prohibited conduct or activities under ORS 86A;

(i) The lender maintains records documenting its compliance with all conditions under this exemption and makes such records available to the Director upon request. Records must be maintained for a period of five years after each loan is made. A lender may maintain records in any electronic format capable of being reduced to written form; and

(j) In addition to the records that the lender is required to maintain under OAR (1)(k), the lender maintains records used to make the residential mortgage loan, including, but not limited to, tax returns, bank statements, financial statements, annual operating statements, and business operating statements. Applications for commercial construction loans should be limited to balance sheets and other information customarily collected for commercial real estate lending.

(2) Section (1) of this rule is self-executing and does not require filing or a fee.

(a) Persons relying on exemptions from licensing have the burden of proof in establishing the availability of the exemption.

(b) If the lender fails to document and maintain records of a transaction, the rebuttable presumption is that the transaction required a mortgage banker license and a mortgage loan originator should have taken the loan application."

I am looking into financing a property hack where the lot has two SFR with a shop/apartment. The listing price is $579,000 in Washington state. My goals are as follows:

* Rent the second SFR

* Rehab the apartment (~$20k with HELOC)

  * Keep down payment under $50k or less

  * Keep monthly payment around $3k or less (annual tax ~$5900 and insurance ~$1200)

I find myself going in circles with 5, 10, 15% down conventional and FHA scenarios; with and without using HELOC to pay some of the down payment. I am not familiar with all my options and during my research I found some wiggle room with seller paying closing costs and possibly the prepaying the mortgage insurance options. Another variable is that the property my be considered two properties and not treated as a "duplex". Both homes are on two different tax lots but the county never had it short platted. Depending on my brokers underwriters option I maybe required to put up 25% down on one and less on the other. The seller is not interested in participating in any owner-carry scenarios but I can ask again if I had a more concrete proposal.

Is there a origination scenario that would meet most of my goals?  Thank you for your time.