All Forum Posts by: Dion DePaoli

Loans are subject to minimal loan amounts. Loans destined for the GSE's have to have a balance of $50k or greater. Portfolio loans are up to the institution that lends.

I suggest you make sure you understand if the lender will treat the HML refinance as a rate and term or a cash out. Sometimes unconventional mortgages are treated like unsecured debt payoff which means the loan will be a cash out refinance further limiting your LTV downward.

"Who are you ?!???....and how did you get my number?!???"

I am probably going to repeat a couple answers a little.

Your employment history and income history is acceptable. Going from school to a job with good income is a natural progression. They still need the documents but the lack of income while you were in school should not hurt your qualifications. Underwriting is smarter than that, simply document the events and you should be fine.

In terms of taking title in the name of a newly formed LLC. I am not too sure you will actually end up being able to qualify for this commercial product. Clearly by the above idea, you are both new to your career and source of income and new to investment property management and ownership. I have a hard time thinking the lender will allow you to vest title in the name of the LLC. If they do, I am guessing they will put forth some additional demand like you have to hold your operating accounts at the bank or perhaps even invest in a CD or something. Point is, there is clearly some credit risk here. Every potential borrower (LLC or You personally) is new to the game and new to their income. Time has not passed to prove the management of income will prevail and you are a good credit risk. That is a decent sized barrier.

In general, I am thinking they will redirect you to more of a residential investment loan and away from the commercial product. They told you about the commercial product, but I don't think at the end of the day they will qualify you.

You will not be able to borrow as a natural person (in your name) and vest title in the name of the LLC at closing. They are going to demand you as a natural person be a borrower. The LLC being new and your experience being null, that is simply too much of a risk for most lenders. The LLC does create some level of complication of enforcing the remedies provided in the security instrument and note and for a new inexperienced borrower, I don't think they will extend that risk on the first deal because of those underlying ideas.

As many folks pointed out, you really don't need the LLC for protection on deal number 1. A good insurance policy will cover you back. This is probably the place to start. Get into the deal, your natural name and develop your relationship with the bank. As you get to a minimum experience time, it will be easier to go back to the same bank with deal 2 and then start talking about holding the assets in an LLC.

Clay, now I want to slap you.

You work as a commercial loan analyst??????
You work at a REIT?????

Man, two of the lessons you seem to need a better understanding of are right in front of you. How do you not know source and season requirements on funds used in equity for a deal? How do you not know about the capital demands said capital must be able to address to reduce the lending risk??

Within your REIT, how does capital subscribe to your REIT? How are those investors secured or unsecured and what evidences their investment into the REIT.

You seem to work at a place which functions a little more advanced than most street level deals but I simply don't understand how you are not tapping into the knowledge right in front of you.

Clay,

No offense but frankly this is crazy talk. Do yourself a favor and stop this non-sense.

When you purchase ANY investment property with financing, the borrower MUST have capital to put into the deal. You must have capital to manage the needs of the property in reserve, ether rehabilitating the property or even simply maintaining the property. In any case where you 'borrow' the funds needed to close, which are documented in underwriting prior to the loan funding, you will be disqualified from the primary financing. So your idea is flawed out of the gate.

As an investor or even as a lender this idea would take about 3 seconds before being filed in the trash can. The request here shows that you still need to learn some more details about how some of these things work.

The answer to your question, "How do I entice the investor to invest capital given that they will have no recourse on the property?"

- yes the answer is easy. YOU DO NOT. There is no deal here. What you are trying to offer is close to a waste of time for any investor. Exactly what is it I need you for...if you need my capital to do ether of these deals? You have not answered and solved that problem.

I am not sure what you have been reading on the 'creative' side of things but this is not creative, it is more fantasy. With the intent of your plan there is ZERO attractiveness to either of these two deals from any unknown investor and frankly even family members likely will not like this either.

You need better reading material from folks who actually do put deals together, I feel like you have read too much from folks with pipe-dreams.

Split your education up on this in to a couple of pieces:

1. Investment Property Finance - commercial & residential - you need a better understanding of the underwriting guidelines for each. How is a borrower qualified and what makes up that qualification. There are many threads here on the subject.

2. Raising Capital & Capital Structure - how to find the capital and how to arrange the capital to suit the project needs while not alienating the above ideas if further finance is needed. These can fork in different directions with joining in title or joining through a subscription or through an operating agreement.


.....wait...

@Ron Steele

It is difficult to give you any meaningful advice since you really didn't share any meaningful details about the structure under which you and the attorney entered into.

One of the only bits of information here is that the it seems you put capital up around $20k. The actual purchase of the property took place 30 months later. Almost 3 years? I am not sure what the longest record is for escrow, but this has to be towards to the top of the list. What happened here?

What are the mechanics (agreements, arrangements, etc) on how you delivered your capital to the attorney? Are you in a JV agreement or did you invest in an LLC or are you simply on title?

We understand the idea that the attorney thinks this is a good deal and for some reason the deal will "come around". What does that really mean? After 3 years, the deal has not 'came around'? Are you rehabbing? Need to lease up? What sort of building is this?

Well, those are just some quick easy questions. Moral of the story, you will get suggestions but only if you provide details so that we can give suggestions based on those details and not be left to speculate on what it is you are trying to talk about.

I would not recommend using a landlord service provider for whole loan credit inquires. The two events are a little different even though the outcome of getting some type of credit report is the same. The authorization to pull credit is not on the same path.

Credco is one of the major folks. You have to be approved to pull credit and you are responsible for what you pull, how you store it and use it.

Josh I see you list yourself as a residential lender, you do not have a vendor service that you already use for your loans?

This thread needs more details. The capital structure is not detailed herein and to some degree some resolutions are just shooting from the hip.

Tell us how the investment is structured. Use one asset as an example. Then, how many of these deals do you two do each year?

In one of the top posts the OP says he uses the investor money for long term holds, is that a type error?

Frankly, this is my experience as well. Man did I know the state statues, but not a damn thing about how to find a deal, put it together and close it. The contacts were good. I just told the same thing to one of our guys getting his license...'work the class, just pass the test, but work the class'.

I would even go so far as to say, holy cow...if I knew then, what I know now. I certainly missed out on some opportunities that were right in front of me that I couldn't see. Hindsight is measured in years, I suppose.

Thanks Jay!

I guess, the concept there is that the course designed to teach a person to achieve license is aligned with teaching someone to be a prudent RE Investor. I am going to go ahead and disagree with that idea under that premise. Certainly some level of education is better than none, etc. However, the RE agent course doesn't teach ownership or management techniques. Nor does a MLB course teach how to invest in mortgages.

I do agree, that learning in a DIY fashion with an experienced teacher is worth it's weight in gold. That has been the more recent theme of the posts. So it still begs the question, how does a newbie judge who would be a good teacher and who would not be?

I think it is easier as your knowledge and skill progresses to judge these merits, but that is for the experienced or semi-experienced. What about the newbie? Even if it is choose a company to mentor you or choose a specific coach, how would a noob filter the wheat from the chaff?

On a side topic, the fact that the license coursed was suggested in this setting is an example of the infinite supply of opinions which may or may not be on point that a newbie must filter through. Curious (not picking, just conversting) Jay have you ever taken a license course for real estate? Which license and do you feel it prepared you to be an investor?