All Forum Posts by: Dion DePaoli

You are getting non-owner occupied loans. Your wife does not have to be on the mortgage but in most cases must acknowledge the mortgage. So if you qualify on your own, without her assets and credit, nothing changes really.

If you need her assets to help qualify, then she has to become a borrower and will be on the loan.

Your tax filing status and the borrowers on the loan are different concepts.

What area of NY?

What sort of deals are you seeing?

A couple concepts in the OP that have not been mentioned. The state specific places to open your LLC such as Nevada and Delaware.

LLC's are still sort of new to the business world. As such, some states have a little longer history than others. Additionally, some states have a better body of law around the concept of LLC's. The greatest example is Delaware. Delaware opened up their LLC to out of state companies on purpose (for revenue). Because many companies opened LLC's in the state (some large) a good body of law around LLC's has been established thus making it an ideal place for an LLC to open opposed to a state with less legal framework abound the concept. Obviously, favorable to the LLC and its operators and members.

Other reasons you hear of Delaware and Nevada, is the anonymity of the members of the LLC. In Delaware the members of the LLC are not of public record. Creating a layer of insulation for the member. In Nevada, you can file either way, anonymous or not.

Then there is the simple issue of state tax. Those states do not have a state tax on LLC's. Another benefit. The filing fees for the LLC are very reasonable as well.

In both of those states, their LLC laws do not require a brick and mortar presence in the state in order to open an LLC. That is not true for all states.

So the take away, which has not been discussed in many of the BP LLC discussions is also, be aware of what business you conduct and what state you open your LLC in, laws are different from state to state and you should involve an attorney to at least advise on your legal protection.

There was a comment above which mentions, a tenant can pursue personal assets if an LLC is present. That is not a blanket true statement. The LLC affords a level of protection from the mingling of personal assets with those of the LLC. Provided the corporate shell can not be pierced no claim can lien your personal assets.

HOWEVER, some states will not allow a single member LLC. And piercing the veil can be simple if proper LLC protocols are not adhered to such as maintaining corporate mins and proper firewalls between personal and business assets.

Designing your 'practical' insulation from liability is not tough. In most cases a single LLC with good insurance is all you will ever need. I agree with Bill, if the general business operation is residential landlord, your tenants lack reasonable resources to bring claims against you that will exceed your insurance, if they had the resources they would own their own house not rent from you. For larger assets, such as apartment complexes with hundreds of tenants, you run the risk of class action suits or multi-plaintiff complaints thus bifurcating that asset from the rest of your business holdings adds a layer of protection from that suit seeking other business assets or personal assets from being included.

The other structures that were mentioned have tax and income benefits which would be individually unique. So when looking into what is best for you, you really should consult an attorney and an accountant.

The key distinction here is the asset being discussed is the note, not the real property. You can 'wholesale' any product or service.

I don't know much about the lady or her program but the key concept in wholesaling is finding a deal where you can enter for less than you can exit, thus creating an arbitrage between your purchase price and your sale price. It is not magic, it is simple economics.

Many of the wholesale teachings are on the premise of using other people's money. Specifically your end buyer's money. Wholesale is really a flip. The entity in the middle doing the wholesale does not intend on being the end user.

As far as many people starting there, can't speak to that, I think there are just as many folks who simply start out as a simple landlord or investor of some sort. The defining factor seemingly being whether you use your money or attempt to use the money of your exit buyer.

I browsed her website. A couple interesting points. Most of the testimonials simply talk about the material in the course being 'good'. Not too many people are testifying how it helped them make money. Then I looked at the "Diamond Coaching" subscription....$10,000 and my heart stopped.

8% in today's market is prime, and is the value put on Class A assets, with a little downward pressure in larger MSA's.

The question here, is this property worth 8% or should you earn more?

47% of the property is currently vacant

I like your step offer for the vacant space. IMO, you are putting a very high premium on the empty space further increasing the value of the property without cause.

There was no mention as to the Tenant Improvement needs to rent that space nor if the leases are single, double or triple net.

You are estimating that the vacant space will lease out for $2.86 psf and therefore the weighted average of all your space rents at $2.37 psf. Yet the actual weighted average of the property is $1.93. So buried in your valuation, you have the empty space adding value instead of detracting value. A premium of 22%, mind you. You do deal with this in some manner with your step offer but it is unclear what happens in the event the step fails and what it takes for the step to fail such as lesser lease amount or space consumption, etc.

The current occupied space you are at 10.80% gross yield. Yet for the vacant space lease target is at 9.60%, one whole point less. So essentially, you drove the price up or are evaluating too high, in my opinion, I would have pushed down, being a little more conservative with future events.

It is unclear what type of tenants the three that are currently in the building are from the post (short term/long term). However, the leases are worlds apart. One tenant is at $0.91, $1.53 and $3.10. The smaller the unit, the smaller the premium. Is this a function of the building or local market? None the less, a situation I would look into.

When i crunch the numbers in general I show you with less than 8.0% return. That said, with the above variables and story gaps, IMO I think you are paying too much for this asset. I think your valuation on the vacant space is where you can get yourself into trouble. I am guessing this is a tertiary market. As such I think real prime needs to be no less than 8.0% cap but I think this asset currently looks more like a 10%. You are giving some very aggressive stabilized values, which seem unwarranted from the post, in my opinion. I am around $200k less on the offer than you and that still might go even further down based on the vacant space potential cash flow and filling in some of the gaps.

Curious what others think.

The conventional minimum loan amount is $50,000. A conventional loan is a loan that is edible to sell into Fannie/Freddie. A small community bank or credit union might have a smaller loan amount which they portfolio. In both cases, it is a very very small group who are less than the $50k. The group is microscopic for less than $35k.

You might have to approach this a little different and see if you can offer up more than one property to get into a higher loan amount. Best bet for an out of the box structure or flexible structure will be the local banks or a private lender.

I agree with Bill Gulley, a short sale or a note purchase would be the two paths I would look into. Taking the deed from the owner subject to this mortgage would not be my first plan of attack. You do not need to jump in the middle of all that if she is willing to cooperate with you.

I would also say take care as to not wake a sleeping giant unless you have a clear path to resolution. Putting your deal together is going involve the owner communicating with the servicing company or investor. Thus, she will then be "re" located. Which collection activity may seem like has been non-existent, but you can not try and collect from someone if you don't know where they are at or how to get a hold of them.

I see a couple hundred million a month of loans across all performance and from many of the big investment banks and other large private equity funds.

Not all things are equal with loans that go stale and loans that progress. They can be affected by many things including geography, state foreclosure process, investor who owns the asset, servicer who services the asset and other concepts.

Many things go into the decisions that an investor or a servicer make regarding the disposition of loan. Most of this still funnels back to P&L or Portfolio management.

That said, progress or activity on loans does not mean final disposition. In some cases failure to pursue collection activity can seriously hamper the enforcement of the note and security instrument on behalf of the investor. However, because of these inefficiencies companies like mine have business. Additionally, there is business and profit potential to the street level investor as well being more efficient in the disposition of the asset.

There will never be and has never been the broad stroke justification for why a loan is dealt with or not dealt with. Falling through the cracks or purposely not disposition. Those reasons approach infinity deriving from mortgage servicing contract restrictions, portfolio size, balance sheet health of the investor and regulations to name a few. This is aside from file defects which prevent enforcement of the note and security instrument or seriously diminish their capacity. In those cases, you will never hear from the investor that the reason they didn't or have not been more aggressive with their opposition is that the ownership chain is broken or some other file defect.

As I said, it is interesting that the BK has been inactive since 2011 and it sounds like no investor or servicer has picked the ball back up to run down the field in what would seem like a pretty easy file to do due diligence on. All that being what it is, therein lies they opportunity for the OP.

Find a bank or lender who will do an investment property loan and they will help put the paperwork together.

First, let us correct what you have said. A mortgage (or DOT) does not get "dismissed" by a bankruptcy or any other event. A Bankruptcy can be dismissed, which means the BK plan was not followed, so essentially the BK applicant was denied BK for lack of following the BK pay plan. If the BK plan was followed, then the debits are "Discharged" which means the creditor is considered paid in full and no longer can collect any outstanding balances.

A personal BK is either a Chapter 7 or Chapter 13. A chapter 13 can include the BK applicants primary residence debt but is not canceled or dismissed. It can be reduced by the court of the trustee but it doesn't just disappear. Additionally, they do not knock that much principal off when it is reduced and that is base don the negative equity and other loan parameters. A chapter 7 does not include the home.

So, the first thing I would do is look up the title to the home and see if the security instrument is still valid. The lender may have already caused a foreclosure and the lady does not know it.

If she is still the vested owner of the property, then she is the person you will have to deal with regarding your plan. If she is not the owner, well she lost the property and you can approach the new owner if that works for you.

In the event, she still owns and foreclosure did not get completed then you will have to deal with the pending foreclosure. I presume you have some knowledge on how to do this. You can call the last know lender, which I am guessing what you have is the last known servicer. If you look at the title to the home, if the mortgage has been assigned to a new investor, there should be an assignment recorded.

It is interesting to see a loan with no progress since 2011 but things happen. This can also be due to many reasons both simple and complex. One of those might stem from the BK filing she did and the loan has been serviced poorly or changed hands and serviced poorly. Since it sounds like the BK is dismissed, the mortgagee can resume collections again. Prior to that, the mortgagee could have filed for Relief of Stay to pursue their collections. If a Transfer of Claim never took place, the new owner or owner's servicer may not have been alerted the BK was dismissed.