All Forum Posts by: Edward B.

@Darian Richardson,

It looks like you understand your options. You just need to decide which you want to do from a cost perspective. Not sure why you set up the Nevada LLC or what you ultimately intend to do with it. If it is just to hold real estate then probably closing it down and opening the GA one is your best bet because if it owns property (does business) in GA it has to be registered there regardless. You could also open a GA LLC and have the NV one own it for another layer of protection, but depending on your situation that is probably overkill.

If the CPA has to file separate returns for each entity then I expect he would charge for that. I had a GA CPA, though, and he did not charge me extra since all of my LLCs are pass through. You may have to file in NV as well if you have an LLC there, though, and that will probably be extra but not too much in my experience since it is just part of your personal return.

@Aaron Christen, make sure you read the paperwork and that there isn't a due on sale clause in there. Just because the lender says they won't put in there doesn't mean they won't, or that the person you are talking to doesn't know what they are talking about. And if it is in there, but they say don't worry because they won't enforce it, understand that won't be up to them if they sell the loan, which they likely will. 

To answer your questions, you can just Deed it over to your LLC, no problem. I agree that the only reason they would insist on loaning to you is because you are getting a residential mortgage and not a commercial one so they intend (or at least want the option to) sell it. If they sell it, see above. A lender would have to chime in here, but I would think that a Due on Sale clause would be mandatory to make it Fannie or Freddie compliant. Honestly have no idea, so like I said make sure you read mortgage/DoT and note.

@Michael LaRocca, I can't speak to the specific areas you are looking at, but I can to your situation. When my wife went to dental school we bought a duplex and lived in the bottom and rented the top. Still own that property and am now renting both units. It is quite lucrative being close to a hospital and college so strong professional tenant base.

The other thing you have going for you is access to funding. Pretty sure it is illegal to use your student loans to buy investment property, although you can use it for housing expenses. You'd have to talk to someone smarter than me on that topic. If you have the money for dental school, though, what you can do is use that money to buy the investment and borrow the money for school. That is not without its perils so understand what you are getting into, but if the numbers work, the numbers work. Some pros to that strategy are fixed rate loans that are often tax deductible. Some cons are shorter amortizations and a loan that is much much harder to get rid of if you hit hard times. 

I imagine a lot of people are going to scream at the dangers of that strategy and they aren't wrong. Of course, investing is never without it's risks regardless of how you do it. You have to be smart about it. Instead of getting out of school with less student loan debt in four years and starting your investing career with incrementally more monthly cash flow, you could be starting out with more student loan debt, but four years of cash flow (or $0 housing expenses), a property that has appreciated for four years, and four years of mortgage pay down and tax benefits. 

Our situation is different from yours and we bought in a different market, but our cash flow is more than enough to pay the student loans and we could have sold the property for more than enough to pay off all of the loans and then some. Just an example of what could be possible if you think outside the box.

I've also seen people acquire a property for next to nothing (inheritance, etc.) and are just trying to milk it for everything they can until someone takes it back because it isn't worth it to try and cure the outstanding liens...or they just can't afford to.

@Yvonne H., lender's are hard to find for a MHP, but they are even harder to find for the POHs. I would be very very surprised if you were able to get a loan for 80% LTV on both the park and POHs.

Having said that, I would value the two separately regardless. You should only be capitalizing the income from the park itself and then only paying the shell value for the MHs. The shell value is typically low enough on a MH to overcome the depreciation assuming you do not overpay. If you capitalize the rent from the MHs you will certainly overpay for them, probably to a significant degree. I would then ensure that I had a plan in place and the reserves available to replace any MHs within 30 days should it become necessary.

A MHP with all POH is not what most investors are looking for. As such you may be able to get a great deal and cash flow rather well if you buy right. You will be buying yourself a full time job, though, and will likely have difficulty unloading it should you choose to do so.

 I'll second that. The rent from the park owned home is a different type of income and a lot of lenders don't like to lend on that. It is certainly not as valuable or stable as the lot rent and should be capitalized at a different rate, but really, all the mhp investors I know separate it out and offer a shell value. Same with any seller financing, totally different type of investment and valued differently.

@Adriana Duarte, I've done business with Anderson Business Advisers and am pretty happy with the product I received (Family Trust, a couple LLCs, and a couple of land trusts.) I think it was good work for the price. I would caution you, though, that they are a big money making outfit and will definitely try to upsell you, so have an idea of what you are looking for before you talk to them. They hooked a buddy of mine up with a C Corp and several LLCs before he had ever done a deal. Lots of coin and sheer overkill in my opinion. Caveat emptor.

@Chris Serger, foreclosure laws are very state specific, but in general if you foreclose from second position you are seeking the amounts you are owed at auction and the buyer at auction needs to realize that what they are purchasing will be subject to all liens senior to you. Everything behind you will get wiped.

In your scenario you can set the auction price at anything up to what you are owed, UPB + arrears + costs to foreclose. What you can include differs by state. I do not deal in OH and have never heard of the 2/3 rule. Might be that things are totally different there.

I'm sure someone with more experience in OH, 2nds, or notes in general will chime in. @Dave Van Horn, @Chris Seveney, @Bob Malecki, @Scott Carson

I rolled 4 properties under one loan with Lima One Capital a couple of years ago. Two of the properties only appraised for $37k  each, so that may still be an option.

 He's not cash flowing $300. His cash flow, as you pointed out, is significantly less than that. Especially over time. However, his mortgage is low enough that he should be cash flowing. Where you get in trouble is when your mortgage is $400 and you think you are cash flowing $75 a month. You are almost certainly losing money in that scenario.