All Forum Posts by: Scott VanHee

@Keith L. SFH can be put into an LLC, however, doing so changes your financing options.

The traditional Fannie Mae mortgage requires the borrower to be an individual. So, putting the property in an LLC typically means that you've eliminated the residential/consumer type mortgage - the one most people want because of the long term low fixed rates.

Lots of people say to just close in your name and then afterwards quit claim to your LLC. While you could do this, what typically isn't pointed out is that those loan docs you signed include a call/demand feature that allows the lender to call/demand full repayment if title changes - which is exactly what happens when you do the quit claim. So, it becomes your risk tolerance. Are you willing to roll the dice that the lender won't call the note.

Other option to consider and discuss with your lender that may eliminate the above risk - LLC owns the property, but loan is in your name - not the LLC.

@Cheryl Moore Short answer, yes. Unless you find a lender who’s lending you money unsecured. The idea is that you refinance based on the much higher value such that you’re able to pull out all your hard money. End result is that you have a property with paper equity and all your hard equity back to move on to the next deal.

@Carol Birnberg DSCR = Debt Service Coverage Ratio.

Lots of good info in the thread. As a few have stated, some of it will come down to your risk tolerance when it comes to dealing with a loan that balloons vs. fully amortizes. The reality is that most traditional lenders (whether banks to credit unions) will cap the loan term/tenor at 5 years with some willing to stretch to 7 years (may require lower LTV) as the lender portfolios those loans vs. selling them off like the owner-occupied mortgages. The shorter tenor is easier for the lender to hedge the interest rate risk when it's providing the borrower a fixed rate loan (that's not done through a derivative). Heck, some of the smaller lenders may not even be hedging, so they're really trying to reduce rate risk.

Obviously, I don't know the specifics of your deal, but generally speaking when people talk about refinancing in 5 years, they just mention that the loan will mature and have to be renewed or refinanced with another lender. There is a cost to the renewal (new appraisals, loan fees, rate adjustment, etc.), but typically the lender isn't re-setting the 20-year or 25-year amortization - they just take the current balance, current rate, and run the am schedule based on original term minus 5 years. Due to the material cost of the renewal - most people will push for a longer term (say 7 years instead of 5) and it's likely the lender will want something in return (higher rate, lower LTV, etc.).

As @Jim Kittridge hits at with #5 - one thing many first timers of portfolio loans don't know is to establish release prices for each property secured by the 1 loan upfront. This isn't necessarily something that lenders will want to do - especially the 'risk approvers'. The issue at hand - if you don't have release prices established up front for each property and during that 5-year period you want a partial release because you want to sell less than all of the properties - a lender will require new appraisals on all the remaining properties as there's usually an LTV max covenant plus, I think, there's a regulatory requirement for the lender (talking a traditional lender, not private, and I'm not an attorney or regulatory expert, thus the "I think"). So, if you had (and paid for) 10 appraisals at closing, then 2 years later you want to sell 1 property and there's no established release price for that specific property then you're paying for 9 new appraisals, then in 3 years when the loan matures you'll pay for 9 more new appraisals for the renewal (assuming no further sales in those last 3 years). That's a lot of appraisals! Appraisals have a relatively short shelf live.

@Shaniqua Dupree tough to provide a definitive answer, as it depends on a lot of variables.  Before getting into any of the variables with regards to the trailers themselves... questions you need to consider are:

1) How much will it cost to move the trailers?

2) Where will you move them to?

3) If to property you don't own, what will be the lot rent?  If you own property, is it already set up for the trailers?

Etc.

As you can see from the above few questions... there's nothing 'free' about the trailers.  You will incur expenses in moving the trailers, setting them up, etc.  Clearly, the current owner has determined that the value to him/her is less than the ~$10K it would cost to move them.  Whether they are of value to you is a completely different issue, but you need to answer the above before moving onto potential costs inside the trailers (for example, do they have bedrooms, kitchen, cabinets, etc.).

I hope this helps.

@Vivianne Salazar I'm no expert, but if you're buying a manufactured/mobile home that will reside in a MHP (i.e. you won't own the land), you (as owner of the home) are obligated to pay the lot rent in perpetuity.  You're leasing/renting the lot with no option to buy and the MHP owner will expect to collect the lot rent each month - so long as the home sits on the pad.  Obviously, if you resell the home then the new owner becomes obligated for the lot rent (presuming the buyer is approved by the park).

@Kris Fox

 Do the Phase I and get several quotes.  The Phase I will do more than just review the history of the property and surrounding properties.  Yes, the few thousand may sound like a lot today, but once you step in the chain of ownership, you can't undo it and can be liable for remediation.  You already have expressed a concern about neighboring properties/companies.

I'm sure a quick search of the Internet will provide you with articles/info regarding stories of people buying properties for $X, not doing sufficient EDD, and subsequently finding out that there's an environmental issue and the remediation will cost a multiple of the $X purchase price.  Even if it's not a multiple, a $50k remediation is a lot coming out of your pocket one way or the other.

With an employer match that's substantial (say 50% or more) and offers index funds as options (in addition to others), I'm pro 401(k) solely for the match.  For those who aren't trying to be the next Warren Buffett or Peter Lynch (in addition to being a W-2 employee, mom/dad, husband/wife, volunteer, etc.) at least the index fund will allow you to bet on the house.  I put less weight into the tax advantages, as no one can guaranty today what the tax structure will be 20 or 30 years from now.  I'm fairly certain it will be different than today, but have no idea to the extent or which codes.

The best thing a person can do is assess their current situation, their plans, their risk tolerance, etc. and make a decision to either invest in a 401(k) (or other retirement plan) or not.  The best thing is, whether you elect to or elect not to, you can change your mind and election at a future date.  :)

@Andrey Y. The lack of an employer match makes a huge difference and makes it a very personal decision and forcing a person to be honest with themselves.  If I was talking to a friend I knew who has difficulty saving and is spending his/her W-2 income on 'stuff' vs. investing in something, then the 401(k), even without an employer match, would make sense to help them save for retirement.  If the individual is good at living within their means and investing the cash flow vs. consuming 'stuff' then they likely already know the answer and should be investing outside of the 401(k).

I wouldn't suggest investing in a 401(k) for the sake of 'diversifying'.  There was a period in 4Q2008 and 1H2009 where nearly every asset was arguably correlated and went down.  :)

Some people believe 'you can't get hurt with dirt', there are others who argue the 'liquidity' of the stock market is better, and there are others who play in both arenas vs. betting on only 1.  Some people can't stomach the nanosecond MTM of the stock market.  Ultimately, it's a self assessment.  If it's going to keep you from sleeping 28 nights of every month, then it sounds like you should avoid it.  :)

@Alexander Mattson

Is the lease in your roommate's name and you guaranteed it?  Or is the lease in your name and you rented out a room?  If the former, there's likely not a lot you can do, as the landlord will look to you for payment and if you elect not to pay then it will negatively impact your credit.  If the latter, and you have paperwork, you might be able to take the individual to small claims court, though if your lease prohibiting you from renting out rooms then it might get thrown out due to the intentional violation.

Any time a person guarantees or co-signs (whether a lease, an auto loan, student loan, etc.), the individual needs to be ready to make the payments (remaining and any already past due).  There's a reason why the guarantee was required... the other individual was an unacceptable credit risk and couldn't qualify on their own.  As the guarantor, you've essentially lent out your credit quality for the other individual.

I agree with  @Michele Fischer ... focus on finding a replacement roommate ASAP to help stop the extra drain on your cash flow and then focus on what steps you can take, if any, against your former roommate.

Disclaimer: I'm not an attorney and nothing above should be construed as legal advice.  :)