All Forum Posts by: Jeff Copeland

Private loans such as this are typically secured by a mortgage and a promissory note. 

Why would they not want their loan secured by a mortgage lien on the property? That is the best protection they can have.

https://www.biggerpockets.com/... - Although the title says Seller Financing, in reality, any type of financing (private, hard money, etc) works pretty much the same way.

In terms of assets, they aren't really unloading anything. Their balance sheet remains more or less the same. They are simply exchanging X amount of liquid cash for X amount of a performing note. The cash is an asset. So is the note.

And yes, you need to keep track of the principal and interest paid. Among other things, it tells you your current payoff balance. And the lender will need to report the interest as income.

When a real estate attorney prepares the loan docs, they typically include an amortization table with the mortgage and the note. As long as all of your payments are exactly to that schedule, it remains accurate. But if you pay down any principal early, it changes the rest of the table. 

An attorney, with input from your CPA, can setup an LLC or partnership or corporation that serves this purpose and more. But these are not DIY legal/tax strategies. Hire the right professionals before you go taking hundreds of thousands of dollars of investor money.

Not necessarily. Underwriting for W-2 employees is based on documented pay (usually payslips and bank statements). The two year rule is for self-employment. Talk to your lender and see what they say.

Hard no for me. And there are actually major risks to accepting a year of rent in advance:

You might consider finding some local investor meet ups. It's a low key, no pressure way to meet the type of people you're seeking. 

You have plenty of time, so there's no real urgency. But I would start by finding an investor-friendly buyer's agent, and they'll likely already have lenders and contractors in place to refer you to. 

Not sure what you mean by wholesale through a realtor. 

But the reality is you can't show proof of funds if you don't have any funds, and if you don't have any funds you shouldn't be making fake cash offers on houses.

You'll need to find a money partner or a hard money lender to front the cast and provide POF.

Most lenders will be more concerned about when the leases expire (and that they are annual and not month to month) than when they were signed. They'll also probably want to confirm that your tenants are actually paying and there's aren't major collection issues at the high rents, but otherwise I don't think this is a problem.

Your loan terms and LTV will be based on an appraisal, which determines the value of the property right now in this case, so the appraiser should use your current rent roll and NOI. They don't care what the property was worth last year, they care what it's worth now.

Welcome. Lots of great resources here. Dig in!

Would you pay $250k for a property that rents for $500/mo?

A $250k investment to get an extra $500/mo in rent is a .2% cap rate. That's a terrible ROI in terms of cash flow.

It could possibly make more sense from an equity standpoint, if the $250k investment raises the value of the property substantially. But that only helps you if you sell or refinance. 

Check with @Doug Crenshaw