All Forum Posts by: Jeff Copeland

@Carolyn Yates would be a great person to reach out to!

It depends on the type of financing. If you are using conventional residential financing, then whoever is taking out the loan will also have to be on the deed. You generally can't get conventional financing in the name of an LLC (Fannie and Freddie backed products are for individuals, not corporate entities). 

Many people do purchase in their own name(s), and then transfer the deed to an LLC later on, but this comes with its own set of problems, namely:

Insurance coverage needs to be updated to reflect the change in ownership, which often increases your insurance costs.

Lender can call the mortgage Due on Sale. 

Jamie Hoover Chief Operations Officer 3H Insurance Team | Blanchard Insurance, Inc. jamie @ blanchardinsurance.com

Essentially, yes. There is nothing particularly "investor friendly" about a refinance. It's one of the most common loan products offered by banks and mortgage brokers. Just shop around for the best rates/terms and customer service. 

Closing costs of a refinance may include:
--Origination costs (to the lender)
--Fees for title work and closing the loan (to the title company)
--Recording fees and taxes on the mortgage (to the state)
--Prepaids/Impounds for taxes and insurance (to your escrow account) - Not really a "cost" at the time, but will still be part of the overall settlement. 
--Costs for services such as the appraisal, lien search, etc. (to the service provider, or may be settled at closing)

You would normally refinance in order to pay off the seller and put long term financing in place. 

For example, let's say you seller financed $100k for 5 years, interest only, on a property that is now worth $150k in year 5. 

For an investment property, you can refinance at up to 75% LTV ($150k x 75% = $112,500).

So you take out a new mortgage with a balance of $112,500. 

You have to pay the seller the $100k you still owe him on the first mortgage (this happens at closing of the refi, so that the new mortgage is now in first position). 

You pocket $12,500, minus closing and origination costs. 

The seller is paid off, and now you start making payments to your new lender, often with a 30-year fixed rate fully amortized loan. 

For a deeper dive, see https://www.biggerpockets.com/...

A HELOC is really only for owner occupants (as a general rule, banks don't do HELOCs on investment properties). But for the sake of this explanation, let's assume this is now your primary residence. Many banks will do a higher LTV on a HELOC, some up to 90%.

So let's say that a year after the above refinancing, you owe $110k on the new mortgage, but the house is now worth $165k. 

$165k x 90% = $148,500. 

Minus the $110k you owe on the first mortgage, you have $38,500 in equity you could potentially tap with a HELOC at 90% LTV. So if you put a HELOC in place, your debt would look like:

$110k first mortgage

$38,500 HELOC (second mortgage)

The nice thing about a HELOC is it doesn't cost anything until you use it, and it's there when you need it.

Assuming your DTI and credit score allow for it, you could pull out $38k from your HELOC and use it as a 25% down payment on a new $152k investment property.

You really should have figured this out before you put some poor unsuspecting seller's property under contract.

Do you have a list of buyers looking for properties in Homewood Alabama? (If not, why on earth would you be entering into contracts there?)

That being said, your next steps are either:

1. Find an end buyer and assign the contract to them, 

2. Honor the terms of the contract you signed and close on the property as agreed, 

3. Cancel the deal and lose your deposit, per the terms of the contract (of course you may have a contingency period during which you don't lose your EMD).

Quote from @Eliott Elias:

Markets where there are rentals on every corner do terrible. Sounds like you won't be able to rent this place out, back out. 

 There's not enough information to make a call like this, and we don't know what the penalties are for backing out. There are a lot of things to consider that we simply don't know the answers to.

@Jillian Steelman - One recent trend for larger SFH in many markets is coliving - You can often collect significantly higher rent, and (perhaps more importantly) almost eliminate vacancy costs. 

For example, we are currently managing a 5-bedroom coliving property in St Petersburg, FL, and we are collecting twice as much rent ($5175/mo versus market rent of $2750) as we would with a traditional SFH long term rental. And even when we have a vacancy, the rent roll is still $4000/mo, compared to a SFH where you can expect about 6 weeks of vacancy (with zero income) every 1-3 years on average. 

This is something you might want to consider for a 4/2. 

Ideally, you want 5 or 6 bedrooms to really maximize the additional rent. But I have a 3/2 SFH under construction here in Florida and I'm seriously considering the coliving model, for the reduction in vacancy if nothing else.

Quote from @Jon Simmons:

I am starting conversations with qualified intermediaries, and I feel more prepared to ask questions with the above insights in mind.

Thank you all

Jon

 You've got one of the best right here in this thread! Highly recommend @Dave Foster.

Congratulations on your first property. 

As the landlord, the utilities will need to be in your name if you want/need them on during vacancies. Who else would you expect to pay for them?

Some utility providers even offer a type of landlord-friendly plan where the utilities automatically revert to the landlord when a tenant disconnects, to avoid interruptions in service (and the hassles of connecting, disconnecting, deposits, connection fees etc). Duke Energy, for example, calls this their Leave Service Active (LSA) program, and it comes with an online portal the landlord can log into to monitor their utility accounts. 

Any real estate attorney or title company can prepare and record a deed for you. You can discuss with your attorney whether a warranty deed or a quit claim deed is appropriate. But in most cases, there's no reason not to use a warranty deed. Do not do this yourself (that's a good way to create a cloud on title that causes problems later on, and it's not that expensive to do it right). 

You are correct that the replacement property in a 1031 exchange mush be titled the same (same taxpayer) as the relinquished property. However, that doesn't mean you can't complete the exchange now with the title as is, and then add her to the deed of the replacement property later on (probably best to wait at least one tax year after the exchange). This is something you can discuss with your qualified intermediary. 

Note also that Texas is a community property state, so depending on when you acquired the property and other details, your spouse may already have an equitable interest in the property, regardless of the deed. Again, something to discuss with your attorney.