All Forum Posts by: Holden Mitchell

Hey Eric,

Sorry to hear about that.

Have you considered parking that cash into an oil and gas mineral rights royalty fund? These pay passive cash flow and range from 10-20% annualized with monthly distributions. I could see current cash flow being a nice cushion to cover expenses and bills while you search for another job. 

Happy to chat. 

Quote from @Holden Mitchell:

Quote from @Jacob LeBar:

You may be able to purchase a property using an FHA 203(K) loan, renovate it, and transfer it to your LLC. However, the loan requires you to occupy the property as your primary residence for at least 12 months after purchase. Transferring the property to your LLC may trigger the "due on sale" clause in the loan agreement, and there may be tax consequences to consider.

Yeah thats what I was worried about. Im new to this whole business and I have heard a few places it is best not to use your own capitol, I want to get my money into real estate as opposed to the bank but I definitely dont want to mess around and lose money due to penalty. Ive also heard not buy in your own name. But to buy using your LLC. But you cant do FHA with a business loan am I right? Sorry for the tornado of comments, I am just ready to pull the trigger on a deal just need a little more info before I do it.

Starting out in real estate can be daunting, but it's important to consider financing options and the best structure for your investment properties to protect your assets. While buying in your name is an option, using an LLC can offer extra liability protection and tax benefits. FHA loans cannot be used with business loans, but conventional, hard money, and private money loans are available for investment properties. Carefully consider the terms and requirements of each option to find the best fit for your investment goals. Don't hesitate to reach out for guidance on your real estate journey.

@Griffin Pratt wow, I guess I should start hanging out in this forum a little more.  I need to give you some real, and specific information here if you don't mind:

There are 3 different "standard" renovation loans designed for primary homes - FHA, Conventional, and VA. All 3 have renovation loan options.

1. FHA Renovation Loans - FHA loans in general are more flexible with credit and allow us to have a 3.5% downpayment on 2-4 unit properties. That's their main benefit. On the other side of the coin, they also have mandatory PMI, higher closing costs, lower loan limits then conventional loans and they can be REALLY annoying. There are also 2 sub-sets of renovation loans in this category. If you are buying a SFH there is very little reason to go this route unless your credit is "challenged".

2. VA Renovation Loans - these do exist and I'm just putting this out there so that some people looking for this subject will ready that, YES - VA RENOVATION LOANS DO EXIST! But they are only for Veterans - 0% down, no PMI. They may not give us the best care after we are discharged but they can certainly get us into debt.

3. Conventional Renovation Loans - And this is the 3rd type.  

Ok, here's why I am saying this - If a property won't get approved for a "standard" conventional loan - then just take it with a conventional renovation loan. That's it. There's no reason to go FHA. The unfortunate thing here is that not every lender will offer these 3 loan types - so they will often steer you towards one...without even telling you that other options exist. It's super frustrating. I have even seen lenders only offer 1 type of the FHA renovation loan! If you are wanting to build a pool - FHA won't even allow that; but conventional rehab loan will! There are clear differences between the different renovation loan types.

Now maybe that FHA renovation loan IS the best loan type for you - but how do you know unless your lender offers the other type?  

You do not have to move into the property while the rehab work is being performed.  The sooner you move in, the sooner your 12 month time starts though.

So let's start with getting you in front of a renovation loan expert first.  And THEN we can go over the specifics of the property and what will be needed with the renovations.

Hope all of that makes sense.  And if you need more details I am certainly willing to share.  Thanks!

Jarret,

FHA & FHA 203K are the same and they do have a 12 month "Expectation" for 12 months for you to live in the home or one of the units. However if you could refinance the home after 6 months and transition the home into a conventional loan. You could then move out and treat it as a rental prior to the (12 months). When you refinance on the REO - real estate owned section you list the home being refinanced as primary but intended to be use as rental/second home.

You might hear that you cannot refinance the home and move out but you 100% absolutely and move out if you set it up "Correctly". This is where a seasoned Banker/Loan officer wold come into play to make sure the 1003/REO/application is done correctly.

You may be able to purchase a property using an FHA 203(K) loan, renovate it, and transfer it to your LLC. However, the loan requires you to occupy the property as your primary residence for at least 12 months after purchase. Transferring the property to your LLC may trigger the "due on sale" clause in the loan agreement, and there may be tax consequences to consider.

Quote from @Holden Mitchell:

Is it possible for me to purchase a property in my own name using an FHA 203(K) loan, renovate, live in for about 6 months, rent it out, and then move it into my llc? Is it that simple given particular loan terms and since I am a single entity LLC?

I believe FHA requires you to hold for one year now? Otherwise, it's a solid plan.