All Forum Posts by: Tim Ivory

@Marc Winter

I would say, I would kind of need to structure the deal is such a way, or atleast, considering my financial situation, it would make the most sense and have potentially less risk than using a HML, insofar as the concerns you mentioned can somehow be addressed within the contract.

The house in question has an ARV around 225K, around 25K in repairs and I would offer to buy at no more than 140K.

The 10K I have to work with would not cover the downpayment on a 140K loan at 10% with a HML, unless I structure the deal with partial seller carryback on a note for 50K payable after the sale is complete, in which case I would need a loan only of 90K which would leave me 1K to cover interest payments, assuming points are rolled into the loan and a bullet loan is not an option.

She is my neighbor and I'm on very good terms with her. I think we can structure as creatively as I can. If the offer of 140K is too low, I was also thinking of adding a stipulation that if I sell the house above 225k, we would split the profit. I'm being conservative with my ARV estimate, especially since there are few comparables, but it could potentially sell for 252K. I'm being extra cautious here since it's my first deal.

To address your other points, I was planning on doing a double close in this case, having the seller put the deed in escrow which would trigger the sale on the B to C transaction, paying her off. I could also use transactional funding if necessary.

Personally, I wouldn't do what you are suggesting with just an option. Lots of other ways to hack that house. But if it gets too complicated and too slick, you might just get slicked out of your $$$.

May I ask why you would not structure it this way, specifically when you say "with just an option"?  How else could you approach it? Would you perhaps approach it with a lease option, thereby giving you equitable interest? I also considered that but would ask to defer payments until it is sold. In which case, how is that different than a standard option, lol, aside from the equitable interest? Now that I think about it, this might be a better option indeed. Is this what you were referring to?

Also, please, help me avoid making any mistakes and getting slicked out of my $$$$, what should I look out for or what are you referring to?

Apologies for the rather long reply, but I'm particularly interested in this scenario to structure my first deal. Cheers.

Option - In legal language, a real estate option is an agreement that grants the party owning the option, the optionee, the exclusive, unrestricted, and irrevocable right to purchase property from the party selling the option, the optionor, during the specified period of time that the option is in effect.

I'm wondering if it is possible to control a house using an option to purchase in order to renovate the property (fix and flip) without actually buying the assett with a HML. Obviously the title doesn't change hands, and I do not believe there is any equitable interest in such a scenario (which also means one cannot market the property). However, as it seems most things concerning contracts are negotiable, is it possible to theoretically construct a deal like this, assuming the sellers agrees to it and it is written within the contract. Can the owner in this case, deed equitable interest or some other legal instrument to allow myself to actually not only make repairs on the property but only pay the owner after the house is repaired and the house is actually sold? Technically with an option, I would have the legal right to purchase the property at any moment. However, it all comes down to how much control I actually have in the property. Would I be allowed to perform repairs on the property? Would I be able to acquire a loan to cover the repairs on a such a property? If so, that would be quite powerful in that case.

@Tae C. 

Sure. I'd appreciate that very much.

If I may, I have another question. For hard money loan pre-qualification, do the majority pull hard inquiries on a credit report? I'm trying to build up my credit so I need to minimize this, at all costs really. I'm not sure if the credit bureaus will treat all the inquiries as they do with people shopping around for traditional loans. If they do, I'd likely only incur a 5 point hit even if 10 hard inquiries happen, but it needs to be within a short period of time. Cheers.

@Account Closed I cannot find that book anywhere, got a link?

@Tae C. Wow. Would those loans only apply to commercial loans or would they work for residential, fix and flips? Can you give me an example of a company. I'd love to do some research on this. Cheers.

@Dan Beaulieu Wow. I was going to give you guys a call soon. Thanks for your response. You guys seem to be the only hard money lender based in TN that I know of at the moment, specifically within BP lender database, however, I do not know if it is necessary to borrow from someone from within state, so my options at the moment are open entirely nationwide. I would love it if there was a hard money lender in my town to rely on for advice or a second set of eyes for deal analysis. Who knows, there still may be, but they are hidden. I will keep my eyes open atleast, especially for additional private money lenders.

@Jay Hinrichs Thank again. May I ask if you need a license to lend only in owner occupied homes or does that apply to business investment properties as well? Any advice to  avoid the scammers? I try to stay away from those with shady, unprofessional looking, unresponsive websites, and will likely ask for referrals once I've narrowed my list of prospects. Any others?

Cheers 

Thanks guys. My business model is to start wholesaling to build up money for fix and flips, leading to BRRRR buy and hold long time strategies. However, my plan is to close on every property I have under contract. If I can't wholesale. I will buy it with HML to fix and flip. I cannot BRRRR for now. I need to build up more income and file taxes for atleast 1 year to conform to their guidelines which allow them to sell to secondary market. Unless of course I can find other sources of private money which do not require proof of income or otherwise accept a different proof of self employment income - like a monthly paypal income and expenses worksheet.

*  I did not pay taxes because I was not legally obligated to do so. This year I will cross the self employment income threshold for my online business (most definitely if I get a few flips done). I suppose a better question to ask is how is wholesale money taxed.

Does it look like this on 100k income? 

Federal Tax (~15%) + State Tax (TN 6.5%) + Self Employment Tax (14.4%) - So around 41% for either Fix and Flips and/or wholesales!? 

The federal is the averaged progressive tax percentage.

Also, what do you mean see if the bank has a commercial department? That is the first I've run into that phrase. Are you refering to portfolio lending? Some banks hold on to some lines, thereby not ascribing to fannie mae guidelines and can therefore structure the deal as they like. Is this what you mean?

@Tae C. Yes, I have considered the traditional bank route and even met with a bank a little while ago. Since they are conforming and sell most of there mortgages to the secondary market, they require W2's for income verification. I am self employed and have not been legally obligate to pay taxes since my net income isn't high enough. It would likely be a stretch to even refinance out of a high interest HML so my only option would be as quick as possible fix and flip using HML.

However, this too is my exit strategy only insofar as I'm not able to wholesale the property to another buyer. I plan to close every property I have under contract, either myself or through assigning/double close. I'm just starting out so my plan is to follow the 'conventional' wisdom of acquiring capital for fix and flips via wholesaling, leading to eventual BRRRR strategy buy and hold. The only other part of this plan to automate the process afterwards with employees.

It seems my options are limited to HML or other private lenders though I'm still going to hit up all my local credit unions to see where I stand for prequalification. At this point I need correct information here on my status to qualify for financing the traditional way. I'd be pleasantly surprised if I find a bank who will work with me.

Do you attend the KnoxREIA meetings by chance? If so, how are they?

Greetings from Mtown.