All Forum Posts by: Account Closed

Look into 1031 Exchanges.  This should allow you to defer cap gains for years to come.  However, eventually, you have to pay the piper.  Also, don't fall into the trap of overpaying for your next deal just to take advantage of the 1031.  It may be wiser to pay the taxes and buy a market deal than to 1031 and overpay.

Andrew, it depends on the value of the property. Is this a fix and flip? If so, what is the ARV? If the numbers pan out, it is possible to go to the closing table with little money if you use a hard money lender.

If its value is close to the $120K purchase price and you are acquiring it to hold, most lenders will require 30-40% down for an investment property.  Doesn't mean there isn't a better deal out there, you'll just have to look harder.

Based on your new payment, the breakeven on your closing costs is approximately 13 months.   Need to determine how long you expect to own the property and whether that is a good trade off.

Hire an attorney.  I believe Ohio is a mortgage state.  You want to make sure you have a first priority lien on the property.  Additionally, improperly worded documents can cause all sorts of issues if the deal turns sour.

More likely route would be to use a hard money lender to acquire and rehab the house and then refinance into permanent financing once completed and rented.  There are mortgage brokers and lenders out there that will provide one-stop shopping.  (They will pre approve you for the permanent loan and then hook you up with a hard money lender for the interim)

I want to clarify a point that keeps coming up in this thread.  A hard money lender does not have to be licensed in the State of Texas (I do not know about other states).  The requirement to be licensed is determined by whether or not a lender originates residential loans (owner occupied).  Providing financing for a fix and flip or rental property does not require licensing (again, in Texas).  Know your local laws, do your homework, and run from lenders who want money up front.  Also, the difference between hard money and private money is how you define yourself. The terms are often used interchangeably.  There are large, hard money lenders who raise millions of dollars from investors and there are private money lenders using their own capital to provide hard money loans.

Disclosure:  I am a lender.

I personally would not escrow if given the choice.  1. when lenders set up escrow accounts, they typically add in a buffer (by the time taxes are due, they are holding 14 months worth of taxes).  2. as you alluded, by not escrowing, you control your cash and have the use of it during the year.

There is a potential downside to not escrowing.  If you are not good at managing your money, you might run into CF problems when the tax bill and/or insurance bill come due.

Lender will typically prepare the loan documents.  Depending on the laws in PA and the security the lender is requiring, it could be as simple as an unsecured promissory note, or more likely, a secured loan.  In Texas, that means a note and deed of trust.   PA could be the same, or could use a mortgage instead of the deed of trust.  The note will set forth the terms of the loan, (interest rate, how payments are calculated, when/how payments are made, maturity date, etc.).  Assuming a 10% interest rate (from your example), with interest only payments due monthly, you would multiply the outstanding balance of the loan x 10%, then divide the result by 365 (or in some cases 360) and then multiply by the number of days in the month.

If you are responsible for drafting, hire an attorney.  If the lender drafts, and you are not comfortable reading/understanding the documents, hire an attorney.  Loan documents are not a place to cut corners.  If issues arise, the documents are going to dictate what happens next.

Good luck!

Shouldn't be too hard to find a lender to make a loan to an LLC. You should, however, expect to sign recourse individually, meaning the bank can come after each of you in the event of default.

Sorry.  Delta = difference