All Forum Posts by: Wilson Lee

There are ways to turn your 1099 income into W2 income.  It well take a level of signification which is a conversation for your attorney, CPA, and yourself to have jointly. The basic Ideal is you will make an S-corp.  Then expense all the S-corps income out to avoid/limit double taxation.   One of the biggest expense of any business is payroll, of which you will be the only employee.  This gives you w2 income and lenders will not think twice about it.   

There are some draw backs. S-corps are more time consuming to maintain than a LLC. But you should only need it for a few years. Later you may not need the S-corp at all.

I though about doing just this.  But now lenders i work with are happy with my financial statements.

I am per-approve for a fix and flip loan with lima one capital.  Has anyone worked with them? What should I watch out for? I don't want to borrow from a company that may try something underhanded. 

I have to buy it Monday

hi,

So buying form auction normally requires a 24 hour close.  So yes cash is the way.  Here are some though in no real order. 

1, Right of redemption. Each state has its own rules. It is 1 year here. The last home owner can buy the building back from for what you paid at auction.  They do NOT have to play you for any improvements you did.  This is a small risk in low income areas. But in high income areas people may have family and friends how may help them get the house back. 

2. Right of redemption is scary to banks.  Construction loan can be harder to get if the building is still inside the redemption time.

3. 6 month seasoning.  When you refit, The bank will want the building in your name for 6 month before they will lend on a new appraisal value. Before that time, They will only lend to cost.  Your cash will be tied up for 6 months.  This may slow down your next deal.

4. HELOC. You can get a HELOC on the auctioned building right after the rehab is done. The local banked I used let us get 80% LTV based off new appraised value. It may help you start your next deal faster while still inside the 6 months seasoning period.

5. Know your max bid before the auction.  DON"T bid more than that.  Other investors may have different goals than you. Some are ok bidding it up to the point they can't pull all of the cash back out.

I am buying a 4 plex (cash)  We are planning to use a construction loan for the rehab.

ARV $80,000-90,000

As is value $34,000 (not purchase price) 

Rehab needed $32,000

Questions,

The property is occupied, but each unit has major work needed.  There is 9 months left on the leases. How do I handel the rehab?

• Should we rehab with the tenants there and seek their corporation?   
  • Advantage, We finish the rehab sooner.  We don't carry the loan long. I can refi and cash my self out sooner.  
  • Disadvantage, the units many turn over soon anyways.  In such event, we would need to redo some work later.
• Should we not renew the lease then do the rehab when we turn it over?
  • Advantage, We can do a full rehab.  we can place new tenants that we vet and move rents to market price.
  • Disadvantage, Longer project time. The cash  I put in the building is needed to fund my next project.

What are typical terms of construction loans? Is the loan to value based off the as is price or the after repair value?

What are some other funding options that I may have not though of?

Is your company a S-corp? or a disregarded entity? If it is disregarded, such as an LLC, Then take distribution and use your personal investment account. Keeping up with your personal account and one for your company is only more work with no benefit.

If you have an S-corp.  They check your income amounts. Your accountant should have better advice for your business.

I have emailed/called ~40 agents from the time I started.  I meet with 8.  

None where able to bring me a deal that was profitable / with in my means.

I found success in agents whom pick up my calls the first time and every time I call.  The ones who just do what I ask and let go of trying to 'sell' me on something they hope is a deal.

@MARK  Thanks, good info.

are construction loans Loan to value based off the current 'as is' market value or off the ARV?

And what are general LTV's that you have seen?

Dyslexia Disclaimer.  look past the typos.

I have a chance to buy a 4 plex! I am bidding on it at auction. Up to $34,000.  The Bank's reserve is 16k.  It is class C-/D+.  We all ready own similar properties and we have systems to manage the demands which comes with this tenant pool. 

The problem? It is a 24 hour closing. Aka no appraisal. We really need to get our cash out after rehabbing it. And this area is the wild west of appraisal values. I will really like some feed back of any one who wants to put eyes on. The address is 913 Cotton Ave SW, Birmingham AL . I have a though of what the ARV is. But I really would like some one to give their opinion with out me casting a shadow them.

Numbers

Asking up to 34,000

Rehab $32,000

Evictions $ up to %1,200

Rent, $500/mo per unit. (24,000/yr) 

We will be buying in cash.  We will use a construction loan for the rehab.  We will exit via a 30 year fixed.

Some other questions.  I never have got a construction loan.  The last rehab we did was out of pocket ($12,000) and we recaptured that on the refi.   So how do construction loans work? 

Oh and I have to buy in 36 hours!

PS

The property is occupied, The tenants refused to pay do to the condition of the property.  They are on new leases with 9 months to go. The current property manager just took up the building 3 months ago. The tenants are now on repayment plans.  I am ready to evict if they don't/can't pay rent.  This county as a 3 week turn around form the date filed.

1, A multi-member LLC is stronger, Have your wife/husband co-own with your if you are married.

2, In your formation papers, articles of formation, State that the owner of the PA LLC is owned by the Wyoming one. It is that easy.

3, You will need to pay a registered agent for the PA LLC. Some property managers will offer a registered agent service.