All Forum Posts by: Patricia Steiner

Let me make sure I understand this...you have an appreciating property, in your backyard, that is cash flowing for you, and your LTV is low.  Really?  Unless there is a newer and better property awaiting, this is my definition of a home run investment.  Not only is it generating current income for you but future as well.  This is the stuff of investor dreams!

And, you even inspected your rental???  You're a rock star!  

What is the rate on your mortgage?  How much will you earn from saving funds?  As a former wealth banker, here's what wealthy people do that others often times do not:

1. You don't pay off a mortgage when the rate is low/terms good.  When you factor in the tax deductions, it's a cheap date.

2.  Liquidity gives you power. Highly leveraged people are seen as high risk.  Those with liquidity are perceived as "diversified."  

3.  You'll need to earn 2% on your cash savings to break-even considering inflation.  The national average for a Money Market Account is 1.8% but it's not hard to find a fully insured account paying over 2% now.

4.  What isn't earning you money needs to go away...it's the old "make my money work for me" versus the other way around.  Brazil is a volatile market and you have to pay-off the mortgage just to have the opportunity to rent it.  That's the "other way around."

Sean, most of all, thank you for your service. You certainly earned that VA loan and it appears that you've made a lot of solid decisions to get you to these options today.

Please make two calls:

To the Lender - does the loan type permit gifting and up to that amount.  What documentation do they require?  I had parents of a client gift $100k and the lender required documentation showing the funds in the parents' bank account - then wired to the buyer's account - then posted to the buyer's bank account.  The documentation was approved by the lender prior to the sending of the wire.

To the Title/Closing Agent - the agent requires proof of funds to close.  They will also need the documentation.  

Please do yourself a favor and avoid any conversation/remarks regarding tax law - other than they will want to check with their CPA regarding tax implications of gifting.  

Fun business, huh?

Stay in your backyard...or move to Texas.  My guess is that your friend has found that having a property that far away poses a whole host of problems. 

Block constructed houses also take less to cool/heat and the insurance savings is significant. In addition to the pest issues with wood, the wood fungus problem in Florida is common.  The fungus actually digests wet wood so the "cure" is costly.  My clients tend to stick with block construction; I did have one investor actually apply stucco over a wood frame/sided home as he planned on the property being a long-time holding and wanted to minimize wood issues (it was very expensive...not sure it's feasible).

Bolt!

Britt, I'm just seeing your post this morning...not sure why it didn't post higher up the forum list but you pose some great questions here.  I have no experience with Lima One; I am a former long-time senior banker, my family has been in real estate investing way before me (like 50 years) - and non-recourse is definitely worth paying a higher interest rate.  When your business liability is commingled with your personal debt it makes the most simple loan request - like for a car loan - get very "entertaining" as your recourse debt counts as part of your overall personal obligations.  Non-recourse is always preferred.

While I'm okay with the higher interest rate for a 30-year fixed term, I would be more concerned about the points charged by the lender.  What are the total costs of the mortgage?  What might be quoted at a 6-something rate actually is something quite vulgar by the time the points and other fees are disclosed/added in.  The lender knows that you won't be holding the mortgage 30-years from now so they want to be paid more upfront.  It increases their profitability - but definitely not yours.

Again, non-recourse is a fiscal no-brainer.  A higher interest rate to secure non-recourse is worth it.  Negotiating other costs - especially points - would be my concern.

Hope this helps...

Keep me posted...can't wait to hear about your new castle!

Dominique, being scared about signing is a good thing.  It's hard to overcome stupid so better this route.  Since you're the buyer, you won't pay any commissions to a realtor for their services so take advantage of that.  Interview a few and find one who you like and trust to guide you through the process.  You're going to want an inspection - and you might want to negotiate further for repairs and more so get yourself a realtor to be a trusted advocate to represent you.  Again, there's no cost to you as a buyer; the seller will pay the commission.  Prior to closing, there will be closing documents for you to review with instruction on where to wire the closing proceeds.  The day of closing, you'll be walked through the Warranty Deed, Title Policy, Survey (please get one), and Closing Statement by the closing agent.

And, congratulations on your upcoming purchase!  There's nothing like owning a piece of the earth.  Process:  Find the right property, prepare contract and negotiate the right price/terms, place escrow deposit, inspection/survey/title, always do a final walk-through, wire proceeds to closing company  - sign...then it's all yours.  

Any realtors in this forum in Dominique's market?  

No apologies...and guess what?  In this business, learning never ends.  We're all in this together.  On your 4-plex, ask the realtor about the contract.  That wouldn't fly here but there is a section in our contract where an option to assign is available.  Many sellers refuse those contracts out of fear of a whole lot of stuff so it is important that your realtor be able to explain that you are a serious buyer with a serious buyer and everyone is serious about closing.  

LLC. "An LLC for real estate is an established legal entity that allows investors to purchase and own real estate in such a way that protects them from personal liability. This means that the investor buys and sells real estate, as well as conducts other business, in the name of the LLC, rather than as an individual."   It's easy/inexpensive to set-up but state specific so google "how to form an LLC in Texas" for details.  

Best of everything on what will surely be the first of many great deals for you.