All Forum Posts by: Patrick Roberts

I suggest researching this for Japan for the past fifty years

You need to talk to a tax professional about this. There are a lot of factors here. Whether or not your living in the house previously will apply for the Cap Gains exemption rule, what your basis is in the property, whether you will even have any cap gains to pay in the first place, what your tax rate would be if you were taxed, etc. 

As far as how to monetize the equity in the property, the most cost effective way to make short term use of the equity as cash is a Heloc. The best long term use play is a cashout refi. In either case, you should be able to access about 75-80% of the property FMV if it's currently free and clear.

 Basically, yes. The vast majority are simply hoping the loan doesnt get accelerated. 

Synovus and Regions had an appetite for this kind of thing in the past, but the fund I worked for had about $100m in assets at the time. Some small, local banks may have an appetite for this, but it literally varies by the bank/risk committee members and the only way to find out is in-person conversations - I dont know of any particular banks offhand. 

Typically, this kind of lending from banks/depositories is as a secured facility at the portfolio level and structured as a warehouse line. I havent seen these get approved when the total portfolio was less than $20m or so because banks usually wont go over 40-50% LTV on the portfolio and it takes a lot to underwrite these. Also, since this is effectively more CRE exposure, there might be an extra headwind there as well.

What I have seen in the past with this kind of thing is a warehouse facility that is used to fund the origination, and then the note is quickly sold either to an SPV consisting of raised investor capital, or to another third-party investment fund/bank that buys for yield, or securitized into a private label mbs/cmbs. The play for the originator entity is the points and fees - usually the asset itself (the note) has to be financed with equity capital rather than debt because the spreads are too thin to lever up unless you have a significant portfolio. Finding a bank that will finance a buy and hold small note portfolio is kind of a unicorn in the note world. 

@Chris Seveney runs a mortgage note fund and has likely come across this. He might be able to add some color. 

What are you trying to accomplish with the cameras? This will have a huge impact on the setup and specs.

Hypothecation is the term youre looking for. Yes, it's out there, but hard to find. Banks and formal institutions typically want to see $20M+ in portfolio size before they'll work it up. You're probably better off trying to find note investors who have sizable assets to negotiate a one-off transaction.

If this is for only one deal, finding a private investor or two with some SDIRA funds would probably work. You could also potentially table fund part of the loan with another lender with the right structure, but not enough info to be able to say for certain.

A couple things on this. First, you will need two years of work history to qualify. If youre just starting school and working, this will be an issue. Doesnt have to be two years of work in this particular job, but you need two years total.

Second, most school stipend/GI Bill BAH/education benefits cant be used because they are not considered stable and predictable. At a minium, they would need to be expected to continue for at least 3 years into the future and not be temporary in nature.

Not saying this cant be done, but this is the starting point.

 7a and 7a Express used to require a 5% minimum contribution from the borrower along with a subordinated seller carryback to make up the rest of the borrower's contribution to 10%. From what I understand, the program recently updated to where the seller carryback cannot receive any payments until the SBA-guaranteed first lien is paid in full, meaning your seller will have to wait a very long time to receive payments. My guess is not many sellers will agree to this. 

All of this is predicated on the lender giving 90% financing. In this environment, Id be shocked to see that kind of leverage unless you have decades of direct experience in that industry combined with a high tangible net worth and a healthy DSCR on the acquired business, similar to what Don was saying. CRE lending and bank exposure is in a rough spot right now - lenders are pulling back on leverage and risk across the board.

Brokers and loan originators/officers will say all kind of things to get you to put an app in so they can sell you on a different product. This is no different than the advertisements that are all over the place in every industry - "prices as low as X." The reality is very, very few people will get that as it's a unicorn offer that .001% of people qualify for. 

Equity from a partner/JV is likely the only way. The SBA recently changed rules around these programs. Borrower's have to bring their own funds (equity) to the project. Subordinated seller financing wont work, either.

Also, if you havent already talked with a lender about this, I recommend you do so. 90% LTV is rapidly turning into a unicorn.

 I understand the sentiment, but the last thing I want is more regulation and more hands in the pot. A prudent seller would choose to be represented by an attorney in a situation such as this, but I dont want the government telling people they have to pay for an attorney for their own good just to sell their own house. 

I'd much rather see criminal laws that are aggressive when it comes to fraud and deceit/sleight of hand. If a property seller makes a poor decision voluntarily, then sucks to be them. But if a wholesaler/solicitor uses fraud or deceit/deception to gain consent where they wouldnt have otherwise gotten it from a party that was not deceived, then this could easily fall into the realm of fraud and criminal prosecution would be appropriate. Now, parsing out fraud and deception vs "sales tactics" will be tough, but that's the nature of the beast. 

I will caveat this with the fact that I am fiercely libertarian and detest the idea of the government being involved at all in a transaction between two parties, but that's just my $0.02. At the rate we're going, pretty soon we're going to need attorneys and government regulators to certify the purchase of a bagel for breakfast.