All Forum Posts by: Patrick Roberts

Jerry Norton is still around, but I think he's selling leads and software now. Wholesaling is profitable, but it's a grind. Typically, this is one of the more common pathways to start when you have time but not a lot of capital.

Nope. Even without STR permits, I think land on the peninsula will continue to appreciate very well for the long term. Too many people want to be here with not enough space, and the peninsula will always be the top of the list.

Being BZA and BAR approved is huge. 

Im very bullish on the CHS peninsula for the long term. If the BZA is onboard for what you're doing, half the battle is already won in my opinion. Question: have you determined whether you're subject to the BAR, or have they already approved your project? This could be a major issue if you have to get demo permits. 

If I was in your shoes, I would probably expand the CHS property. If you're able to get STR permits (which is a hurdle in itself), the peninsula is probably one of the best places in the country for it. Also, you may want to convert the ADU into a vacation home for yourself one day.

Long distance properties just add headache and complexity. 

Conventional loans cannot be closed in an LLC. If you expect to refinance in the near future and would like to use a convetional loan for the refi, you need to personally hold title at the time the new loan funds, and the new note and mortgage will be to you personally, not your LLC. If you want the entity/LLC to be the borrower on the note and mortgagor on the mortgage, you'll have to use a DSCR loan.

I would first speak with an attorney regarding the necessity for asset protection of moving the property sooner vs later - there may not be much value in this and therefore no real cost to waiting. 

To answer your question, if you feel that you will refi in the next year or so and would like to use a Conventional loan, keep the property in your own name for now. If youre ok with using a DSCR loan in the future or if you think it will be a while before you have the opportunity to refi, then probably no point in waiting.

I do not suspect rates will change materially in the next few months such that it will make sense to refi, but I do not have a crystal ball, either. 

There is nothing to resolve - the term sheet that you provided in the initial post shows this as an interest only loan. More importantly, the note, mortgage/DOT, and other documents you signed at closing will have spelled all of this out, regardless of what the term sheet said. Again, you didnt read the documents and understand what you were signing for, which is your own fault. You have no standing to push the lender to do anything.

Im also getting the feeling that you dont understand how an amortizing loan functions. If you put $127,000 and 7.52% into an amortization calculator for a 30yr mortgage, you will get a payment of $889.74 - this is what you need to pay each month for this loan to amortize. Even if the lender modded the loan, all this would do is increase your payment from $795 to $889. Your payment is not going to stay the same with a part of it now going to principal. The balance hasnt changed, and the rate hasnt changed, so the amount of interest wont change. Just pay $889 each month instead of $795 and your loan will amortize in the way that you expect. 

This is no one's fault but your own. You failed to obtain clarity, you failed to read the term sheet, and you failed to double check the math and figures. The term sheet clearly shows this is an interest only program. 

If you were buying a house for $200k and then got told to wire $400k to the closing attorney, would you blindly do so? Or would you question that? Youre paying less than $800/month on a loan of $127,000. This alone shouldve set off some alarms that something was off. 

People like you are the reason we have out of control, excessive regulation and increased deadweight compliance costs that just make lending more expensive for everyone. Rather than accepting accountability for your own underperformance, your reaction is to come here and start preaching about how lenders should have to do more to protect idiots from themselves, which implies more regulation. How about a law that says would-be investors have to get licensed and pass a test before buying investment properties or getting investment loans. Then they would be prepared to read term sheets and do basic investment calculations and would prevent them from doing something they dont understand. 

The reality is that all you have to do is take your loan terms and plug them into one of the million-plus online loan amortization calculators to tell you how much extra to pay towards principal each month in addition to the interest only payment. Then, magically, your loan will payoff in exactly 30 years in the fashion you expect with the amount of total interest you expect. Spoiler alert - your monthly payment will increase, and the total monthly payment will be exactly the same amount as if you had gotten an equal-payment, 30yr amortizing loan with a rate of 7.5% and a loan amount of $127,000.

People like you are why we have all of the RESPA/TRID/Dodd Frank garbage in the first place. 

It also wouldnt surprise me if this is some clickbait spam post. The corpus of the post is clearly AI.

I agree with this - this loan is on the servicer's radar because of the delinquency. There is a much higher than normal probability that the loan will be accelerated if the property changes hands. Also, I'm not really seeing where there is much equity in this deal. If the loan balance is at $140k, ARV is $200k, and the property needs a trashout plus full interior refresh, youre probably looking at putting $20k-$40k into, depending on the size of the house and quality of finishes.

So between rehab costs, transaction fees, and costs to bring the loan current, you'll be into this property for $175k-$185k on day 1, all to grab maybe $15k in equity? And to have the axe of a probable loan acceleration hanging over your head? I dont see where this is a deal.

Agreed. One can glean a ton of perspective and grounding from the input from others in the field. Extremely valuable.

Also, I'd be cautious about buying and continuing to operate the existing LLC. You might be buying a ton of "baggage" that goes with it, such as pending lawsuits, violations, improper formation/documentation, etc. You cannot get insurance (that Im aware of) to insure over this in the same way that you can get title insurance for title defects. This is part of the reason why it's so common to see asset sales with small businesses.

For seller financing, expect an above market rate and at least 10% down (15% would be better). The size of the deal/loan amount definitely adds a wrinkle to it, but could still be doable. There are outsourced underwriting services that the seller can use to properly underwrite and originate the loan. This heavily depends on whether there is currently a loan on the property.

If this is set up correctly, the seller should be able to sell part or all of the seller financed note to cash out within a relatively short amount of time. There are a couple ways to structure it, but the most common would be a first and second mortgage where the seller sells the first mortgage after a year or so and then keeps the second mortgage long term. CA's new junior lien law may impact this, however. 

Another point to think about - having two ADUs on the property will make getting a traditional loan difficult. You may not be able to refinance into a lower rate/different loan, and any future buyers may have a hard time getting a loan to purchase it.