All Forum Posts by: Erik Trefzger

@Matt Devincenzo

"So my question back to you is what is the benefit of getting the seller financing for you? Lower down payment, unfinanceable condition, high DTI, low reserves...?"

All of those things (minus unfinanceable condition) could become issues as I purchase more properties. My thoughts were if SF could postpone any of those issues (okay, mainly preserving cash/reserves and keeping my DTI low) w/o counting against the conventional limit, then it would be worth hustling now and trying to find them. Given the fact that I work a full-time job and time is limited, there are enough screaming deals (REOs and SSs) on the MLS that I'll probably wait to go after SF until I hit my limit. That said, you are correct in that if I came across any now with favorable terms, I wouldn't turn down a good deal.

@Mike M. et all. Thanks for clarifying, legal terms are not my strong point. Yes, in all of my posts above I did mean single entity LLC (not sole proprietorship), sorry for the confusion.

@Chris Simmons Thanks for the response. I have looked into commercial loans in the past and am pretty familiar with how they work; I've stopped in a few local commercial banks to chat with their loan originators and it's not for me right now. I did have one lender express interest in paying off all of my 30 year notes and giving me one blanket loan to cover all of my properties but taking on a balloon loan is more risk than I care to take right now (especially given the 4% rates all of my mortgages are at). In fact, all of the other scenarios you explained are precisely why I want to avoid commercial lending for now, although I do see how they could be helpful in the future. In the scenario I was discussing above, I was referring to a seller financing my LLC for the SFR my LLC would purchase from them. I am confused that you said you haven't come across sole-proprietor LLCs; I would assume that by far the bulk of LLCs are owned by one person or couple. In fact, when a married couple are the sole owners of an LLC, it is still classified as a sole-proprietorship rather than a partnership (which is the case with our LLC).

@David J. That's what I figured, and that is what the consensus appears to be. So from what I can gather from these posts, it does not make sense to consider seller financing until I hit the 10 property limit, since that would just count against my conventional mortgage limit.

@Bob E. Thanks for the input, I do intend on using portfolio lenders and seller financing after I hit the conventional limit, I was just trying to figure out if it made sense to explore those paths before I hit the limit (and it sounds like it doesn't). In fact, I've already met one great portfolio lender locally who I look forward to doing business with in a few years once we get to that point.

@Jesse Gonzalez so buying seller financed through my LLC (both the title and the financing) still counts against my personal limit of 10?

@Chris Simmons we are doing the same thing- right now half of our rentals are in my name and half are in my wife's. We are both on our primary mortgage which is quite large so that essentially counts twice against us when buying future rentals (the full monthly payment applies to me when I am buying sole and separate, and likewise for my wife). That might make it hard to get 9 each, but I think we'll be able to get close. Can you confirm if what you said about LLCs not counting against our personal limit is true? I am afraid Fannie/Freddie might look at a sole-proprietor LLC the same as your personal holdings.

@Jesse Gonzalez thanks for your response. Assuming I am not talking about commercial properties and everything is four units or less, here is a summary of my initial question and your response:

- if the seller financed note is in my name, it does not help me get over the ten property limit, unless I am already at ten properties.

- if the seller financed note is in my LLC's name (even though my LLC is a sole proprietorship), it does not count against my Fannie/Freddie limit, and I can use owner financing to eventually own more than ten properties (yet finance the full ten Fannie properties), even if I own less than ten now.

Are both of those statements correct? Thanks!

I've browsed through the forums and wasn't able to find anything on this, but I'm sure other people have this same question. I own 6 properties all financed with conventional 30 year mortgages. I'm considering adding a seller financed property to my portfolio, but I would also like to max out the 10 Fannie Mae backed mortgages as well.

I know that if you buy a property using seller financing it doesn't show up on your credit score, but the rental income will show up on your tax returns. When I apply for a mortgage, the bank looks at the last two tax returns of mine, and they also want to know how many properties and mortgages I have. Even if the private mortgage isn't showing up on my credit score, what would I tell the bank regarding the seller financed property? Here is the issue as I understand it:

1. Fannie Mae / Freddie Mac count the total number of mortgaged properties against your 10 property limit, not just Fannie/Freddie backed loans.

2. I am not at the 10 property limit yet, and would like to have 10 cheap, low interest mortgages on my books before taking on higher interest debt.

3. I don't see how I can add a private mortgage to my portfolio and not have it count against my limit, thus reducing the number of Fannie/Freddie loans I can get by one.

4. Should I just wait until I hit the 10 property limit before pursuing any seller financed deal?

Have any mortgage brokers out there run into this?

Thanks,

Erik

I just googled PropTrend and it shows up on a ton of scam reports as it seems like it is often being sold by "gurus" as part of a very expensive and worthless package. One complaint that I read stated that some of the data that program pulls is outdated as well.

Just some food for thought before you spend anything on PropTrend or any other software that might not be worthwhile. In my opinion there is plenty of free information and data out there that provides more than enough deals for me.

Hey Jessi, are you doing most of the work yourself or acting as the GC? How many rehabs have you done in your investing career? I'm in the middle of a major rehab in Seattle, I'd love to share ideas and tips with you if possible.

@Ellissa Anderson

Thanks for the heads up, I'll try to make it to one of the Tues/Thurs meetings one of these days. Is the sole purpose of the meetings to go through the auction inventory and figure out which are good buys? I've never purchased at an auction before, but it is something we are interested in.

@Justin Case Trading with ISOs does share some similarities with derivatives trading, but bilateral trading is another animal altogether. The whole power market is moving towards ISOs, but the amount of capital and credit required to participate in the market is rather high, leaving mainly utilities and investment banks as the main players.

@Justin Case Do you know of any REI groups in Renton or Seattle?

Energy trading isn't very well understood by the general public-- it's a small, specialized segment of trading but it fits my lifestyle and I enjoy it. We could grab coffee sometime- I spend most of my time in Seattle, Bellevue, and Renton.