All Forum Posts by: Ronald Isgate

@Florence Crosby - no problem whatsoever.  With rates the way they are, i would explore a straight up purchase at this point - as long as the property cash flows/meets debt service, there are very attractive options out there - that could be as little as 15% down.   PM me some details of your deal and i can let you know some options.

Coming from an attorney - consult with one.  As said above - odds are most times you wont need an attorney, but as your purchases/portfolio get larger, those tend to get more complicated.  Take the time to ask around to find a competent real estate attorney that works regularly with investors.  When you find a good one, they will know that you wont need them on every transaction - but can be a resource for you when issues arise, and point you in the right direction.  

I would also recommend finding a very good CPA/Accountant to do your taxes for you.  I personally find that a solid CPA is just (if not more) valuable than a good attorney.   Build your entire team from the get go, I can guarantee you that it will save you money overall in the long run.  

You should definitely speak with a local real estate attorney and CPA. In PA, you trigger transfer tax each time you deed the property into an LLC - so if you have the same rules in your state, that could throw off all your numbers.

Couple things you have to worry about if you purchase an existing LLC membership interest (i.e. you purchase the membership interest in the LLC rather than the asset) - is that you inherit any liabilities that the LLC may have - this can range from taxes to a person who slipped and fell 6 mos ago and is just about to sue the owner. That is one of the catches when purchasing an existing llc. Plus, if there is already financing on the property, many times there are provisions in the loan docs that state if there is a transfer of 50% or more of the company interests, it triggers a call on the loan.

It is a possibility, but there are alot of entanglements you must go through to ensure you don't walk into a hornets nest.

First - congrats on the expansion of your portfolio - BP is an awesome resource.

The answer to your question really depends on how you set up your business structure - LLC, S-Corp, etc. - are there preferred returns listed in there ----- assuming these are equity investors and not debt (i.e. they have mortgages against the properties). Depending on how you set it up, the default could be any distributions of profit must track ownership interest percentages - which may or may not work for your deal(s).

Check how you have your business structure set up - that will go a long way in determining the answer to your questions.

It does depend on the bank - many will want to see a stabilized property for 6+ mos. I have seen some banks make exceptions to that if the property has had long term tenants and there are not major improvements/reno needed (i.e. turnkey). I strongly suggest you call around to the banks in the area and see what programs they offer. What also factors into the equation is if you have a prepayment penalty on your HML - that could throw the math off making it more worth while to hold onto the HML for a certain period of time.

Agree 100% with @Derek Harris - do your DD and evaluation based upon the properties, not on the fact that its SF.  You will need to get basic terms from the Seller as well - you have no idea whether he/she is reasonable with their expectations on rate and term.  Its super important to find out what his debt structure looks like so you can evaluate whether pursuing SF is even worth it.  Depending on his situation, you may get a better deal if you buy they outright (and the guy gets a big check all at once) - you just never know.  Get an idea of his expectations, that will help you tremendously in evaluating everything 

I agree above - no reason to get into a long term hard money loan. If you have exhausted calling around to conventional lenders/banks and the debt/income ratio is just not there, then you have two options really - first, would be not to pursue it of course. Second though would be to get a short term HML that would allow you to make any repairs, increase rents and stabilize the property. Once you get to that point you should immediately refi out of the HML. If you go that route, make sure that the HML you get does not have a prepayment penalty (or the smallest one you can find), as your goal should be to get out of it as quickly as possible. Hard money has its place and use, but its not for long term financing.

@Michael Stokes - feel free to email me, i work with quite a few HML that dont charge pre payment penalties that will give you a 12 month term as well.

It all really depends on your specific deal.  Generally speaking, smaller banks and CU's are easier to deal with and have better customer service, but these smaller lenders tend to have their own "sweet spot" in lending, i.e. some love 1-4 family properties, some hate them, etc.  I would not paint with broad strokes that smaller is better than larger lenders - it really depends on your location and the project.  Some big lenders regularly run "specials" for certain types of properties.  The best thing I could recommend is to take the time to call alot of lenders, remember, you are getting into a long contractual arrangement with them, and possibly, a repeat situation if you go back to them for additional loans (getting a relationship built with a lender can be a huge bonus).  In doing so you will get a good idea of what lenders are aggressive (and ones that are not) on your particular deal.  If the best one is a big lender, then so be it; if its a local one, that is fine too ----- as long as their money is green!