All Forum Posts by: Saran Mandhadapu
Saran Mandhadapu has started 21 posts and replied 84 times.
Post: 4 unit property - Please help me choose an Option
- Devon, PA
- Posts 93
- Votes 23
Originally posted by @Kevin Hunter:
@Saran Mandhadapu, my suggestion is go with option 1 for the larger return on investment. This will allow for a large initial return. However, one thing you should do is beef up your insurance policy on that property. The LLC is an entity to provide you with legal protection for various reasons. If you are not smart on those, no assumption but just in case, go to the podcasts and listen to several that discuss LLCs. In lieu of that right now, beef up your insurance to protect yourself, take the additional cash flow, and look to quit claim the property into your LLC at a later time. Good luck and let us know what you decide.
Thanks Kevin. For another 5 unit property that I am purchasing this month, I choose to do a commercial loan (because of 5 units) and put the title on LLC name. That was an easy decision because residential loans cannot be done for 5 unit property.
This property that I am planning to purchase is 4 unit so I am trying to figure out what to do. I get $200 more per month in cash flow if I choose 30 YR fixed conventional mortgage because of 30 year amortization vs the 20 year amortization for commercial loan.
Trying to understand if it is worth loosing $200 per month for the sake of buying the property in the name of an LLC.
Anyone else please chip in. The more suggestions the better it is for me to make a decision.
Post: 4 unit property - Please help me choose an Option
- Devon, PA
- Posts 93
- Votes 23
Originally posted by @Kevin Siedlecki:
@Saran Mandhadapu, From a pure ROI standpoint, you can get higher ROI on more money with option 1, so that's what I'd go with, especially if you don't have much of a portfolio yet. As you buy more and grow, the LLC offers asset protection that you will want to consider when you have more assets to protect.
Thanks for the reply Kevin.
Looking for others to chip in.
Post: 4 unit property - Please help me choose an Option
- Devon, PA
- Posts 93
- Votes 23
Could you please give me advice on which Option to choose. I have to buy the property on my own name for option 1 whereas I can buy the property on LLC name for option 2.
Does paying more each month in Principle and Interest justify buying the property on LLC name?
Here are the details. The down payment for residential mortgage is 25% whereas for commercial mortgage it is 20% (Yes, it is less).
Purchase price = 140,000
Option 1) Conventional Loan with Title on my OWN name
30 YR residential = $548 monthly payment (P and I)
Interest = 4.75% fixed for 30 years
downpayment = 35k (25%)
monthly cashflow = $563
CoC = 16.8%
cap rate = 9.5%
Option 2) Commercial Loan with Title on my LLC name
20 YR commercial = $761 monthly payment (P and I)
Interest = 5.4% fixed for the first 10 Years
downpayment = 28k (20%)
monthly cashflow = $350
CoC = 12.6%
cap rate = 9.5%
Post: Advice on financing 4 unit multi-family
- Devon, PA
- Posts 93
- Votes 23
Originally posted by @Jacob Bindler:
Buy yourself and transferred to LLC later. You will break the terms of Mortgage, but the bank will 1) probably will never find this out or 2) will not care as long as you asking the payments .
If you do that, dont you have to pay county transfer taxes? I do not want to make this complicated by forming a LAND TRUST and transferring the property to a Land Trust and then making the Land Trust owned by an LLC. It is too complicated and much more paperwork.
Post: Advice on financing 4 unit multi-family
- Devon, PA
- Posts 93
- Votes 23
Originally posted by @Marc Yu:
The LLC protections for single members aren't as strong as they used to be. For the state of Washington, however, it still is pretty good.
https://www.nolo.com/legal-encyclopedia/llc-protec...
Other states: https://www.nolo.com/legal-encyclopedia/single-mem...
The PA LLC (Single Member) is owned by WYOMING LLC which is a Partnership. I do not own PA LLC, I own the WYOMING LLC and the PA LLC is owned by WYOMING LLC.
Post: Advice on financing 4 unit multi-family
- Devon, PA
- Posts 93
- Votes 23
Originally posted by @Jeff B.:
MAKE SURE the lender will close with a title of the LLC, you don't want a last mintue surprise. I say this as getting the LLC on title is frequently difficult.
Jeff, the conventional residential mortgage do not allow the Title on LLC name, it has to be in personal name. For commercial loan they allow the title on LLC name but the interest rates are higher and fixed interest term and amortization term is less.
Post: Advice on financing 4 unit multi-family
- Devon, PA
- Posts 93
- Votes 23
Here are the details. The down payment for residential mortgage is 25% whereas for commercial mortgage it is 20% (Yes, it is less).
Purchase price = 140,000
30 YR residential = $548 monthly payment (P and I)
Interest = 4.75%
downpayment = 35k (25%)
monthly cashflow = $563
CoC = 16.8%
cap rate = 9.5%
20 YR commercial = $761 monthly payment (P and I)
Interest = 5.4%
downpayment = 28k (20%)
monthly cashflow = $350
CoC = 12.6%
cap rate = 9.5%
Post: Advice on financing 4 unit multi-family
- Devon, PA
- Posts 93
- Votes 23
With option 2 (commercial loan), down payment is 20 % and the monthly cash flow is $350 for 4 units (Cap rate is 9.5% and CoC is 12.5%)
With option 1 (conventional loan), down payment is 25% and the monthly cash flow is $530 for 4 units (Cap rate is 9.5% and Coc is 15.5%)
The downpayment is 5% more for conventional than commercial.
Post: Advice on financing 4 unit multi-family
- Devon, PA
- Posts 93
- Votes 23
Hello,
I am a new investor and I am looking to purchase a 4 unit multi-family in PA. I have two options to purchase this property, please let me know which option you would choose and why?
1) Purchase the property with conventional mortgage in my OWN name. Title will be in my name.
Interest Rate = 4.5%
Fixed term = 30 years
Amortization = 30 years
2) Purchase the property with Commercial mortgage in the name of an LLC that I own. Title will be on LLC name.
Interest Rate = 5.35%
Fixed term = 10 Years
Amortization = 20 years
Payment term = 20 years
What is the best option. I know if I buy in the name of an LLC I get more liability protection. But if I buy using conventional mortgage in my own name, my monthly payments are about $140 per month less.
Please advice
Thanks,
Saran
Post: HELP!! Need Advice for Mortgage for investment property
- Devon, PA
- Posts 93
- Votes 23
Originally posted by @Thomas S.:
Are you not able to get a loan with a Amortisation longer than 20 years. The longer the better for investment income properties. You want as little equity lying dead in the property as possible to increase the cash flow from the property itself. Paying a return on your equity is far greater than any prevailing mortgage rates.
I generally take 30 year where possible, 3-5 year term, variable rate. Historically variable rate mortgages have always been less over the long haul.
This is a 5 unit multi-family commercial loan. The max amortization I was quoted was 20 years. Do you think amortization matters or the fixed rate term of 10 years as opposed to 5 years matters considering the rates are low currently and will most likely be higher after 5 years?