All Forum Posts by: Seyi A.

That's amazing, good work!  I, too, am pretty bullish on Chicago's South Side.  Also Uptown.

I suppose I could also just post what I'm thinking here... 

The full scope of activities the business will engage in (across multiple states) are as follows:

1. Putting together and managing syndicated commercial (5+ unit) multi-family deals as a/the general partner
2. Opportunistic fix and flips of single family and 2-4 unit multi-family residential buildings
3. Tax lien investing
4. Buy, reheb, and hold long-term rentals

The business will be operated out of Chicago, IL and I will initially be the sole employee.  Based on the research I have done to date, I believe the optimal initial entity structure for these activities would be as follows:

1. OpCo: A single-member IL LLC taxed as an S-Corp with a Qualified Retirement Plan/Solo-401k that will be funded by rolling over existing retirement accounts. The QRP would then purchase membership interest in this business and the FundingCo (see below). This entity will be the main operating company, and will be party to contracts with 3rd parties (consultants, property managers, etc), and hire employees. This entity would also be the/a general partner in syndicated deals.
2. HoldCo: A WY manager-managed LLC with initial nominee manager (for anonymity), disregarded for tax purposes. This entity will hold the interest to all assets that are intended to be held long term.
3. FundingCo: A WY manager-managed LLC with initial nominee manager (for anonymity). This entity is for raising 3rd party capital, though I am not sure whether it should be a disregarded or elect C-Corp designation for tax purposes. I would like the ability to raise capital from international investors, so perhaps it should be taxed as a C-Corp. Funds raised by this entity will be used to fund asset purchases via loans to either the OpCo (for fix and flips, etc) or the entity that takes title to the buy-and-hold assets. Loans to be repaid either through refinance or asset sale.
4. Assets; Assets to be held in land/grantor trusts wrapped by LLCs (disregarded for tax purposes) with interest attributable to my equity held by the WY HoldCo.

I know this may seem a tad "much" for someone just starting out, but I'm a details kinda guy and I like to figure out where I would like to be long term and work backwards from that.  With all this in mind, what do you think of the structure?  Any changes you would recommend?  Many thanks in advance.

Hello BP forums,

I've been looking for some advice on the optimal legal entity structure for the real estate business I intend to build over the next 5 years, and I've come across a few firms that charge for a consultation.  Do you think I should pay for one, or could anyone recommend a good firm they've worked with before that offers the first consultation for free?  Thanks in advance!

Hi,

I am considering making an offer for a residential REO SFH and will need to finance both the purchase and rehab. Can anyone recommend a portfolio lender in Chicagoland that would be open to suspending loan repayments until the rehab is complete (6-9 months)?

Seyi

Thank you!

Any recommendations for a good attorney and CPA for estate planning? I'm considering setting up non-grantor trusts to hold partial interests in my primary residence (which will be owned by an LLC), and would welcome some advice. I'm based in Chicago.

Hi,

I was thinking through some creative financing structures, and a question popped into my head regarding the following structure; 

- Buyer and seller agree to a sales price of $X

- Seller agrees to seller financing in the form of a mortgage with a principal of $Y (<$X) , and an unsecured loan with a principal of $Z = $X-$Y and 10-year term

- The unsecured loan has a provision that, if the loan is not paid off by the end of Year 5, a lien attaches to the property to secure the remaining 5 years; a "springing lien"

My questions are:

1) would the sales price be recorded as $X or $Y?

2) would the unsecured loan and accompanying lien be recorded at the time of sale, or only after the lien "springs into existence"?  

And, in case you're wondering, yes there is a reason why the buyer may not want the full purchase price to be recorded as $X.  Thanks in advance for the insightful responses! :-)

Thanks Tom!

Hi,

I am in the process of crunching the numbers on a single family home in Chicago, and I trying to think through the ins-and-outs of the financing structure I have in mind.  The property has been on the market for a considerable period of time, and I understand why, but it is in exactly the location I want and I'm comfortable with taking on the work to address the issues it has.  

The seller currently has a mortgage that is assumable (subject to approval from the lender), but the terms are far from ideal and I suspect she has run into problems refinancing.  My proposal is to assume the mortgage and offer her a note for the balance (10yr interest-only, 30-year amortizing), and I would be looking to refi the original mortgage at some point in the not-too-distant future once I have fixed the issues with the property.

My questions are:

1. Will my future lender learn the terms of the seller-financed mortgage by my declaring it on the loan application, or do they have some independent way to learn of its existence and its terms?
2. How will my future lender consider take into consideration the seller-financed mortgage?  Will they ignore it, or treat it just like any other mortgage?  
3. Is the interest on the seller-provided mortgage tax-deductible?
4. Are there any adverse tax implications of with this strategy?
5. If instead of a seller-financed mortgage secured on the property, I instead negotiate an unsecured note, how would the answers to 1-4 above change?
6. Given that what I'm trying to do is to a)help the seller get out of her sticky situation without b)needing to bring much cash to the table, and c)save funds for what will be a substantial rehab that would probably disqualify me for a traditional construction loan, are there any better ways to structure my offer?

Apologies for the 20 questions, I'm still very new to this whole "creative financing" party.  Thanks in advance for you answers.

Bump. Any thoughts?