All Forum Posts by: Tanner Sherman

Thank you for your advice!

My statement is very positive. My statement says, "be careful about what you wish for because you may just get your wish". 

My post makes a statement that should be easy to understand. When a newbie starts out with saying they are looking for a mentor that person has created an environment where he subjected himself to having an unscrupulous and experienced investor take him under his arm, get him involved with real estate investing that benefits his mentor's agenda and the newbie gets ripped off. That equates to a mentor (if there is such a thing) seeing an opportunity to get from a newbie a blank check (so-to-speak).

Did you miss all that in the shortest one-line post I ever wrote?

Jorge,

Congrats on getting started. Some thoughts on your questions below (context: I am a partner in a hard money lending business).

1. Let's first make the distinction between hard money lending and private lending. Hard money is a loan on the underlying asset. Most HML's are going to only be able to loan to LLC's or corps due to the Dodd-Frank legislation requirements on consumer loans. Private money can come from any individual, typically friends and family when you are getting started. Private money could be unsecured by the asset (i.e. you could borrow the money from your mom or grandpa, best friend, etc.) in the form of a promissory note, or it could be tied to the property itself with a deed of trust or mortgage. Private money can be loaned to an individual or an LLC/Corp, but keep Dodd-Frank in mind.

2. Conventional 30 years financing is most commonly issued to individuals, not LLC's.  If you quit claim the property from your LLC to yourself, it may be a taxable event - so be sure to consult your tax pro before doing anything.  Also be aware that the original lender (hard money or private) will likely not be a fan of you using a quit claim while you have a loan out (in my business, we do not allow this).  They likely will have language in your loan docs that specifies what the consequences could be if transferring the title to another entity or yourself while the original loan is still outstanding.  You could have the loan called due. Private money lenders (especially friends/family) may be more flexible on this stance than a HML.

3. This is going to vary widely from lender to lender.  As I mentioned above, friends and family are common private money sources and will likely be more flexible with terms than an institutional lender.  The easiest way to do what you are describing is to use an LLC to buy the property, finish your rehab, then refinance out of the hard money loan into a commercial loan using the same LLC with a commercial lender (or private lender if you have access to one). Pros - A lot less paperwork and headaches with commercial loans vs conventional loans, plus faster decisions and processing times. Cons - typically shorter amortization period, higher interest rates, and shorter periods of fixed interest before ballooning.

Hope some of this helps.  Feel free to DM me if any questions.

Good luck!

Owen

@Tanner Sherman rereading your comment.

Example. 1 property is listed at $60k. I know with certainty that a lesser property sold site unseen for 90k(on the market for 1 day)last year and another for the same price (60k on the market for a month). The 2nd just resold for 240k after being on the market about 2 months). They were about 5 miles from this property. I also know a property sold not even 2 miles from this property that was a 1/4 its size(with improvments. (Septic, water and power already on property.) For the same amount. What they have for sale is what a majority of my customers said they were looking for when they settled for the property they bought.

If I went in and did roughly 10k worth of work. It would take me a month (weather permitting) to do what I needed to do. They should be able to easily list that property for 120-130k and be fairly cheap compared to simular properties in the area. Not approach with a partnership of sweat equity. They just pay a finance fee sort of. But then they would be stuck at a set price. Let's say im 20% of the profit over their asking price minus my fees. 120k-60k-10k=50k-20%=40k. So they are now walking with 100k vs 60k with no up front cost to them.

I could just raise my price. Put my speculated price into the cost of me doing the job. But if the market suddenly falls on it's face. They lose. Now they're wrapped up in a deal where they have to get 80k out of a property they originally wanted 60k for that already wasn't selling.

If I work the ground. They put it up for 120 and get 50 offers at 90k and decide to let it go for that. My 20% now drops to 4k. They still walk with 76k without having to.do much more than relisting the property. NOT TO MENTION, MY OFFER GIVES THEM THEIR ASKING PRICE. There zero chance the property won't be worth 70k when I'm finished. That could only happen if Russia invaded the Ukraine and we went in to world war 3.