All Forum Posts by: Todd Dexheimer

I have over 10 properties, so I can't get conventional.

Yes. Answer is still the same

Banks will use your rental properties as income if you can show profit for 2 tax years (this is for Fannie/Freddie loans). Local banks financing through your business like to see 1 year, but they may go with a projected cash flow statement depending on circumstances.

Chris, I think the real question is are you purchasing 1-4 unit buildings or 5+ unit buildings? Net worth is used in 5+ unit buildings as Andrew and Eric have stated. In 1-4 unit deals, net worth is not a requirement, especially if you are financing in your personal name.

Also, you keep stating you will be using 100% financing, which is not accurate. If you have $120k to put down on a property that's great, but you need to have reserves for that property and reserves for you personally. Many people also have a 401k, mututal, etc. You also probably own a vehicle and possibly your own house. These are all used in Net worth calculations. If you have none of that and only have $120k in cash, I would suggest buying a home using no more than $50k.

My suggestion is if you are buying a 1-4 unit building, go seek out some local lenders in your area and get prequalified. Get the money first, then find the deal.

You will pay taxes. Your LLC will be taxed the same as your ordinary income. If you are flipping properties, the IRS sees you as a developer. If you have rentals and you sell them as long as you meet the long term capital gains requirements (typically 13 months used as an income producing property), then you will pay long term Capital gains (18%), plus your state income tax as normal.

The only way to avoid taxes right now is to complete a 1031 Exchange. This cannot be done on a short term flip property, but can be done on a rental property. With a 1031 Exchange you are selling the property for say $200k and buying a replacement property for $200k or more.

Jerry

I currently have 4 properties financed in my personal name and an additional 30 in my LLC's

Multi-family millions - David Lindahl

ABC's of Real estate investing - Ken McElroy (Also, Advanced ABC's of RE)

You're being mislead. You're purchasing power is determined based on a lot of things and the asset type you are purchasing as well as the type of financing you are obtaining. This is the quick response:

For Conventional type (loan in your personal name) with 1-4 family you will be getting a loan based on credit, income and debt to income ratio. This type of loan you can get 40% of your income and sometimes more if you're a strong buyer. You typically can get the deal done with 20% or less down payment

For commercial loan 1-4 family your loan will be based on nearly the same standards as conventional, however they also look at the asset performance or projected performance. The bank may base the loan amount on your net worth as well in this scenario depending on the borrower.

For Commercial loans with 5+ unit deals or other commercial assets your loan will be based on your financials and the property performance. This is likely where net worth will come into play. Most banks want to see a net worth close to the loan amount. If, however, you have an extremely high income from your job they may look past a low net worth.  Afterall, if you make $500k/year and have a low debt to income, you should be able to cover some pretty good loan payments.

If you are looking at buying, figure out your goals and call local banks. Ask for a mortgage lender and discuss with them your options.

I would say be careful. Most that invested in 2004-2007 in most markets lost their money and credit, so if your market is over valued then don't buy. Either invest in a different market or invest your money in a different asset class and wait for the market to dive. What ever you do, don't just buy Real estate to buy, that is how people get burned.

For analyzing your deals look at the market trends. What have historical prices looked like? If sale prices are higher than ever and rent amounts are higher that ever, you may have a problem. At the same time if you can use the rental price average over the past 10 years and still cash flow on a purchase, then you may want to buy.

Do your research on the market you're in and decide of it is ready to crash or there for the long term.

I am currently trying to expand my rental portfolio to Milwaukee, WI and I am in need of banks that can lend on 1-4 unit properties. I have a lot of experience in owning rental properties in Minnesota (over 50 units), but I am being turned down by every bank I call in Milwaukee because I am not a local investor. My company has a lot of experience, I have good credit and good income. Does anyone have any solid banks that can lend to out of state owners?