All Forum Posts by: Tom S.

@Ryan Bakerian  Just adding to the above, depends a lot on what the seller puts down now and the terms.  

If he's putting down 5% now and the terms are interest only, it's very likely he'll have to bring money to the closing table in 5 years to refi.  Unless he's doing something like a big rehab to force appreciation.

If he's putting down 25% now, then he should be able to refi with no additional money due in 5 years.  The principal paydown (and hopefully appreciation) over the 5 years should offset the refi fees.

@Rebekah L Bunn That's good to hear you got it under contract at a great price - congrats!

@Patrick Forelli  Really it's a question for a good real estate attorney to address.

The main issue I see with the proposal is that typically conventional lenders don't loan to LLC's. You may be able to change title to the LLC after closing, but that can create another set of problems.

@Noyessie Hubert  Personally, I don't think there's any money to be made in this deal but let me know if I'm missing anything.

Looking at your numbers:

- Best case scenario, $150k purchase, $30k rehab, $180k value.  After closing costs and any other fees, you're losing money.

- Worst case scenario, $150k purchase, $40k rehab (or more), $170k value, you're losing a lot of money.

IMO, I would pass and look for better deals.

 

@Praveen Van Not sure on a DSCR loan specifically but I have similar commercial loans, that are based off the rental income of the property. They don't reflect on personal credit. However, if applying for a new conventional loan, it's supposed to be disclosed. Also note the loan will show on your tax returns.

@Rebekah L Bunn  So the house could be worth $624k, or at least $500k for a quick sale, and the contractor will let it go for $335k - only because of a $3k electric meter?  Even if the contractor is out of money, borrowing the $3k to finish the job and get top dollar would seem the way to go.

Nothing else is wrong with the house?

@Andrew Fusco  I wouldn't recommend that route for a downpayment.  Even if you could get a business card credit with a $40k limit and 0% interest for a year, you'll need a way to pull that money off the card, which will incur fees.  Then after 1 year it's likely the rate will go to 20% +.  Unless you have a solid plan in place to sell or refi the property within a year.

A HELOC on your existing rental would prob still be the best bet, and you may just have to keep calling around. Good luck!

@Andrew Fusco There are quite a few negative reviews on this site if you search. 

My understanding is that they're just applying for business credit cards for you, and charging you $3500 to do so.  That's why the range of the loan amount varies and the timing varies, it just depends on your credit and how many cards they can get for you.

@Tim Licatino  We just added my name to that bank account with the funds.

@Tim Licatino  We just did it as a contract drawn up by an attorney, with the terms we agreed upon.  As mentioned, partner put up the downpayment, I put the loan in my name, and we split it everything 50/50.  

We didn't do an LLC, or anything like that. As it was a conventional loan in my name, we didn't want to mess around with changing title, loan getting called due, etc. Of course, this worked for us, but for others and their terms / requirements out of the deal may be different.

Good luck!