Posted by Ern on July 03, 2002 at 10:13:15:
I am saying this if you want more than one FHA loan. From my understanding (I just asked an underwriter), you can have more than one FHA loan, however no one wants to give a person or EIN more than one FHA loan because of liability. If anything happens, all the properties are unprotected. Therefore these corporations are formed to protect each property. I would really recommend a RE or Tax lawyer on this.
CRE fianancing ideas would be appreciated - Posted by Joan Wardzala
Posted by Joan Wardzala on June 30, 2002 at 19:47:15:
I posted this on the other board too.
I just viewed 2 four-family units. One building has 4 one-bedroom apartments and the other 3 two-bedrooms and one three-bedroom. The buildings are next to each, on a corner, on a busy street. The entranceways face the side-street. There are 2 parking pads for 6 cars each. According to the seller a business across the street offered him $15,000.00 for the parking pads. The building lots are large. The appliances, water heaters and roofs are fairly new. The furnaces, however are ancient. There is a separate furnace for each apartment. The income is $1,700.00/month each building. I could get more. He wants $135,000 for one and $139,000 for the other. They should appraise right around there, maybe slightly higher. He has owned them for 1 year and has FHA assumable loans. He purchased them from a friend for cheap and fixed them up. He says at these selling prices he has around $60,000- $70,000 in equity. He lives in one of the units and wants to rent it after he sells the building because he put a lot of money into the unit. He would not consider managing the buildings.
The buildings are brick with a solid foundation. The couple apartments I saw are in great condition and large. There is work that needs to be done to the hallways. The neighborhood, though no where near the top one around here, is decent. The tenants that I saw look decent too.
He says he is desparate to sell because FHA has called his loan. He talks alot but I don’t think he is telling me everthing about why he needs to sell. He says he only has a little bit of time before he has to sell. It sounds like he may have said both would be owner occupied to the bank and they caught him. I am just guessing. He says he was told he can’t have two FHA loans and that is why they are insisting he sell. He says he wants out of the landlording business and wants $60,000.00-$70,000 out of the buildings so he can buy a used car lot and ship cars to Costa Rica (He’s from there). He will only sell them both and won’t take a contract on just one.
He is financed through Homeside Mortgage in CA. I found out on the internet that they have been bought out by Washington Mutual but are currently still using the name Homeside Mortgage.
I would like to purchase these two buildings for cash flow. (After that I want to start flipping, but cash flow is my main target right now). He is willing to pay closing costs but that seems to be all for right now. I already own 2 duplexes and one single family that I purchased last year. My credit score is around 65. I was told a while back that since I own three buildings that after I go past owning 4 buildings it is considered a commercial purchase and would be much more difficult to get a loan. I live in one of my duplexes now. Does this rule still hold true if I am living in one? If I purchased the 2 buildings as a package that would be considered commercial too since it would be 8 units, right?
I have never assumed a loan. Stupid question: Do I need a downpayment? I don’t have any cash right now. Is it difficult to assume a loan. Would I have to assume both of them or could I buy one and assume the other? Both are held by Homeside. Would I want to assume the loans?
Any ideas on how to put this together would be greatly appreciated.
Joan
Re: CRE fianancing ideas would be appreciated - Posted by Joan Wardzala
Posted by Joan Wardzala on July 01, 2002 at 11:13:26:
I called the lender. The seller has 2 FHA loans, one on each building. The lender said that a person can’t have two FHA loans at one time. I did not know this. Also that these were qualifying FHA loans but of course only one of them could be assumable. Anyone have any creative ideas about how to put together a deal knowing this information?
Re: CRE fianancing ideas would be appreciated - Posted by Ern
Posted by Ern on July 01, 2002 at 16:50:28:
I work for a commercial real estate lending firm and work with HUD/FHA loans. We deal with larger properties, but you can have more than one FHA loan. If you do, you have to have it under a different EIN or SSN. If you don’t mind creating a LLC or something like that, you can purchase both properties. However that puts you in the commercial loan bracket.
typo credit score 650 not 65 - Posted by Joan Wardzala
Posted by Joan Wardzala on July 01, 2002 at 12:38:27:
typo credit score 650 not 65
Re: CRE fianancing ideas would be appreciated - Posted by Joan Wardzala
Posted by Joan Wardzala on July 02, 2002 at 03:20:53:
Pardon my ignorance as I am fairly new at all this. What does being in the commercial bracket entail. I was going to form an LLC anyway to put my other properties into. I have to refinance one more property then I will have fixed rates on all of them. Once that happens they can all go into the LLC.
Joan
Re: CRE fianancing ideas would be appreciated - Posted by Ern
Posted by Ern on July 02, 2002 at 09:14:08:
Actually, the term I should have used is “mulitifamily” properties over $1mil. I’ve seem borrowers puchase a number of properties all at once, but they must all have different borrowers (different names or company, LLC names). For example I want to buy three multifamily properties, Property 1, Property 2, and Property 3. My Company name is Ern Real Estate Inc. I could use Property 1, LLC (doesn’t neccessarily need to be an LLC, consult a lawyer on possiblities) for Property 1, Property 2, LLC for Property 2 and so on… I could then use my company Ern Real Estate Inc as the management company or hire an outside management company. Also All the LLC’s could be owned by Ern Real Estate Inc. But the key is having a different name on the note.
Not sure if this is what you were looking for, but hope it helps… Also, keep in mind, I’m new at this and have been at my current possition for only a year.
Re: CRE fianancing ideas would be appreciated - Posted by Joan Wardzala
Posted by Joan Wardzala on July 02, 2002 at 10:05:12:
I am incorporated. Right now I do not have my properties under the corp. My sole proprietorship company managages them. Are you saying that each property should be under a separate LLC and the LLC should have it’s own EIN? I thought that the way an LLC is reported on tax returns is through the SS# of the person, like a sole proprietorship. If this is not the case I need to find out. You obviously have seen this done before. I sounds workable. Also, I was told that it is next to impossible for an LLC or a Corp to purchase a property and that I should buy them myself and then transfer them to the LLC or Corp. What is your take on this?
Joan