Do you have a portfolio of rental properties? Are you wondering how to continue to get more and take advantage of the lower rates as well?
Watch this latest episode of Passive Wealth Show with Bill Fairman, Wendy Sweet, and Jonathan Davis of Carolina Capital Management and learn how to protect your assets while maintaining anonymity.
Timestamp:
0:01 - “How can you protect your assets?”
1:00 - Introduction
1:46 - https://www.CarolinaHardMoney.com
3:08 - How to transfer your personal portfolio into a corporate structure.
4:43 - How to protect your portfolio.
11:15 - How to get more mortgages.
15:01 - Caution on doing portfolio loans.
18:11 - Wednesday With Wendy: https://calendly.com/wendysweet/wednesdays-with-wendy?month=2021-05
Carolina Capital is a hard money lender serving the needs of the “Real Estate Investor” and the "Small Builder" borrower who is striving to build wealth and generate income for themselves and their families. We offer “hard money rehab loans” and "Ground-up Construction Loans" for investors only in NC, SC, GA, VA, and TN (some areas of FL, as well).
As part of our business practices, we also serve as consultants for investors guiding them to network with other investors and educating them in locating and structuring transactions. Rarely, if ever, will you find a hard money lender willing to invest in your success like Carolina Capital Management.
Subscribe:
Visit our website:
YouTube Channel:
Facebook:
Listen to our Podcast:
------------------------------
Bill Fairman (00:02):
Hello folks, Wendy's doing the jig over here.
Wendy Sweet (00:05):
Tap Dancing.
Bill Fairman (00:06):
That's a soft shoe for those of you that are about half our age. That's a dance.
Jonathan Davis (00:16):
It wasn't an epileptic seizure. We promise she's okay.
Wendy Sweet (00:19):
That looks different.
Bill Fairman (00:20):
Right? So thanks for joining us on The Passive Wealth Show, if you ever had a portfolio of rental properties, and you're wondering how to continue to get more and take advantage of lower rates as well as the question comes up a lot about.
Wendy Sweet (00:39):
Assets.
Bill Fairman (00:39):
Protecting your assets and having a little bit of anonymity. We're going to cover that a little more right after this.
Bill Fairman (01:00):
They just continue to impress don't they?
Wendy Sweet (01:01):
Super cool.
Bill Fairman (01:01):
I feel badly that I didn't wear my R2-D2 t-shirt that has his hand up in the middle R2-FU. I can only wear that to selected areas.
Wendy Sweet (01:21):
That's right.
Bill Fairman (01:21):
So my name is I'm not going to say that yet. This is Wendy Sweet and Jonathan Davis. I'm the special guest, Bill Fairman.
Wendy Sweet (01:29):
He is special.
Jonathan Davis (01:30):
That's very true, you are very special.
Bill Fairman (01:30):
We are Carolina Capital Management.
Wendy Sweet (01:34):
It depends on what special is.
Bill Fairman (01:35):
We are.
Wendy Sweet (01:35):
Keep going.
Bill Fairman (01:35):
We are lenders in the Southeast. I didn't travel on the little bus.
Wendy Sweet (01:43):
You drive it too.
Bill Fairman (01:44):
Yes, I did that as well. Anyway, if you're interested in borrowing money in the Southeast, go to our website, www.CarolinaHardMoney.com, click on the apply now button. If you're a passive investor, looking for passive returns, click on the accredited investor tab, don't forget to like, share, subscribe, follow us.
Wendy Sweet (02:06):
Like us.
Bill Fairman (02:06):
Please somebody like me.
Jonathan Davis (02:11):
Hit the bell, all that good stuff.
Bill Fairman (02:14):
Really liked me.
Wendy Sweet (02:17):
You and Sally Field.
Bill Fairman (02:18):
I want to go ahead and Oh yeah. Thank you for reminding me with those fancy graphics. We do have a question or a comment section either to the right or to the bottom of your screen, depending on the platform that you're viewing us from. So if you have any questions, comments, keep them to yourself yourself, or put them in the screen. So we had a guest and.
Wendy Sweet (02:43):
Now we don't.
Bill Fairman (02:43):
Unfortunately it's me.
Wendy Sweet (02:47):
We had a the last minute change of plans.
Bill Fairman (02:53):
And this is why we love the industry that we're in, by the way,.
Wendy Sweet (02:56):
Well I like to tap dance, I'm a figure out something else to do.
Bill Fairman (02:59):
We have always learned how to turn the ship in a shorter space.
Jonathan Davis (03:05):
Right.
Wendy Sweet (03:06):
That's right.
Bill Fairman (03:07):
So, all right. I did have a question from somebody that was following us on Facebook. I am not going to mention his or her name because they didn't give me permission to, but they had an interesting question about owning a large portfolio of single family properties. And basically what they're looking to do is refinance into a corporate name or a company name number one, so they could continue to get mortgages through Fannie, Freddie, and.
Wendy Sweet (03:45):
So currently, he or she has all of these properties in their individual name. Is that what your saying?
Bill Fairman (03:50):
Right. Yes, I would get to that. So this person has a $2 million portfolio all held in personal name. Couple of reasons for the refinances, because when you're doing Fannie Freddie loans on most of these, you know, debt to income ratios, you have to deal with.
Wendy Sweet (04:10):
Well you're limited to 10.
Bill Fairman (04:12):
And you're limited to 10 properties financed, as well as asset protection. So, I mean, that's a lot to cover and there's a lot of different avenues to take on this as well. Asset protection, you're going to get a certain amount and I'll do that part and you guys can handle the loan part.
Wendy Sweet (04:36):
Thank you.
Bill Fairman (04:37):
Thank you. You're welcome.
Jonathan Davis (04:39):
Appreciate it Bill.
Bill Fairman (04:39):
Asset protection. You're going to get a bit of asset protection. When you put properties in a company name, here's where you run into problems, is you don't really have anonymity because.
Jonathan Davis (04:54):
Is that a sea creature?
Bill Fairman (04:54):
Is that a relative? Anonymity.
Jonathan Davis (05:00):
Don't hurt yourself.
Bill Fairman (05:00):
So when it's in a corporate name, anybody can look up the corporation and see who owns the corporation. So you don't have anonymity.
Wendy Sweet (05:12):
Right.
Bill Fairman (05:14):
But you do have.
Wendy Sweet (05:15):
Protection.
Bill Fairman (05:17):
Some sort of legal protection, unless of course you do something that is willful or neglect.
Wendy Sweet (05:24):
Or co-mingle your funds and showing that you didn't stick with your LLC or entity, and you did personal stuff in your bank account too, that can kind of mess you up. Cause then they can pierce it and say, Hey,
Bill Fairman (05:41):
Yeah, well essentially what you need to do, and Walter Walford was the prime example of this. He had, I think he had like 25 properties at a single LLC. And he got a lawsuit against him for a dog bite.
Wendy Sweet (06:01):
On one of the properties.
Jonathan Davis (06:02):
On one of the properties. And he said, I'm not going to worry about this, I didn't even own the property when it happened. So I cannot be responsible and there, and this was in Jackson, Mississippi nothing against Jackson, Mississippi, but there was a reason that class action lawsuits were filed in Mississippi prior to this, they had no tort reform and they didn't have a very bright jury pool because he ended up losing the case.
Wendy Sweet (06:27):
Are you going all people in Jackson not too bright?
Bill Fairman (06:30):
No. Just the people that aren't smart enough to get out of jury duty.
Wendy Sweet (06:35):
Yeah.
Bill Fairman (06:35):
Anyway.
Wendy Sweet (06:35):
Please don't email us about his comments.
Bill Fairman (06:39):
Cards and letters to me only. So anyway, long story short, he says, never put anything more than one property into a single entity.
Wendy Sweet (06:52):
Which is tough.
Bill Fairman (06:52):
And he wants to.
Jonathan Davis (06:53):
He only blocks up that one property doesn't lock up alight.
Bill Fairman (06:59):
And the problem with this was he had 25 properties. He had $50,000 lien against it judgment that he was still appealing. And none of the properties in that portfolio were worth $50,000 individually. So it tied up every single property that he owned and he couldn't move 'em couldn't do anything with them other than just continue to rent. So to avoid that,
Jonathan Davis (07:24):
Couldn't he sell like three of them off at one time?
Bill Fairman (07:28):
He would've had to pay the judgment and was appealing the judgment.
Jonathan Davis (07:32):
Yeah. But even if you have one property, we still lock that up, I guess it just did he want to sell any of the properties?
Bill Fairman (07:41):
That's beside the point.
Wendy Sweet (07:42):
No, he didn't.
Jonathan Davis (07:46):
Just say like, you know, then what's the point?
Bill Fairman (07:49):
Well, the point is that if you have, you know, a bunch of properties under one single entity and one them, we tie them all up. So if you keep them separate, they can only tie up the one that the property is in.
Jonathan Davis (08:03):
Sure.
Bill Fairman (08:04):
The rest of them are, you're free to do anything you want to with them.
Jonathan Davis (08:07):
Okay.
Wendy Sweet (08:07):
One won't affect the other.
Jonathan Davis (08:08):
I understand that, but my, I guess my, if you're not, if they're all rentals and you don't want to sell them, then why would you?
Bill Fairman (08:16):
Well, first off, you never know what's going to happen.
Wendy Sweet (08:19):
I can tell you the details on that. He seller finances everything, one person would get to a point where they paid.
Jonathan Davis (08:28):
And they wanted to transfer the property, then he couldn't do it.
Bill Fairman (08:33):
Even if that wasn't the case and he never wanted to sell any of them, you never know what the market conditions can change. And you need that. You need to have your plan B and C, and that deprives you from your plan B.
Jonathan Davis (08:46):
Sure.
Bill Fairman (08:46):
If it locks you into.
Wendy Sweet (08:48):
So many attorneys will tell you is instead of just putting one in its own little entity that you, if you've got 20 properties, break them up, threes and fours. And because otherwise you're doing taxes.
Bill Fairman (08:58):
The other way is to do a land trust and make sure that the trustee and the land trust isn't a separate state from the property because what happened, this is for anonymity purposes and anybody with enough willpower can break that veil. But here's what typically happens. It keeps you from having the ambulance chasing attorneys get involved. Cause it's just too much work.
Wendy Sweet (09:28):
Yeah.
Jonathan Davis (09:28):
And .
Jonathan Davis (09:28):
So, you talk about being sued?
Bill Fairman (09:29):
Slip and fall, whatever.
Jonathan Davis (09:32):
Wouldn't the best insulation for being sued. It would be having 20 to 30 properties in one LLC and having a blanket loan on them. So that one property, if you pick that out, it would look like there's $2 million of debt on that property. We can't sue you, there's no equity there.
Wendy Sweet (09:48):
That's another one. Or you could have an umbrella policy with everything to protect you.
Bill Fairman (09:54):
Here's the thing an attorney might look at it and say, Oh, he's got 20 properties.
Wendy Sweet (09:59):
Let's go for the gold.
Bill Fairman (10:00):
He's got money somewhere.
Jonathan Davis (10:02):
Sure.
Bill Fairman (10:03):
So then they say.
Wendy Sweet (10:05):
They don't know a lot about landlords do they?
Bill Fairman (10:05):
If they think you only have one or two properties, they would probably let you go. And if they don't know how many properties you have, because they're all in land trust and they, all they know is the trustee. They don't know who the landowner is. They would have to pay another attorney in the state that the trustee is in the even talk to that person. So it's just too much trouble and they move on either way. If they move on before they start the process and you're saving a lot of money. If they start the process, now you've got to hire somebody to defend you. And now you're talking about a cost involved. There is no way, let me finish this real quick. There is no way that you have a veil that you can't penetrate.
Wendy Sweet (10:50):
That's right.
Bill Fairman (10:50):
It's just, one's going to be harder to penetrate to the other. Let's talk about it some more.
Wendy Sweet (10:54):
Well, I'm not sure his whole point for transferring the properties was for protection either. He was trying to get.
Bill Fairman (11:02):
There's several things that I will tell you that the goal is personal DTI.
Wendy Sweet (11:07):
Debt To Income.
Bill Fairman (11:08):
So I can get more mortgages and asset protection slash anonymity.
Wendy Sweet (11:13):
Right.
Bill Fairman (11:13):
So it's all the above.
Wendy Sweet (11:15):
So it's to get more mortgages, that's great and wonderful. First of all, A guy that owns 20 properties and that can qualify FHA for more he's or conventional he's strong Fannie Mae's what I meant to say. Sorry. He's he's a strong guy. He's got, you know, good income, he's a strong guy to be able to do that or girl to be able to do that. The thing is, is now Fannie Mae is putting the timeout on.
Jonathan Davis (11:46):
The 7% cap.
Wendy Sweet (11:47):
Yeah, on doing second homes and investor loans.
Jonathan Davis (11:53):
That's true. Yeah. I mean, to clear out to free up there's so many different schools like schools of thought. I mean, you could throw them all into a, like we talked about a portfolio package with a portfolio loan. You know, if someone tries to sue you, they're going to see that each property has a massive amount of debt on it. Now if they dig deeper, they can find out, Oh, you actually own all these properties. So you know, that may not be as helpful.
Wendy Sweet (12:22):
Well even his interest rates are gonna be, you know, four or five, six percent, talk a little bit about the new program we have now,
Jonathan Davis (12:28):
Oh yeah.
Wendy Sweet (12:28):
Long-term.
Jonathan Davis (12:30):
Yeah. Our rates start at four and a quarter, so.
Wendy Sweet (12:33):
Amazing.
Jonathan Davis (12:33):
Yeah.
Wendy Sweet (12:35):
So it's true.
Bill Fairman (12:36):
Yeah we have 900 credit scores.
Wendy Sweet (12:39):
That's not true.
Bill Fairman (12:43):
50% down.
Jonathan Davis (12:43):
I don't know. But.
Wendy Sweet (12:46):
Again, not true.
Wendy Sweet (12:47):
Not true.
Jonathan Davis (12:47):
But yeah, start there. And you know, it goes up, I mean.
Wendy Sweet (12:51):
760 I think is where you get the best break.
Jonathan Davis (12:53):
Yeah. If you have over 760, I mean, you're going to just get phenomenal deals. But our minimum credit score, it's going to be right at 680. You know, there's exceptions for, you know, a little below that. And we will do, you know, minimum a hundred thousand dollar loan there's exceptions down to 60,000 depending on the area, because not all areas are the same. And we actually understand that, you know, so.
Wendy Sweet (13:26):
You can do portfolio loans.
Jonathan Davis (13:29):
You can do portfolio loans, single, you know, single assets you know, there's five one seven one ten one.
Wendy Sweet (13:37):
What that means is a five, one arm, a seven one on which means.
Jonathan Davis (13:41):
It's an adjustable rate after a five-year term or seven year or ten year. And then there's also a 30 year fixed.
Wendy Sweet (13:49):
And there's free thing on that too.
Jonathan Davis (13:51):
Yeah. So most of them will have a three, two, one, and some will have a five, three, five, four, three, two one.
Wendy Sweet (13:58):
So, which means you have five years of a prepay cause we got to make sure there's people that don't understand financing on here.
Jonathan Davis (14:04):
Yes. So our deal is so good that we want you to stay in it for five years.
Wendy Sweet (14:08):
That's right. And actually, when you're going back to Fannie Mae to get these loans, those are the rates you're going to be paying now because in order for them to take their portfolio from 15% down to the seven that they're trying to get to, they're having to raise the rates right?
Jonathan Davis (14:25):
Their up, their what? About four and a half right now?
Bill Fairman (14:29):
My wife worked for a very large banking firm.
Wendy Sweet (14:35):
Starts with B and ends with A, it has an of there in the middle.
Bill Fairman (14:41):
Too much business was to raise their rates. And what would make me laugh is that people would still get their loans. Even their rates were higher than everybody else, but that was a way to slow down production. When it got too busy for them, they would just continue to raise their rates until he said, I am going somewhere else. One of the things I want to caution people on, if they're thinking about doing portfolio loans, there's nothing wrong with them. It solves a lot of problems, but it also adds a layer that could be an issue. And that's if you're, if you're monitoring your portfolio and you want to sell properties off, as you get too much equity in them, and you don't want to have lazy money in there, and maybe you want to sell a couple and buy something somewhere else getting those carve outs for the properties that are all under one loan, some lenders, and you have to look at the paperwork. So some lenders may want 125% of the loan, so.
Jonathan Davis (15:42):
115 to 120 is pretty standard. Yeah.
Bill Fairman (15:45):
So it may not benefit you to sell that property.
Wendy Sweet (15:48):
Right.
Bill Fairman (15:49):
And get that equity. So
Jonathan Davis (15:51):
Why do they want that? What's if you sell a property, typically you're going to sell the property that's most desirable.
Bill Fairman (15:59):
That's why it has the most equity.
Jonathan Davis (16:01):
That's why it has the most equity, it's the most desirable one. So the lender says, okay, if you're going to sell the most desirable one, the ones that are left are less desirable than that one. So we want to be we want to have a lower loan to value ratio on the one that's that are left in.
Wendy Sweet (16:17):
Right.
Jonathan Davis (16:17):
So if you sell the best property and we were at 80% LTV, then when you do sell that, we want to be at 77, 78% LTV. We want to just keep lowering that jail.
Wendy Sweet (16:31):
And it may give you as much credit on that pay-off.
Bill Fairman (16:34):
They may have looked at a blended loan to value in that portfolio. So you had some at 80, some at 75, some at 65, some at 50, and they're happy with the blended. And then you sell the ones that have the lower amount. Now their LTV is gone.
Jonathan Davis (16:50):
Exactly.
Bill Fairman (16:50):
So it's more risk for them if they have to take it.
Jonathan Davis (16:52):
Yeah, exactly. Cause the principle that gets allocated from a loan amount to each property is different based on the properties value. So, you know.
Bill Fairman (17:01):
But there is value in doing it both ways, you just have to kind of juggle it and understand that there are things you have to think about with exit strategy,
Wendy Sweet (17:12):
Right.
Jonathan Davis (17:12):
And then the other piece of it is, I mean like blanket loans make it much easier to do your taxes. When you have 30 different LLC for each asset, it gets a little complicated.
Bill Fairman (17:25):
This is why in the earlier show, when we were discussing multifamily, it's a whole lot easier to have a lot of stuff under one roof, a lot of doors under one roof than it is to have a spread out portfolio. However, when it comes down to it, the single family homes are the most liquid and those are the safest.
Wendy Sweet (17:46):
Yeah for sure. There's benefits.
Bill Fairman (17:48):
I hope we didn't confuse you. We're just trying to.
Wendy Sweet (17:53):
Clear as mud.
Jonathan Davis (17:54):
They're only as confused as we are.
Bill Fairman (17:56):
We just want you to go into these things as wide open and look at all the angles.
Wendy Sweet (18:00):
Yeah.
Bill Fairman (18:01):
And make sure that you have the exit strategies that you desire.
Wendy Sweet (18:06):
And the right questions to ask.
Jonathan Davis (18:06):
Number one is bankers were always looking at worst case scenario, by the way, don't forget about Wednesday with Wendy. The link is right there in the chat box.
Bill Fairman (18:30):
I was told by Scott. Pause when you say Wednesday with Wendy.
Jonathan Davis (18:33):
And you didn't.
Bill Fairman (18:35):
Did I? I was not gonna pause. I just continue to talk.
Wendy Sweet (18:39):
Keep trying to hit the button.
Bill Fairman (18:42):
So maybe my batteries will run down. Anyway, it was an awfully wonderful show.
Wendy Sweet (18:50):
Yes it was.
Bill Fairman (18:50):
We are Carolina Capital Management. We are lenders in the Southeast, stop dancing. If you are a borrower and you're interested in borrowing money in the Southeast, please go to www.CarolinaHardMoney.com, click on the apply now tab if you're a passive investor and you're looking for pants and returns, click on the accredited investor tab, don't forget to like.
Jonathan Davis (19:13):
All the way at the beginning.
Bill Fairman (19:13):
Share, like, subscribe, hit the bell. And I'm thinking my back.
Wendy Sweet (19:29):
That's a bad word.
Bill Fairman (19:31):
You guys have a wonderful week. Thank you for joining us on the Passive Wealth Show.
No comments:
Post a Comment