What is happening, YouTube? It's Matt Faircloth. Welcome. Welcome to Mentorship Monday. I am flying
solo today, and that's okay because I got you guys. I've got a couple of good questions. I'll
read them off and I'll answer and we'll do it old school style like Mentorship Monday back in the
day when I would just read people's questions and send my thoughts and all that. We'll do it like
that. First question comes from Ron, who is in Tennessee. Ron's question is, "I've been looking
for an owner occupied hard lender in Tennessee, but I've struck out." Ron, just to be honest,
what I was looking for is he's looking for a hard money lender on the primary residence,
which is interesting because maybe this maybe doesn't speak for Ron, but maybe you've got
someone who has reasonable, maybe not the best credit or maybe not the best income,
whatever it is, but they've got a lot of equity in their house and they're looking to
put a loan on their home so that they can go and do whatever else they want to do with it.
They want to go and maybe they need it for living expenses, maybe they need it for whatever they
need it, but whatever it is, they want to put a loan on their home and a traditional bank lender
like a HELOC or a refi for a mortgage or whatever isn't going to work. So, a hard money lender like
a private investor to lend on your home. Now, few thoughts here, Ron. First of all, if you guys
have a home that you're looking to do a loan on that you live in and you've got a lot of equity,
then maybe you fall into this boat. Maybe you want to put the money in different places,
you want to invest in real estate, whatever, but for one reason or another, you're not bankable.
First and foremost, hard money loans can be weapons of mass destruction. Okay? They're
very expensive. The rates can be in the double digits, the interest rates can, and they're
intended for short-term use. A hard money loan is something that you're supposed to get into,
use the money you're getting for a renovation, for a flip or whatever it is,
and then get out of it by refinancing, selling, whatever it is. So, you're putting this money
on your primary residence. Odds are you might not have an outlet for it, so you're using it
for living expenses or to get by while this massive COVID mess blows over or whatever.
I'm cautious of advising that you do something like that because it's going to subject you to
11, 12, 13% interest on your primary residence and I don't see an exit strategy here.
If you have an exit strategy, I would consider going to a couple of small community banks,
and if you're asking me about this, maybe you've already done that, but going to small community
banks and try and negotiate a HELOC, a home equity line of credit. Now, maybe you don't have the best
tax returns, maybe you've filed bankruptcy. Maybe you've got all these different things going on,
but there's probably a lender out there that would give you a loan and that would that overlook
your current financial situation. So, I would start with a small community bank,
even if you already have. If your current lender has already told you that they won't do that,
so consider doing it. Consider talking to other small community bank lenders. Okay?
Secondly, there are maybe you're a money lenders that you could talk to that are going to be
high interest rates, but just bear in mind that their rates are going to be high and
you better have an out for that money. They might be open to talking to you because these folks are
in business to lend money, so they may be open. So, look in your local real estate group and find
a hard money lender that may be open. Thirdly, my book, Raising Private Capital, is going to talk
about now, if you're in a financial difficulty, you're in a personal situation where you don't
want to go and put out there that, hey, you're having financial difficulty and need a loan,
maybe that's not the best solution, but if you're looking to leverage your home to grow your
business or to get involved in an exciting venture versus just getting yourself by, then maybe
raising private capital can give you some ideas on how to leverage your home, because there's a
lot of conversations like that in there in how to leverage your home with some, for someone to lend
you money so you can do a business venture versus just if you're looking to just keep your lights on
and your boats afloat, it's probably not the best angle, but if you're looking for a real estate
venture, that can be the place to go with it. If you are in financial distress, and this goes
for everybody too, my heart, goes out to you. There are agencies out there that can support you,
that can offer assistance. You can also call your existing lender and ask them for forbearance
and maybe ask them for an extension on your loan, the existing lender that has the note now
to go to them and ask them for an extension on your house, because maybe that's another
angle that you could go to. Those are a lot of different options, Ron, and my thoughts go out
to you, and my prayers go out to anybody right now that has a lot of equity in their home but
is in a financial situation where they need to pull that equity out so they can put it to work,
or just not put it to work, but just keep things going financially in the family.
I hope those options help. I think that there will be more government programs out there,
so if you're able to hang on, I think that as the next couple months come out, there'll be
more and more things you could do on how to, as an investor, pull equity out of your home
and then put it to work, so a hard money lender on your own primary residence could be something
to call this thing. That's that. That's the answer for my friend, Ron. I'll sling one more question
out there because, like I said, I'm flying solo without my boy Justin today in that. I'll throw
one more question out and I'll answer that one as well. Hi, Matt and team. I've been watching your
videos for a while. What amazing content. Thank you. I appreciate you. This is from Matthew. Hey,
maybe you've covered this, and we have covered this one, but that's okay. I want to touch it
again because it's a very common question. My question is, I'm currently house hacking
and I want to move my property into an LLC, but moving into an LLC doesn't remove the loan from
my personal name or my credit. What do I need to do to remove the loan into my LLC as well?
Looking forward to hearing from you. There are two steps in moving a property from
your personal name into an LLC. This is for a house hack or for any type of venture. Although
you are house hacking in the property, Matt, I will just make this a broader conversation. Now,
first of all, before I get into that, one touch, Matt, if you own the property in your personal
name and you are living there, fine. But if you were planning on moving from the property, now
then would be the time to move it to the LLC. If you're going to continue to live there,
I don't recommend you live in a house that's owned by an LLC because, I guess talk to your CPA about
that. I'm not sure if you would lose some of the homeowner benefits if it's an LLC owned by you.
But that seems wonky to do. My guess is would be that you would move out of the house then move it
to the LLC. The way you do that is, I've talked about this before, you do a quick claim deed,
right? Which is like a dollar transaction where you sell the property for a dollar
from you to the LLC. It's called a quick claim deed. Have a lawyer do that for you,
right? Don't just tell them Matt said. Have a lawyer, talk to a lawyer about a quick claim deed
and have them set that up for you. You sell it to yourself for a dollar and you assume, the LLC
assumes the mortgage you have on the property. Immediately, hopefully at the same closing table,
you then refinance that property into the LLC, so now the LLC owns the property because it bought
it for a dollar from you personally, and then you refinance the property to take the mortgage off of
your personal name and into the LLC. That will take it off your personal credit. It won't show
up on your credit score anymore, won't show up as an asset of yours. It'll all show up on the LLC
because now the LLC is the owner. It's not on your personal credit. It's completely off of you as a
borrower, being the LLC and that. Now, you will, and then maybe this is what you're referring to,
Matt, but this is what it is, you will likely have to personally guarantee that new loan. That's not
something you need to get out from under unless the loan amount is really, really big, right?
You will have to still personally guarantee the loan, but it's not going to show up on
your personal credit score as I understand it. It's going to show up on the LLC.
The LLC is an asset and a loan there, but it won't show up on your personal credit anymore. They are
going to check your credit to make sure you have good credit to make sure you've got the income,
and if God forbid the loan didn't get paid, they could come back on you as the guarantor, but it's
not something that's going to show up on your loan and on your personal credit anymore as an asset
you have, as a loan you have or whatever, but you are going to have to personally guarantee it, but
that's just the cost doing business for loans that are, if you're borrowing less than a million, you
can expect to personally guarantee the mortgage in that scenario. Matthew and Ron, awesome questions,
guys. I hope that helps. As I always say, guys, have a great and profitable week.