6/11/24 – Bridge Loans and a Reverse 1031 Exchange

Happy Tuesday, and I hope you are doing well. It is funny how deals get put together sometimes, and I get excited when I get to do something creative to get a buyer their dream home. Joe and Don buy a house together and own three other properties. House #1 is worth $1.9 mil, and they owe $760K, house #2 is worth $1.1 Mil, and they owe $432K, and house #3 is worth $1.2 Mil and they owe $556K. They are purchasing a house for $3.00 Mil, and none of the houses are listed, and houses #2 and #3 are investment properties with solid profits!

Our ultimate goal is to secure the client’s new home, which they’ll be moving into in 2 years, while avoiding Capital Gains. Do you have any thoughts on how we are going to do this?

House #1 is a primary residence, so we will get them 75% of the appraised value on a Bridge Loan, which will get them about $650K. #2 and #3 are Investment properties, so we will get them Private second Mortgages (Bridge Loan for Non-Owner) up to 75% of the appraised value. Giving them $400K and $350K from the investment properties and a total of $1,400,000 down on a $3 Mil property. We can’t do a straight 1031 exchange because the investment properties are not sold, so we will do a Reverse 1031 Exchange where an LLC buys the property, and then when both of the investment properties sell, they can then purchase the property from the LLC and complete the 1031 transaction. At the start, the LLC will have a $1,600,000 loan for the Reverse 1031 exchange, and when it converts and all properties are sold, our buyer will have a loan for about $750,000.00. They are purchasing non-contingent, and we waived appraisal and loan contingencies to get the offer accepted. We also got them a $90K deposit, so they did not have to pay anything out of pocket.

So why did we do it this way? The Reverse 1031 will push back any Capital Gains that Joe and Don would have on the two investment properties. If they own the house until one of them passes away, the property will go to a stepped-up basis, and the surviving spouse could then sell with no Capital Gains. Therefore, deferring the capital gains of over $1.2 million on the two investment properties will save them over $360K in taxes for their heirs.

I am available the rest of the week if you need anything. Let me know if you have any questions or if someone is interested in buying a property! My cell is 661-714-6258, and my office line is 661-260-2970 ext. 2222. My direct line is 661-291-2222. When you text, text (661-714-6258) or email me at Mike@AugustaFinancial.com.

But wait, there’s more!

Interest rates are a tad better today after a bad Friday and a semi-flat Monday! The Fed is meeting now and will lilkely decide to leave rates unchanged. Core CPI is this week!

• 12-day escrows if your buyer is pre-approved - Conventional / FHA / Jumbo / Bridge
• We do loans in all states, so call me with anything you need.  
• Government Loans (FHA / VA/ USDA) are in the high 5’s and low 6’s
• Conventional Loans up to $766,550.00 are in the high 6’s and low 7’s
• High Balance Loans $766,550.01 – $ 1,149,825.00 are in 7’s
• Jumbo loans above $1,149,625 are in 7’s
• Bank statement loans - They are available with 10% down again! 7’s to 9’s depending on down and credit score.
• Profit and Loss Statement loans- You don’t need bank statements, just a profit and loss statement!
• No income qualifier – 40% down with reserves! In the 8’s!
• 0 down loans are in the high 7’s – 660 credit score min right now, up to $793,000.00.
• Private Money lenders - Hard Money Loans – 35% down!
• No Ratio Loans 30% down
• DSCR – Debt Service Coverage loans with as little as 15% down
• Bridge Loans - typically 7.99% with limited fees – and they get you where you need to go!
• 0 down California Dream for all Equity Share – Registration April 3 to April 29, 2024
• 3/2/1 Buydowns 2/1 Buydowns and 1/0 Buydowns are available at great start rates!

Interest rates are subject to change without notice! The above are LA County Loan Limits.

Condo Update?  

Cameo Woods HOA - Per the litigation disclosure, the association is being sued by a homeowner for water heater damage and discrimination, and the damage is still ongoing. We received confirmation that the HOA’s insurance agency is not covering the lawsuit, and the claim was denied due to the nature of the complaint.

Condo / Townhome – issues we know of now. Properties can be financed with 10% down and are considered NON-WARRANTABLE:

1. American Beauty Condos – The brown ones – Insurance – 50 Mil in coverage for 748 units is not nearly enough!
2. American Beauty Gardens: 19% delinquency on special assessments due. 19% are 60 days or more late! We can do with 5% down, but others can’t!
3. American Beauty Village: On Fannie’s List. Per Fannie, this project needs critical repairs and may have conditions such as material deficiencies and significant deferred maintenance. This project’s master insurance policy deductible exceeds the allowable limit
4. Bouquet Canyon Village is on Fannie’s list! Per Fannie – This project’s master insurance policy coverage does not meet the requirements
5. Bridgewater, Emeryville - On Fannie’s list!
6. Brookside Walk – Insurance –
7. Cabrini Villas, Burbank - On Fannie’s list!
8. Calla and Rowan – 27513 Illumination – Fannie Mae Approval expired – New Construction.  See Blog on 5/7/2024
9. Cameo Woods HOA - Per the litigation disclosure, the association is being sued by a homeowner for water heater damage and discrimination, and the damage is still ongoing. We received confirmation that the HOA’s insurance agency is not covering the lawsuit, and the claim was denied due to the nature of the complaint.
10. Canyon Village – Reserves and 10% of the dues not going to reserves!
11. Canyon Oaks – Insurance On Fannie’s list!
12. Casa Marabella – 13951 Sherman Way, Van Nuys -On Fannie’s list!  
13. Cassia and Jasmine  – 26949 Winding Trail Court  – Fannie Mae Approval Expired. See Blog on 5/7/2024
14. Cornerstone – Insurance -On Fannie’s list!
15. Creekside – ??? We don’t know
16. Encino Oaks – 5460 White Oak Ave – On Fannie’s list!
17. Lantana at Valencia – 27034 Hummingbird Lane – Fannie Mae Approval – expired. See Blog on 5/7/2024
18. Liberty Canyon HOA – 27409 Country Glen Road, Agoura Hills, CA- On Fannie’s list!
19. Madison at Towne Center  – Litigation – We can do with 5% down, but others can’t!
20. Mariposa: On Fannies List. Per Fannie Mae – This project’s master insurance policy coverage does not meet the requirements.
21. Orchid at Valencia – 27033 Open Sky Place – Fannie Mae Approval Expired. See Blog on 5/7/2024
22. Penn Court HOA – 4201 Pennsylvania Ave La Crescenta On Fannie’s list!
23. Princessa Estates – has $8200 in Reserves, and they are voting on an assessment in May!
24. Rainbow Sierra Terrace – On Fannie’s Naughty List – This project’s master insurance policy is not written to Replacement Cost Value. See Selling Guide Sec. B7-3-03, Master Property Insurance Requirements for Project Developments.
25. Scenic Hills – Insurance – On Fannie’s list!  This project’s master insurance policy coverage does not meet the requirements in Selling Guide Sec. B7-3-03, Master Property Insurance Requirements for Project Developments.
26. Shadow Ridge – Oak Park – Insurance -On Fannie’s list!
27. Sherman Way Condos – 17900 Sherman Way Reseda – On Fannie’s list!
28. The District Community Association – 19533 Cardigan Dr, Northridge – On Fannie’s list!
29. Treana - Stevenson Ranch: On Fannie’s list! Per Fannie, this project needs critical repairs and may have conditions such as material deficiencies and significant deferred maintenance.
30. Valle Di Oro is on Fannie’s list! Per Fannie Mae, this project contains timeshare, fractional, segmented, or split ownership units or other arrangements (such as mandatory rental pooling, shared interest apartments, or community apartments) restricting the unit owner’s ability to occupy the unit.
31. Vista Del Canon – Insurance is too low, UGH!
32. Walnut Gardens II – 7320 Lennox Ave Van Nuys CA – On Fannie’s list!
33. Warner Center Condos – 5515 Canoga Ave, Woodland Hills, CA –  On Fannie’s list!
34. West Creek Condos and Townhomes: On Fannie’s List. Per Fannie, this project’s master insurance policy coverage does not meet the requirements in the Selling Guide!

Please let me know if you hear anything new on condos or townhouses.

I am still available all week if you need anything. Let me know if you have any questions or if someone is interested in buying a property! My cell is 661-714-6258, and my office line is 661-260-2970 ext. 2222. My direct line is 661-291-2222. When you text, text (661-714-6258) or email me at Mike@AugustaFinancial.com.

Have a great day and an even better tomorrow! Please call me when you have a client who needs to borrow!