Recourse Vs. Non-Recourse Loans & a Surprise!

Caeli Ridge recorded this episode on 7/25/2023

Recourse vs. Non-Recourse Loans

Caeli provides an overview of what recourse and non-recourse loans are and in what situations you would choose one over the other. She details that the difference in rates and terms between the two options is significant, and that she does not see a place for non-recourse loan options in most cases as it pertains to real estate investors purchasing 1-4 unit residences.

Caeli's surprise is an exciting new loan option for Ridge Lending Group that Caeli has been working tirelessly to secure for our borrowers.

Q&A throughout the episode on these topics and more!

Check out the video with the screen share and the documentation in the Community.

You can join these live each week by following this link to join the call:
https://community.ridgelendinggroup.com/events/live-with-caeli-each-tuesday-beginning-at-430-pm-et/list

As always, give Ridge Lending Group a call if you have any questions at
855-747-4343 or email us at info@RidgeLendingGroup.com

1
00:00:02.280 --> 00:00:25.889
Karlie Libby: Hello, everyone Welcome to calling all real estate investors. We are here every Tuesday from 1 30 pm. Or 4 30 pm. Eastern standard time. today, Caeli is going to be going over recourse verse, non recourse loans, and I think we're going to have a little surprise sprinkled in there as well. So stay tuned for that.

2
00:00:26.130 --> 00:00:29.090
Karlie Libby: and thank you so much for being here.

3
00:00:29.320 --> 00:00:44.710
Karlie Libby: If you have any questions throughout this call, please go ahead and drop those in the chat, and we will get them answered as soon as possible. So yes, we love your participation. Anything. All questions please. Put those in the chat.

4
00:00:44.770 --> 00:00:52.049
CAELI RIDGE: and then I'm gonna hand it off to Caeli. Thank you so much. Thank you, Miss Karlie. Hi, guys as always, thanks for being here with me.

5
00:00:52.200 --> 00:01:03.400
CAELI RIDGE: So I was thinking about this today, and I wanna, I want to take a minute. And and I kind of have an open form for anybody that wants to participate. This is totally unrelated to

6
00:01:03.420 --> 00:01:15.270
CAELI RIDGE: so mortgage or to real estate investing. But this is a nice platform in which I can ask some questions about some things that I'm observing, and I'm just interested in

7
00:01:15.830 --> 00:01:26.550
CAELI RIDGE: some opinions just from from, you know. colleagues, people in a in a space that I occupy, so I hope you'll forgive me again. Totally unrelated to anything that we would be otherwise talking about.

8
00:01:26.900 --> 00:01:45.489
CAELI RIDGE: there's a few things has anybody noticed? And and this is going to be a little bit of a dig. Gen. Z. So anybody that's in that that age group. I don't think there's probably too many of you. But any of you that in in that age group my apologies in advance this is not meant to be offensive. I have 2 of my own

9
00:01:45.600 --> 00:01:51.280
CAELI RIDGE: that I've just recently, you know, launched both. They're both now out of my house.

10
00:01:52.430 --> 00:01:59.469
CAELI RIDGE: And I actually, Lisa, I was talking to you a little bit about this a couple of weeks ago. First of all,

11
00:01:59.780 --> 00:02:15.819
CAELI RIDGE: the the language barrier. I think there is an epidemic. going on right now with the word like. Has anybody else noticed that the word like as a as a use, a place filler for for conversation, because they don't maybe have

12
00:02:15.920 --> 00:02:27.220
CAELI RIDGE: the they don't have the words to use. yesterday last night I was out to dinner with my husband, and we were sitting next to a group of girls.

13
00:02:27.940 --> 00:02:33.629
CAELI RIDGE: and I I was overcome by I could not believe

14
00:02:34.070 --> 00:02:40.859
CAELI RIDGE: how many likes, and I started to count, and it was just such a ridiculous thing. Is anybody getting this or picking up on

15
00:02:40.960 --> 00:02:53.949
CAELI RIDGE: how often that word in conversation is used inappropriately? They're not saying I like ice cream or anything like that. Anybody I mean anybody getting a feel for the that at all, because it's it's

16
00:02:54.040 --> 00:02:56.960
CAELI RIDGE: I think it's such a a drastic

17
00:02:57.010 --> 00:03:08.490
CAELI RIDGE: difference to how people are communicating, and it's not good. It is not good. If I had an interview with any one of those girls, I mean, I would be done in inside 5 min, and and I would never, ever.

18
00:03:08.620 --> 00:03:16.970
CAELI RIDGE: How are they gonna be employed? I mean, how are they going to survive and and talk that way? Does anybody have anybody seeing this? Is it just all on me? That's the first part.

19
00:03:17.090 --> 00:03:21.949
CAELI RIDGE: And Carly, can we? Is there any way that we can just get rid of the they have to ask to unmute?

20
00:03:22.370 --> 00:03:45.080
Karlie Libby: yeah, no, definitely, I can get rid of that. And we do have a couple of comments, so Walt, says he, he years a lot of like and sweet uses filler words, and Charles says all the time he he he hears this. Lisa says Valley girls always said, like, you know, whatever

21
00:03:45.080 --> 00:04:13.859
CAELI RIDGE: it yeah, Teresa said, it's it's overused. And and Lisa actually says she doesn't feel like this is a new phenomenon. So I actually agree with you, Lisa, I feel like it's been going on for a while I think it's just gotten so so bad. I know that in our house because it it yes, I have heard it. My kids are are now both in college but in our house, when their friends would come over, it didn't matter who it was they would be doing push ups or or putting a quarter in the in the jar if they use it in an inappropriate way. So we tried to curb that

22
00:04:13.870 --> 00:04:37.449
CAELI RIDGE: at a very early age when I started to hear it. But I just think it's out of control now the second thing is, and then I'll get off this, and I'll I'll move on to to what you guys are here for. I just, I'm very interested to get some feedback, because I'm you know, guys, I live in in kind of a box I'm I'm singularly focused in the space that I'm in, and and I don't get out much. So I'm really curious. If you guys are seeing this out there in the service industries, especially.

23
00:04:37.450 --> 00:04:56.140
CAELI RIDGE: there isn't anybody that is mentoring this generation from a workforce perspective. and I'm finding that you know, wherever it is, whatever it is, when you need to be you, you're being served in a restaurant or on the phone, or it doesn't. It doesn't even matter

24
00:04:56.390 --> 00:04:59.370
CAELI RIDGE: But there has to be some customer service involved

25
00:04:59.460 --> 00:05:09.720
CAELI RIDGE: that they just are clueless. And they I I can feel that they feel it. They feel that I feel it. And it they just don't they? The training isn't there? And I I I'm really

26
00:05:09.720 --> 00:05:30.389
CAELI RIDGE: trying to impart to my kids that necessity is the mother of all invention. Right? Somebody needs to step up and and help take control, especially on a corporate level and provide some kind of mentorship or training for this young Gen. Z. Because I feel like they don't have that. Is it just me? Is anybody else feeling that when they go out and about in the world.

27
00:05:30.580 --> 00:05:35.760
Rev. Jamal Tharp: I'm really fortunate that I have a 20 year old in the

28
00:05:35.930 --> 00:05:55.999
Rev. Jamal Tharp: 16 and 15 year old, and they're both really industrious, hard workers, my 20 year old, where she just went into Michael Cores, and simply because she's bright and aware and can connect with people. The manager came up and said, Can I hire you? Gonna give her her attire and

29
00:05:56.000 --> 00:06:21.610
Rev. Jamal Tharp: a a commission on top of great pay, and she has those experiences, she says everywhere she goes, and what I can tell you is, she's just simply a present young person, and I do think that they're rare from what I can tell And when she went to a very expensive school for a year, which she didn't quite fit culturally.

30
00:06:21.890 --> 00:06:37.199
Rev. Jamal Tharp: everybody was like like, like like. Now she goes to community college and holds down 3 different jobs and is, you know, loves it because she says she's around the diverse group of people. we mean not just

31
00:06:37.210 --> 00:06:41.220
Rev. Jamal Tharp: her age and people who are more interesting. So

32
00:06:41.290 --> 00:06:45.469
Rev. Jamal Tharp: I I yeah, I do think it's sad that

33
00:06:46.020 --> 00:07:04.740
CAELI RIDGE: but I I also think it might have to do with maybe the lack of engagement, of conversation with people outside of I think that's exactly right with phones and social media and the abbreviation of of text and everything. I think that's true. Thank you, Jamal, for for that. Input I really appreciate it.

34
00:07:05.130 --> 00:07:18.219
CAELI RIDGE: yeah, I I think that it is the exception. And I think, the the younger generation is is gonna get stuck. And I think I hope somebody. Maybe maybe one of my kids with my harping on them can come up with some solutions to help

35
00:07:18.230 --> 00:07:33.560
CAELI RIDGE: bridge some gap, anyway. Okay, sorry. Okay. I know that was so random. But you guys are the only people that I really get to talk to collectively, and I can't really have this as a one on 1 one on one conversation with our clients during the day. They'll think I'm crazy. So you guys get to think I'm crazy. okay.

36
00:07:34.130 --> 00:07:52.279
CAELI RIDGE: let's get on with what we're here to talk about. Last week I had said, we're going to talk about amortization versus interest, only I have yet to become prepared for that for you. So I change the topic, and we're going to talk about recourse versus non recourse. I had asked some people in the office, what questions that we're getting, and that one's coming up a lot.

37
00:07:52.280 --> 00:08:05.640
CAELI RIDGE: So just to quickly go over some of those differences, and why? It's important to know the differences. Then I'll get into my surprise. I think if you read the headline, I've got something exciting to share that we will finish the the half hour with

38
00:08:05.840 --> 00:08:19.109
CAELI RIDGE: recourse versus non recourse. So the difference is very simply whether or not you're obligated to the debt individually obligated to the debt, and where it can be most important is when we're talking about those golden tickets, the Fanny Freddie's

39
00:08:19.210 --> 00:08:32.130
CAELI RIDGE: for those of you that are not aware. We call Fanny May Freddie Mac. Conventional agency, conforming loans, whatever you want to call it, the golden tickets, because these are going to give you the highest leverage at the lowest interest rates on the planet

40
00:08:32.539 --> 00:08:41.830
CAELI RIDGE: and the guidelines for that. Say that you cannot have more than 10 finance properties per qualified individual. Okay, that's what Fanny and Freddie say.

41
00:08:41.990 --> 00:09:08.759
CAELI RIDGE: So. The definition of what counts against those 10 are as follows, and this is where people get tripped up a little bit. so first of all, it's residential. Only single family up to 4 unit. If it's a commercial property, 5 unit or a retail space or a strip mall, or whatever does not apply. This is only applicable to residential property

42
00:09:09.050 --> 00:09:28.159
CAELI RIDGE: that is leveraged, that is, alone on it in your individual name, or personally guaranteed by you. Very commonly, almost daily, people think that the loan that they secured in their Llc. Name a year or 2 or 5 or 10 years ago, where both the loan and title close in the Llc. Name

43
00:09:28.200 --> 00:09:41.530
CAELI RIDGE: would not count against the Fanny Freddie 10. Well, that is not true. If there was a personal guarantee associated with that commercial loan. If there was a personal guarantee, and we would find this via the note

44
00:09:41.950 --> 00:09:46.050
CAELI RIDGE: that you signed a closing, then that absolutely will count

45
00:09:46.080 --> 00:09:47.910
CAELI RIDGE: against the Fanny. Friday. 10.

46
00:09:48.130 --> 00:10:02.580
CAELI RIDGE: Okay, so very, very important distinction. those people that that have 30 properties. They're all mortgaged, and they think that they have all their golden tickets left because they were all secured by using an Llc. But come to find out. They all have personal guarantees.

47
00:10:02.950 --> 00:10:22.790
CAELI RIDGE: Those people cannot get or not eligible for those, Fanny, Freddy. They'd have to refinance those commercial loans into what's called a non recourse, where both alone and title close in the entity name. But there is no personal guarantee. Okay, now let's talk about kind of the differences between those 2 things.

48
00:10:22.850 --> 00:10:43.589
CAELI RIDGE: You know. I was, I was emailing a client earlier on this topic had come up. He was saying he didn't want to have the loans show up on his credit report. And I I wanted to dig a little bit further and kind of understand why, what was the method of his need for this, and if it's exclusively asset protection, you guys

49
00:10:43.620 --> 00:10:52.829
CAELI RIDGE: then I would tell you that having it on your credit report or not, probably. Isn't that big of a deal. I'll come back to that. Let me finish my thought on on recourse versus non recourse.

50
00:10:54.290 --> 00:11:12.770
CAELI RIDGE: The circumstances when I think non recourse is appropriate or applicable is really going to be for those multi 1 million dollar transaction types. You know, a hundred unit apartment complex or 500 unit apartment complex. That's when a non recourse loan, I think, is going to be most appropriate.

51
00:11:12.770 --> 00:11:26.730
CAELI RIDGE: Let's go back to recourse. And what that really means. If you've signed a personal guarantee. That means that in the event of default, technically, the lending and to T or the servicer can come back and attach assets for their losses. Right?

52
00:11:27.100 --> 00:11:45.919
CAELI RIDGE: That is true, and it is written in your loan documents that way. However, I would share with you guys that in the 25 years that I have been doing this in the event of default, which is pretty rare. But let's just say that you did default on the loan the amount of times that I have seen a a lender go back and attach

53
00:11:45.960 --> 00:11:47.740
CAELI RIDGE: the individual.

54
00:11:47.870 --> 00:12:13.150
CAELI RIDGE: It would be a Fr. I think. I think I've even only heard of it one time, and that one time exception was because the property was in such disrepair I mean just completely gutted and and totally tore up. That was a circumstance that I had heard of. I wasn't even involved in the scenario where the lending entity went after the individual. Otherwise my point here is they just want the property back

55
00:12:13.290 --> 00:12:20.389
CAELI RIDGE: right? They're not. Gonna they. They just want to get their property back as quickly as possible in the event of default. Get it ready and resell it.

56
00:12:20.400 --> 00:12:32.960
CAELI RIDGE: Okay, attaching you and your assets? even on a recourse loan. I suspect, would be an extremely extremely rare proposition. So why is this piece of intel important?

57
00:12:32.970 --> 00:12:38.850
CAELI RIDGE: The difference in rates and terms between recourse and non-recourse are pretty substantial.

58
00:12:38.950 --> 00:12:42.300
CAELI RIDGE: If you truly believe you need a non-recourse loan.

59
00:12:42.410 --> 00:13:06.649
CAELI RIDGE: Okay, there's no personal guarantee. It is in the entity name only. that's fine. But then you need to be prepared for a balloon feature right where, at the end of 5 years or 10 years, or something, the note is due, or maybe it's an adjustable rate. Mortgage extremely harsh prepayment penalties on a non-recourse loan, and the interest rates are going to be, you know, upwards of 2% plus higher than anything else that you're going to get.

60
00:13:06.650 --> 00:13:19.899
CAELI RIDGE: So keep in mind that if, in deciding between recourse and non-recourse, you're dead set on that non recourse, what does it actually mean for the bottom line of the investment. And what are you really getting out of that?

61
00:13:20.440 --> 00:13:23.890
CAELI RIDGE: Okay, any comments, questions about any of that guys, anybody

62
00:13:24.390 --> 00:13:28.989
CAELI RIDGE: recourse, non recourse, how it applies to the Fanny Freddy golden tickets.

63
00:13:29.150 --> 00:13:49.709
CAELI RIDGE: general rule of thumb. The further away you get from skin in the game, the higher the the rate, and the less attractive the terms are going to be, and that would be applicable to non recourse. If you look at the spectrum for you know best rates and terms on investment, real estate, and then the worst. A non recourse is going to be

64
00:13:49.760 --> 00:13:53.680
CAELI RIDGE: the the highest rate and the least attractive terms

65
00:13:53.800 --> 00:14:00.310
Karlie Libby: here from Walt. he asks, does a Dsc. Our loan fall under a non-recourse?

66
00:14:00.760 --> 00:14:19.750
CAELI RIDGE: It could sure well, but more often than not, debt service coverage ratio loans most most of the loans that you guys are going to be looking at. I'd say the vast majority are going to be recourse, whether it's debt service, coverage, ratio, or it's a full income documentation. If it's written to the entity name.

67
00:14:19.990 --> 00:14:28.419
CAELI RIDGE: If the loan is written to your Llc. Name and your closing title in the Llc. Most of those are going to be recourse anyway. Most of them come with a personal guarantee.

68
00:14:29.090 --> 00:14:40.270
CAELI RIDGE: and certainly yes, the debt, service, coverage, ratio can fall under that. But non-recourse certainly can can apply to debt service, and completely without the personal guarantee.

69
00:14:40.300 --> 00:14:42.350
CAELI RIDGE: to the entity.

70
00:14:45.840 --> 00:14:46.880
CAELI RIDGE: Anybody else

71
00:14:47.260 --> 00:14:51.979
CAELI RIDGE: anything recourse, non-recourse. So I guess, just to summarize what I would say about this.

72
00:14:52.480 --> 00:15:03.290
CAELI RIDGE: I I don't see a place for for non recourse, unless it's very, very specific set of circumstances that actually benefits you. I think you're going to be better served

73
00:15:03.730 --> 00:15:06.909
CAELI RIDGE: with. If you, if you just you want the

74
00:15:07.830 --> 00:15:20.969
CAELI RIDGE: the loan in the entity name. If even that is super important to you, fine sign the personal guarantee. Get those significantly better terms, because at the end of the day, in the event of default, they really just want the property back. Okay.

75
00:15:21.040 --> 00:15:26.100
CAELI RIDGE: I'm going to preface by saying I'm not an attorney, and I'm not giving anybody here legal advice to be clear.

76
00:15:26.390 --> 00:15:31.340
CAELI RIDGE: There's there's that and and just to to go backwards real quickly

77
00:15:31.590 --> 00:15:41.789
CAELI RIDGE: if you have golden tickets and your intention for having the properties holding the properties in the Llc. Name. If it's exclusively for asset protection.

78
00:15:41.810 --> 00:15:45.979
CAELI RIDGE: there's no reason that you should not secure, and you can qualify.

79
00:15:46.350 --> 00:16:03.399
CAELI RIDGE: There's no reason that you shouldn't secure those Fanny, Freddy loans and maximize those golden tickets, because, if if the need for the entity is exclusively asset protection. You can simply execute the quit claim. Deed, qu it. Quit claim, bead. Sometimes it's called a warranty deed. After closing

80
00:16:03.550 --> 00:16:05.640
CAELI RIDGE: into the L. L. C. Name

81
00:16:05.720 --> 00:16:20.130
CAELI RIDGE: without that do on sale clause that is old thinking old philosophy do on sale. Clause does not apply to Fanny Freddie any longer. As long as you. The one obligated to the debt has the majority ownership in the Llc.

82
00:16:21.430 --> 00:16:31.710
Karlie Libby: We do have a question here from Armando. he asks. Will we talk about options once we've exhausted our 10 golden tickets or 20 golden tickets, if they're married.

83
00:16:32.780 --> 00:16:37.359
CAELI RIDGE: Yes, thank you, Armando, for the question. your so

84
00:16:37.760 --> 00:16:59.139
CAELI RIDGE: kind of looking at it from the lens that we want to maintain. You know, when we go from from the Fanny Freddie's, which we've already determined golden tickets. Right? Those are going to be your best options for terms and rights, etc. The next step is going to be on the non. Qm, non- Qm. Stands for qualified mortgage. Fanny May, Freddie Mac.

85
00:16:59.190 --> 00:17:11.199
CAELI RIDGE: Okay, they have those that 10 Max requirement. Now we're going to move into non- Qm. Has debt, service, coverage, ratio, bank statement loans, asset depletion loans, but it also can keep going full. Doc.

86
00:17:11.359 --> 00:17:28.359
CAELI RIDGE: Right remember, I said just a second ago, the more skin in the game you have the better the terms are. So if you're if you've already maxed out your golden tickets, and you just want to continue down that kind of that lane or that path. You're going to go into. Non-qm. And you're still going to supply all of your income documentation, etc.

87
00:17:28.850 --> 00:17:32.509
CAELI RIDGE: Okay, you're going to close the loan in your individual name.

88
00:17:32.590 --> 00:17:36.300
CAELI RIDGE: These loans will allow you to close title in the Llc. Name.

89
00:17:36.970 --> 00:17:52.349
CAELI RIDGE: So Fanny Freddie, both the loan and title close at closing in the individual name you would quick claim into the entity name after closing Fanny Freddie, non Qm. Most of the time is going to close in your individual name. Not always, but most of the time we'll close in. Your individual name

90
00:17:52.550 --> 00:17:56.600
CAELI RIDGE: and title can close in the entity name. You don't have to do the quick claim deed.

91
00:17:56.850 --> 00:18:20.239
CAELI RIDGE: Okay, best rates and terms past the Fanny Freddie. 10 are going to be non-qm. Full-income documentation. There is no longer a restriction to how many finance properties you can have a Non-qm. But it's going to be. It's not. It's not federally guaranteed. You don't have the United States Government guaranteeing that mortgage backed security against default. Right? It's a separate set of investors. So the interest rates going to be a little bit higher.

92
00:18:20.690 --> 00:18:22.080
CAELI RIDGE: but

93
00:18:22.500 --> 00:18:36.720
CAELI RIDGE: that would be your your next best. So from going from Fanny, Freddy full Doc. Non. Qm. Closing the entity in the title title in the Nt. Name loan is still in your name. But but even if we go outside of that

94
00:18:37.980 --> 00:18:48.829
CAELI RIDGE: outside of the Non-qm. We have products that will allow you to close the loan and title in the Llc. Name, but that is one tier or one step further from

95
00:18:49.550 --> 00:18:51.600
CAELI RIDGE: the rates and terms

96
00:18:51.910 --> 00:19:08.139
CAELI RIDGE: on the non-qm, full, Doc, right? You guys following me. So if you think about a spectrum and the further away you get from full income documentation files of blood and DNA samples, and the entity name and a personal guarantee. The further away from that we get

97
00:19:08.140 --> 00:19:33.960
CAELI RIDGE: the the less attractive the terms are going to be, and we have all of it. It's really going to be specific to your own set of circumstances where you are right now, where you want to go next year, etc. That'll help us decide which one of those buckets you're going to be focused on at any point in time. Thank you for the question. Anything else? Carly? Yeah. Another from Armando. Yes. Will we still be required to show income and expenses on all properties? mortgage statements, lease agreements, etc.

98
00:19:34.790 --> 00:19:55.610
CAELI RIDGE: only if you want the the best terms, and that non Qm. Space. But no. So non-qm. Again, just by itself as a as a product line has lots of different individual loan programs inside 9 Qm. The best of those are going to be that you would supply all of those documents right. Just like you would, Fanny. Freddy!

99
00:19:55.850 --> 00:20:08.179
CAELI RIDGE: if you didn't want to do that inside. Non-qm, as well. We've got debt service coverage ratios that say no no income documentation is going to be required. It's really more about your assets. You have your your cash to close

100
00:20:09.110 --> 00:20:24.829
CAELI RIDGE: and your credit score. My credit score will will ultimately just determine largely what kind of interest rate you're going to get. The debt service of the property plays a big role there, too. But I think that answers your question, Armando. If not, please, type in another one.

101
00:20:25.720 --> 00:20:40.810
Karlie Libby: let's see. So we have a question from Lisa. She has a quick question on what you were just talking about, because she was told that She had to close in her personal name and then quick claim to her trust. for a non. Qm, and is that correct?

102
00:20:41.530 --> 00:20:58.400
CAELI RIDGE: depending on the product that we're talking about? It could be. But there are products as well that you can close in the entity name at closing, so the terms might change lease. But yes, you could do that. So I think, looking at them side by side, and and seeing what is your preference? So if it means you've got

103
00:20:58.480 --> 00:21:09.749
Lisa Brubaker: it might be the. It might be the product that I have then, because she said I could do it like, said part of the same closing, but then it had to originate in my personal name, and then I could quick claim it to the trust.

104
00:21:09.780 --> 00:21:12.969
Lisa Brubaker: But I can't do it. I can't close in the trust

105
00:21:14.500 --> 00:21:26.290
CAELI RIDGE: it it definitely could be. But let's make sure that we're we're distinguishing between. The loan is probably closing in your name

106
00:21:26.770 --> 00:21:33.530
CAELI RIDGE: and title at closing when you're signing your loan. Documents can be titled in the entity name or the trust name.

107
00:21:33.850 --> 00:22:01.120
CAELI RIDGE: Correct? That's what. Yeah. That's why my title. I'm sorry. Yeah, yeah. Okay, so that's yes. Then that's absolutely the product. And I'm gonna recommend. That's probably what you want to do. Because, remember. So maybe I'm not explaining this in in the best way possible. So let's take Lisa's example. Okay, she is closing on a product where the loan is going to be in her individual name, Lisa Brubaker. Okay, this is a non Qm product that will allow her at closing

108
00:22:01.180 --> 00:22:03.659
CAELI RIDGE: for the title to close in the entity name.

109
00:22:03.820 --> 00:22:10.330
CAELI RIDGE: So Loan is in her individual name title, when she's signing her documents will be in the name of the entity

110
00:22:10.620 --> 00:22:23.860
CAELI RIDGE: that is going to be better terms than if we were to find a loan that is going to close the loan in the entity name and title in the entity name. But chances are that product is going to sign a personal guarantee anyway.

111
00:22:24.270 --> 00:22:28.740
CAELI RIDGE: So you personally would be on the hook anyway. So the difference between that

112
00:22:29.010 --> 00:22:33.189
CAELI RIDGE: and what we're structuring over here, where the loan is in your individual name is

113
00:22:33.210 --> 00:22:41.530
CAELI RIDGE: pretty much 0, I think the one difference would be is that the one that's going to close in your individual name will show up on your credit report.

114
00:22:42.280 --> 00:22:54.059
CAELI RIDGE: But who cares? What difference does that make? And if it's for asset protection, if the entity is for asset protection, anybody that is going to to the trouble of to Sue. You wouldn't have access to your credit, anyway.

115
00:22:54.140 --> 00:23:01.030
CAELI RIDGE: They'd never have access. They they wouldn't know what was on there. They're going to be doing title searches to find out what assets are in your individual name?

116
00:23:01.140 --> 00:23:02.670
CAELI RIDGE: Did I answer your question? Li.

117
00:23:02.970 --> 00:23:26.429
Lisa Brubaker: yeah, I'm going to email her because she specifically said that I had to arrange for the quick plan. She specifically said that I had a quick claim that we had to close in my name, and but I don't know what we could be talking about different products, and I don't want to.

118
00:23:26.580 --> 00:23:37.779
Karlie Libby: You have another. we have a question here from Chris, can you generalize on the spread of rates between the range of products? Qm. To non-qm. To Dscr products?

119
00:23:38.180 --> 00:23:50.699
CAELI RIDGE: Thank you, Chris, this is a very good question, and and I'm afraid that the answer is going to be a little bit convoluted, because within each of those answers are are 20 different variables that could change the range. So I'll I'll do my best.

120
00:23:50.880 --> 00:24:16.409
CAELI RIDGE: actually, let me start this way the lowest possible rate I think you're going to find for an investment property. And remember, you guys, the variables of the transaction greatly dictate the rate, regardless of product, right loan to value loan, size, property, type, purchase versus refi credit score. All of those things have very specific changes to the interest rate. So I'm going to go lowest possible

121
00:24:17.150 --> 00:24:23.409
CAELI RIDGE: interest rate, and I'll take it up to feasibly, maybe the highest, and then I'll try to break it down in between

122
00:24:23.680 --> 00:24:40.279
CAELI RIDGE: So right now the best possible scenario rate, I would say that you maybe would get into the this low sixes, maybe the high fives. But you are leveraging maybe 50. You are completely full, Doc. it could be

123
00:24:40.450 --> 00:24:53.189
CAELI RIDGE: There's probably a buy down buy down of the rate associated with that in in that kind of rate range. That's your best case scenario. And it's almost certainly a conventional product. Or maybe it's a credit union product.

124
00:24:53.270 --> 00:24:55.600
CAELI RIDGE: worst case scenario

125
00:24:55.650 --> 00:25:01.079
CAELI RIDGE: institutionally speaking for investment residential investment.

126
00:25:03.340 --> 00:25:13.799
CAELI RIDGE: And I'm not talking bridge long, because that would add a whole whole. Another layer. We're talking about more of a long term, you know. 5 year arm, 5 year fix to 30 year fixed, you probably

127
00:25:14.290 --> 00:25:20.400
CAELI RIDGE: 1011% right? That's going to be the range between maybe the best and the the highest

128
00:25:20.490 --> 00:25:31.409
CAELI RIDGE: And then in between. When we talk about the full Doc and the debt service coverage ratio, non. Qm. Qm. Recourse non recourse right? It starts to get real convoluted.

129
00:25:31.840 --> 00:25:45.109
CAELI RIDGE: Add anywhere from a point to 2 points in each one of those buckets. Chris, if you want, we can have a a quick one on one call, and I can. I can layer that out a little bit easier or more.

130
00:25:45.190 --> 00:25:51.000
CAELI RIDGE: directly. If we have a scenario that we can work from. Let's say that we. We take one

131
00:25:51.590 --> 00:26:04.090
CAELI RIDGE: one particular purchase at these different variables, and then I can say, Okay, if it was in this bucket, this would be the approximate rate. And then we can kind of go up from there and and be more specific if that's helpful. Just ping me. Chris. Okay, anything else, Carly?

132
00:26:04.120 --> 00:26:06.370
Chris Barrett: That'd be great. Thanks. Yeah. You bet.

133
00:26:06.850 --> 00:26:10.400
Karlie Libby: that's all questions. For now, I think, yeah.

134
00:26:10.570 --> 00:26:11.960
CAELI RIDGE: The surprise

135
00:26:12.530 --> 00:26:25.590
CAELI RIDGE: with a few minutes to spare. Okay. So I have been working tirelessly to try to expand the products that we we have offering for our our investors. And while it's already fairly diverse, I think.

136
00:26:25.600 --> 00:26:34.470
CAELI RIDGE: I am very pleased to announce that finally this has been on my radar for many, many years. We now have ground up construction

137
00:26:36.020 --> 00:26:45.949
CAELI RIDGE: but the the horn, the the trumpets. Blair. This has been largely missing for several years. It you know it.

138
00:26:46.000 --> 00:27:05.730
CAELI RIDGE: We used to do a fair amount of it way back in the day after the crash. Not so much. And then it just went away. I mean little legitimately gone, especially for for rental properties. They started to bring it back a little bit for primary residence. so I'm very pleased to say that ground up construction for those of you that are interested in that is back on tap.

139
00:27:05.730 --> 00:27:18.240
CAELI RIDGE: it's extremely brand new. We we have not even closed on one of these yet. We. We haven't even started marketing to it. But I'm going to share my screen and just kind of go over a few of the details and bullet points

140
00:27:19.000 --> 00:27:23.049
CAELI RIDGE: that will be associated with this. What did I do with it? Hold on, gang!

141
00:27:25.490 --> 00:27:27.910
CAELI RIDGE: Let's see if I can figure this out.

142
00:27:28.090 --> 00:27:31.770
CAELI RIDGE: Where did you go? Share screen.

143
00:27:33.430 --> 00:27:35.200
CAELI RIDGE: And there it is.

144
00:27:36.240 --> 00:27:58.060
CAELI RIDGE: Okay. So I had to Carly throw this together just before our call. So this is just a very quick overview of what you can expect. Carly, if you want just real quickly on the side. Anybody maybe take a poll of anybody that is interested in has been is, or maybe we'll be interested in ground up construction just to get a feel for whoever is on this call that might be in need of more information.

145
00:27:58.200 --> 00:28:17.579
CAELI RIDGE: So ground up construction. You guys can see these bullets. We'll put it on the community site, too, so you can grab it. This pretty self explanatory. I won't spend a ton of time on this 12 to 18 month terms. There's always room for extensions if you needed it. If the construction was delayed. For whatever reason, there'll be a cost almost always to extend

146
00:28:17.590 --> 00:28:20.819
CAELI RIDGE: up to 75% loan to cost.

147
00:28:20.890 --> 00:28:28.479
CAELI RIDGE: Okay? So for those of you that don't know what that is. You're gonna take the, you know, the purchase of the property

148
00:28:29.700 --> 00:28:38.839
CAELI RIDGE: and the cost of construction. Add those, together with the arb. and then 75% is going to be the cap there.

149
00:28:38.980 --> 00:28:54.450
CAELI RIDGE: 100% controlled construction budget. This means that it's going to be whether it's it's owner, builder, or it's a general contractor, etc. It's going to be extremely scrutinized. We're going to make sure we're going to have people on site, making sure that the

150
00:28:54.810 --> 00:29:00.720
CAELI RIDGE: The completion is is done to satisfaction before draws will be released or issued.

151
00:29:00.870 --> 00:29:10.580
CAELI RIDGE: Obviously no income documentation is necessary. On this it can apply to a purchase rate and term or cash out refinance. There's your rate ranges.

152
00:29:11.150 --> 00:29:13.039
CAELI RIDGE: minimum credit scores.

153
00:29:14.150 --> 00:29:30.259
CAELI RIDGE: I've seen us get around stuff like this in the past, depending on a variety of variables. You may not need this minimum if the the rest of there's compensating factors and the rest of the the scenario is very strong. You may not need that experience.

154
00:29:31.650 --> 00:29:40.510
Karlie Libby: Anything here, Kly, I don't know. Is that for me? Oh, I just started the poll. So go ahead and

155
00:29:40.820 --> 00:29:43.339
it has to be in a Us. Entity.

156
00:29:44.400 --> 00:29:58.000
CAELI RIDGE: We don't want to be in rural markets, and it's got to be shovel ready. So what that means is that it can't be raw land. Okay? So it's got to be improved plans and permits. Everything's got to be all ready to go. The the county

157
00:29:58.050 --> 00:30:01.259
CAELI RIDGE: has to have signed off on everything, etc.

158
00:30:02.300 --> 00:30:23.270
CAELI RIDGE: so yeah, that's that. I'm we're gonna be adding some other portfolio products to just expanding some of our bridge loans and and maybe our debt service ratio. I don't think that we had announced this. It's fairly new to we recently removed our non recourse, so as of today at one, excuse me, 201 Pm. The twenty-fifth.

159
00:30:23.300 --> 00:30:42.270
CAELI RIDGE: We are not offering non recourse on any of our cross collateralization, which was the only place that it lived before, anyway, for a few reasons, one non recourse comes with very, very harsh prepayment penalties, and we know that people are going to be refinancing more likely than not in the coming years. So it didn't make sense.

160
00:30:42.350 --> 00:30:46.580
CAELI RIDGE: And to. For reasons that I described earlier.

161
00:30:47.380 --> 00:30:56.449
CAELI RIDGE: the non-recourse terms are are so much worse than the recourse with a personal guarantee, and it just didn't make sense. So

162
00:30:56.750 --> 00:30:58.629
CAELI RIDGE: anybody that was interested in that.

163
00:30:58.690 --> 00:31:18.820
CAELI RIDGE: No, on for the moment. We're not offering on recourse. That was the only product that we had it for. And we're not giving it on that anymore. so yay, oh, I have something else to share with you. I have also been actively pursuing a self-directed Ira expert that we are going to have on

164
00:31:19.030 --> 00:31:28.410
CAELI RIDGE: one of our our coming up Tuesdays, and then a a portfolio partner is going to come on and start talking in more detail about some of the

165
00:31:28.430 --> 00:31:35.729
CAELI RIDGE: ground up and and debt service and bridge loans that we're going to be bringing on soon as well. So

166
00:31:35.770 --> 00:31:40.129
be looking for those announcements. Anybody else before we wrap for today?

167
00:31:40.390 --> 00:31:47.960
Karlie Libby: Yeah, we do have a question from Madu. they ask, can we use low alone to add on an 80 you

168
00:31:48.520 --> 00:32:01.430
CAELI RIDGE: the ground up construction? Yes, absolutely, Maddu. You can do that. Yes. So anybody that's interested in in adding, whether it's a purchase, or you own the property, and you you're refinancing to add the Edu absolutely. That works

169
00:32:01.860 --> 00:32:07.320
Karlie Libby: perfect. So I'm going to go ahead and end this poll. And then share the results with all of you guys.

170
00:32:07.480 --> 00:32:15.900
CAELI RIDGE: So you can go ahead and check that. You guys. Okay, so yeah, so so it looks like, you guys, there's a significant amount of you that are interested in in ground up. That's exciting.

171
00:32:15.980 --> 00:32:32.429
CAELI RIDGE: so probably the best case scenario is just to email me or info, just email info, because I'm on the distribution. I'll see it. with your your circumstances. And then we can kind of give you an idea of of expectation. If you've never done one of these before, that's okay. well.

172
00:32:32.440 --> 00:32:42.689
CAELI RIDGE: you need to have some history of investing. We we'll talk about that. I don't want to go down that rabbit hole. Just let us know what your scenario is, and we'll we'll get on the phone and and hash it out.

173
00:32:43.530 --> 00:32:56.299
Karlie Libby: okay, guys, yeah, go. Correct. I'm sorry. I do have one more question. Then we can go ahead and end it. But Jenny asks, is there a reason a Dscr alone would need to go into my personal name instead of my Llc.

174
00:32:56.850 --> 00:33:09.580
it's going to be about terms. Jenny, so you you can choose if you really, really, really don't want it to be in your personal name. Fine. But you, and getting to expect that the terms are going to be less favorable if we close in the entity name

175
00:33:09.660 --> 00:33:27.539
CAELI RIDGE: and keep in mind, you're gonna have a personal guarantee on it, anyway. So, looking at those side by side and weighing the options, you may decide that it makes more sense to go ahead and close it in your personal name, close in the entity name or quick claim into the entity name, because at the end of the day, you guys, it shakes out to be the same liability.

176
00:33:27.540 --> 00:33:40.119
CAELI RIDGE: So if the entity, if the Llc. Let's let's just let's determine what is the need if the need is exclusively asset protection. My advice is to. If you have golden tickets left

177
00:33:40.690 --> 00:33:43.150
CAELI RIDGE: and you qualify, use the golden ticket.

178
00:33:43.230 --> 00:33:53.899
CAELI RIDGE: If the Llc. Need is for asset protection only that is your best possible scenario. If it's available to you, and you qualify right. If you have golden tickets left and you qualify.

179
00:33:54.300 --> 00:33:55.500
CAELI RIDGE: use that

180
00:33:55.830 --> 00:34:03.630
CAELI RIDGE: transfer it, quit claim or warranty. Some States call it a warranty deed into the Llc. For that asset protection, because the other scenarios

181
00:34:03.930 --> 00:34:07.239
CAELI RIDGE: that either let you close in the name of the Llc.

182
00:34:08.010 --> 00:34:21.110
CAELI RIDGE: Right? What whatever whatever combination there there of is at least with us right now, and 99% of the other loans that you're going to find out there will have that personal guarantee. So from a liability standpoint, from that perspective.

183
00:34:21.949 --> 00:34:26.700
CAELI RIDGE: it's the same. There is no difference. You're personally obligated to that debt, and

184
00:34:26.920 --> 00:34:39.499
CAELI RIDGE: you've signed a personal guarantee, so that in the event of default, they do legally have the right to come after you. Personally, though I've never seen it happen that way. The non recourse, no personal guarantee is the only way around that.

185
00:34:39.580 --> 00:34:46.120
CAELI RIDGE: and your terms are going to be far less favorable. Hopefully I answered, your question.

186
00:34:46.219 --> 00:34:50.769
CAELI RIDGE: Jenny, if I didn't feel free to hit me up an email, if you want

187
00:34:52.860 --> 00:34:58.469
Karlie Libby: perfect. We have one more from Jamal. Can those loans work to buy and put in boxibles?

188
00:35:01.350 --> 00:35:04.509
CAELI RIDGE: Jamal? I don't know what boxibles are. Tell me what that means

189
00:35:10.390 --> 00:35:23.440
Rev. Jamal Tharp: they are tiny homes that are rebuilt. Oh, us government, Federal government, and Elon Musk have bought times, and

190
00:35:23.610 --> 00:35:30.509
Rev. Jamal Tharp: they're about $50,000. They're nice and as long as you have a slab and all the utilities

191
00:35:35.160 --> 00:35:41.979
CAELI RIDGE: you breaking up. Just a little bit, Jamal. I'm going to say that it's it's possible. Why don't you email me? And I'll I'll double check with our investor.

192
00:35:42.280 --> 00:35:46.320
CAELI RIDGE: Okay, great, thank you. Yeah. You bet. Thanks for the question.

193
00:35:46.630 --> 00:35:47.950
Rev. Jamal Tharp: Thanks.

194
00:35:48.890 --> 00:36:08.180
CAELI RIDGE: is there another one from Jen? I I'm actually I I opened up our meeting so real quickly, Jeannie, for tax tax reasons. this brings up a good point. No, it shouldn't have. There shouldn't be any difference. And and let's be clear about something, so you'll have a an option to file if you've personally obligated the debt, anyway, which is what you're gonna do like, I said.

195
00:36:08.250 --> 00:36:10.969
CAELI RIDGE: Now, 50 times,

196
00:36:11.150 --> 00:36:22.949
CAELI RIDGE: filing it on a business tax return is only going to hurt your chances of going conventional again later, anyway. because the rules conventionally say that if you have filed

197
00:36:23.120 --> 00:36:31.060
CAELI RIDGE: your residential investment properties on a business return on the Llc. Return. But you personally obligated the debt.

198
00:36:31.250 --> 00:36:33.879
CAELI RIDGE: You will not get to take any of the gain

199
00:36:34.170 --> 00:36:52.539
CAELI RIDGE: from whatever that's the scheduling calculation comes out to be. But I will hit you for the loss up to a maximum of the properties. Piti! That's a little convoluted, I would say, ping me on that, Ginny, and I will go over with you. I think it requires some visual aid just to kind of show you what I'm talking about. But

200
00:36:52.670 --> 00:37:15.519
CAELI RIDGE: there isn't going to be any difference between now, if you're a corporation and you're starting to have K ones, etc. That's another conversation, but if it's just a straight llc. No, there's not going to be any difference in in the taxable benefits that you would receive from one or the other. But there would be a very significant difference in how you would qualify if you do it the way I think you're defining.

201
00:37:18.440 --> 00:37:19.650
CAELI RIDGE: Okay, team.

202
00:37:20.290 --> 00:37:36.179
CAELI RIDGE: So I'm gonna try Jesus, I'm gonna try to get my shit together. Excuse me and make sure that next next Tuesday I've got the amortization and the interest only visual aids ready for us to dig into that So say a prayer for me, please.

203
00:37:36.300 --> 00:37:52.939
CAELI RIDGE: otherwise we'll have some other good content to to share with you. okay, guess what we're on. Stand by. If anybody needs this for anything, you know how to get us Ridge lining group.com Info Ridge, Learning Group a 574 ridge. All of those things. see you soon

204
00:37:53.940 --> 00:37:55.040
CAELI RIDGE: bye, peeps.

Calling All Real Estate Investors

Recourse Vs. Non-Recourse Loans & a Surprise!

Listen to this podcast on