In over my head???

Question

I have purchased 4 rental properties in the past year or so. the latest I just closed on this past week.
So far the ones I have purchased cash flow VERY well. My personal threshold is the property must flow a minimum of $300 a month on hard money. None of mine are that low.

Anyway, they are all financed with hard money right now. I do own another free and clear. My biggest note is $70K. I have a great relationship with a lender who gives me 12.5%, and 18 month terms, with one point to extend for 12 months. he gives me favorable terms because I only charge him half a month rent for placement fees via my tenant placement business.
2 of the properties are financed through him. I have two others that are financed via hard money from friends, they have no balloon due date, and since they are for $22k and $30K and flow great, my plan is to just pay those off.

I have not tied to refi yet. My once spotless credit is not fair to good. My wife and I got laid off in 2008 and have since started out own businesses.

I am asking for thoughts and advice. After the latest property is rehabbed(starting tomorrow) and rented, I am going to step back for a bit and do what I can to be able to refi those properties, and my personal property.

Des Shei · Answer

i would recommend you take a brief pause and get things under control. work on a plan to refinance those units into more stable financing. There's nothing worse than being overly ambitious and over-leveraging yourself. I will be purchasing two more units myself within the next 4 months; once those are done will step back and re-evaluate my goals.

Anthony Clayton · Answer

I think you should work on and pay off any outstanding debt, due to the fact you have time on your loans. Once you repair your credit you should refinance into a mortgage loan or get a line of credit with a low interest rate and then use the line of credit to pay off your hard money loans.

Good luck!

Nathan Emmert · Answer

What sort of terms did you get?  70% non-recourse versus 75% recourse might be interesting if the terms aren't terrible.

Do you know if it had to be funded by an SDIRA or was that simply the route you chose?

Jon Klaus · Answer

I've heard insurance companies are starting to finance more residential, but SFRs?  Maybe they will be the go to source for investors in the future.

Dennis Tierney · Answer

I recently did 2 non-recourse loans, one a refi at 60& LTV and one a new purchase at 70& LTV. Both were done through a mortgage broker who found an insurance co. willing to do the deals. Both were non-reourse becuase they invloved SDIRA in the ownership.

Nathan Emmert · Answer

I would call them and check.  A non-recourse loan generally means it is simply guaranteed by the property itself.  While I can think of a few reasons a lender may only want to lend to an SDIRA (can't pull cash out as easily "raping" the cash flow) I'm not sure that's the case here.

Out of curiosity, has anyone made calls for non-recourse loans?  What sort of rates were you receiving?

Scott Karg · Answer

Let me clarify the over my head title. I am referring to the financing aspect right now. If I had a job and made what I do with my business this wouldn't be an issue. I have other free and clear properties as well. The landlording aspect I am good with.

I am not buying any more until I accumulate more reserves and more importantly figure out a way to get financing with my wife and I both being self employed.

Life is good, I love this stuff!

Scott Karg · Answer

I would assume you'd need an IRA to fund that loan in the first place...

Nathan Emmert · Answer

Sorry for the slow response, had to recreate my research...

I believe it was through First Western Federal Savings Bank.

http://www.firstwesternfederal.com/

Scott Karg · Answer

I do own my own business, that is less than 2 years old.

In over my head???

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