Rehabber · Orland Park, IL · Member since 2013 · 34 posts · 2 votes
So I am trying to get a traditional loan to be able to flip more houses because my bottleneck is funds right now. I know that I can go the investor route but my question to everyone is "will a bank give me a loan"?
I have just finished my 3rd flip with success and it sold in one day for full price. I take great pride in doing all the work myself for the time being but am looking to expand.
Because I have no job will a bank accept a "portfolio of houses" that I have completed as proof? It is really hard being a 25 years old with no job and student loans trying to get money from a bank. I flip houses full time and do the work myself, but im starting to think I might need to get a job so a bank will give me money.
What banks are the most lenient with "buy and hold" and "fix and flips"?
Its possible but not likely easy. I know a number of rehabbers that are doing it full time who are able to borrow money from banks to fund their deals, 4.5-6%, one year interest only notes for 80% of purchase price, plus rehab money, up to 80% of ARV.
Your best bet is with a local portfolio lender. They have the most flexibility to make loans that dont fit into a particular box. If you have decent credit, and some reserves and a sucedsful track record where you can show that you have made good money on three flips, you have s shot.
Call every local independent bank, ask for the branch manager or commercial loan officer. If you persist you will likely find what you need.
Its possible but not likely easy. I know a number of rehabbers that are doing it full time who are able to borrow money from banks to fund their deals, 4.5-6%, one year interest only notes for 80% of purchase price, plus rehab money, up to 80% of ARV.
Your best bet is with a local portfolio lender. They have the most flexibility to make loans that dont fit into a particular box. If you have decent credit, and some reserves and a sucedsful track record where you can show that you have made good money on three flips, you have s shot.
Call every local independent bank, ask for the branch manager or commercial loan officer. If you persist you will likely find what you need.
So I am trying to get a traditional loan to be able to flip more houses because my bottleneck is funds right now. I know that I can go the investor route but my question to everyone is "will a bank give me a loan"?
I have just finished my 3rd flip with success and it sold in one day for full price. I take great pride in doing all the work myself for the time being but am looking to expand.
Because I have no job will a bank accept a "portfolio of houses" that I have completed as proof? It is really hard being a 25 years old with no job and student loans trying to get money from a bank. I flip houses full time and do the work myself, but im starting to think I might need to get a job so a bank will give me money.
What banks are the most lenient with "buy and hold" and "fix and flips"?
Reasons why im turned down
25 years old
have college debt
no job (flipped 3 houses full time)
Is your business entity type a corporation? Why don't you start paying yourself as an employee at least once if not twice a month to show a pattern that you have income. Deposit checks into your personal account written by your business/corp. It can help in times like this when you need to show employment for a loan. My coin.
do you have two years of experience "flipping houses" on your taxes? As long as you have two years of income in your profession on your tax returns you would be fine. It never hurts to follow up with a mortgage broker.
Do you have the capital for the purchase of the home? If you do once you control the property with your capital place a hard money lender in the deal so you can pull your cash out. All the people I know don't us a traditional bank to finance a flip unless it is in the form of a unsecured line of credit, a personal line of credit. It takes several years of putting many deals together to really get some momentum.
Showing self employed income is what you need to do but unfortunately it is not going to help you now. Your going to need to show at least 2 yrs of self employed income on your taxes for the banks to start factoring that in.
Ryan S. Have you created a corporate entity yet? It does not sound like it from the post. The banks just want to know if you will be able to repay the loan. That is the primary concern you should focus on. You have no documentable income and if there is no corporate entity a bank is going to look at your flips as a hobby.
If you have a company, you might be able to put together a business plan and a case for a small business loan for expansion instead of a personal loan.
Good luck!
I have 1.5 years of flipping but no positive income on tax, this year I will. This is why when a mortgage broker looks at my statements they say "hell no".
I do have a LLC but do not know how to use it to my advantage just yet. I am learning while I go. A business plan is something I think I am going to do so I can bring it to the banks and they can look thought it.
Unfortunately real estate and taxes is just not a kind combination. While it is awesome we can have a positive cash-flow and show a book loss. It make it REALLY hard to get the next loan. So it is really important for growing real estate investors to make a choice.
@Ryan S. Find the business people in your community that are fairly wealthy. These people have money and want more. It might be someone you even know. I wouldn't go to a professional hard money lender. The majority of them only care about the deal and not you the entrepreneur. Once you create a relationship with a money person you will have so much more flexibility and life will be easier. 6-10% interest only on there capital contribution should be fair. Everyone has a target.
I'd try every small, local bank I could find. Talk to the head of the commercial lending side. If nobody will play ball, then use private/hard money lenders for a year or two until you have the portfolio and tax returns to support bank loans. That was my path.
Ryan, you need to put together a business plan before you do any more searching for funds. Put yourself in the position of someone with money to lend. If you had a person with no reportable income, very limited experience, and no business plan approach you asking for money, would you lend it to him/her?
Come to the table with a detailed plan outlining your experience, your business structure, and exactly what you are going to do with money (including exit strategies in case deals go south). Having all of this put together will make a lender much more inclined to take you seriously.
One thing you could try is you could get unsecured lines of credit. That way you don't have as much risk and you don't have to deal with a hard money loan, you can get no interest on these lines of credit as well. The risk is a lot less on something like revolving lines of credit, plus if you get multiple lines of credit so you can leverage the banks against each other to get the most perks with your cards. If you or your parents credit score is good you might be able to get between $80,000 to $100,000 to start.