Hard Money loan due and need to sell..suggestions?

12 Replies

I bought a house in East Dallas last summer with the intent of flipping and holding as a rental. I got a hard money loan and was told by the lender that I would be able to refinance through them as soon as the rehab was done. Then when it came time to refinance, they said they messed up on the underwriting at the beginning and said my retirement account money doesnt count as reserves anymore, therefore I am not eligible for a refi. 

I have a tenant in place and the house is completely rehabbed and now my hard money loan is due. I have tried selling through realtor but was unsuccessful. I am at the point now, where I will take just about any offer. I need out. Any suggestions, wholesalers, investors out there that need or want a turnkey rental? 

I had it listed at $130K with comps selling closer to 135-149K. Currently leased for $1200 and I get 1-2 tenant requests per week, so it is a very secure rental area/property.

3bd, 2bath, with an office that could be a 4th. big yard. brand new everything. foundation, AC, roof, fence, floors, kitchen, bathrooms, security system, etc

Any help of suggestions would be greatly appreciated. Thank you!

How much do you owe on it, Garrett?  Have you tried local banks and credit unions?  Why do you think it didn't sell when you had it listed for less than comps?

Find another lender.  Retirement accounts can indeed count for meeting the reserves requirements.  They do get discounted to account for the taxes, but they can count toward reserves.

I agree with Jon you should try other lenders, maybe a local bank or credit union.

@Garrett Anderson

Back to Jon's question: "What do you owe on it?"   Followed by: Does it work as a rental (What are the numbers)?  ... Would you prefer to keep it or do you want out as well?

If the rental numbers look good (DC >1.4, BER DTI is out of bounds). In the latter case, put a term sheet together and post to the MarketPlace forum looking for a private lender.

@Garrett Anderson

something does not add up on the resale aspect of this.. Dallas ( I don't know this area) is red hot and has been to sell to cash flow investors.  if your not getting any takers as investors then the market is telling you the price is too high.. It could be that on the open market the investors look for 1% rule  IE  a up and running rental renting for 1200 has a value of 120,000 to an investor... I suspect that's the issue with your resell efforts as much as anything.... Having been on the beneficial side of this equations many many times. you will see that 75% ltv in many markets is really only enough equity to protect the lender.. there in many cases in no equity for the owner... Can't tell you how many loans I did over the years were I was the ONLY one who made money the rehabber or investor did all the blood sweat and tears and ended up with nothing or very little.

Its why the powers to be here at BP talk about 70% ARV minus repair costs.. Now I know that's no feasible in most markets as others will pay more but that is a very safe metric.

Its also why in heavy rental markets value is ONLY what an investor will pay for cash flow apprasials of said assets not using income approach are worthless.

Thank you all very much for the responses and suggestions. Unfortunately, I cannot get refinanced due to DTI issues (at this point.. wasnt the case when I started, family issues have changed things). My realtor was marketing to homebuyers and not really to investors. It has been really frustrating because I see other places flying off the market and dont have what mine does. The feedback I received on almost all of the showings (and there were a lot) was that, the potential buyers didnt like that there was a tenant there. So basically, non investors.

Im all in at about 115K with repairs, holding costs, purchase price, etc. I know this wont be much of a money maker, if at all, at this point of desperation. Im about at the point where I will accept any offer.  

When I started the process, everything was in place with the refinance and it was going to cash flow easily so I was really excited. I was even cash flowing with the hard money loan for a while before that rate jumped up. Now I am breaking even each month.

At this point, I just need out. Seriously, I will just about take any offer. So if you know anyone looking for a rental in Dallas, let me know. Thank you all again. I genuinely appreciate your advice.  

@Garrett Anderson

  unfortunately you are getting a lesson here that your paying for. 

A few take a way's.

1. Never rent a house your intending to flip to a retail investor... Maybe you could get away with that in some markets but most NO way. you will end up in the situation your in.

2. HML to rate and term refi can be a dangerous strategy as your again finding out.. I know it almost sunk me from the lenders side when rate and term refi's were non existent from 09 to 2011.

You need it on MLS and you need to be the best deal in the area..

We all get educated in RE... over time... some by paying companies a lot of money to teach them these things... some by reading it on line like here on BP... I know its no concellation but thank you for sharing I am sure others who are reading will remember this scenario and learn.    

Are you doing anything to market it to investors in the DFW area?

What do you call East Dallas? Garland? Mesquite? As far as Forney?!

As @Jay Hinrichs said above here, something doesn't add up...

East Dallas is the eastern side of the city of Dallas. The other areas you mentioned are their own cities; suburbs of Dallas.

The positive about this whole thing is that you made a move! You have tenants in the house so that's awesome. Atleast you re not in the negative so all is not lost! I don't know what you ve done thus far to aid in the marketing of this home but get on craiglists and post this house all over the freakin U.S then place ads in the paper if you think selling is the way to go. Go to REI club meetings and tell people about the house. Yea you learned some lessons but it ain't over!! I would definantly keep searching for a lender to refi with someone has to say yes! And I would smack that hard money lender you have (not literally) Just don't give up!

Hey Garrett, I agree with some of the other comments here.  However, that's really not okay that your hard money lender didn't get you fully qualified/approved for the conventional loan with their affiliate lender prior to originating your hard money loan.  We are a hard money lender here is Dallas and work with a number of buy and hold investors.  We would need to run the numbers on your specific deal and then would be able to give you our opinion on it, and the most we think someone will pay for it.  If you would like for us to do this feel free to contact me at [email protected]

Originally posted by @Jon Klaus :

East Dallas is the eastern side of the city of Dallas. The other areas you mentioned are their own cities; suburbs of Dallas.

 I know too many locals that reference to properties in these cities as "east Dallas" which is why I asked for clarification...

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