BRRRR financing question

[Chris B.]

Hi all, need some financing advice. I have 2 single family rental properties. I purchased them w/ a HELOC using my home as collateral. One I purchased under my own name. Now as I am getting more into real estate, I purchased the second one under a S corp account I have from another business that's not doing much. I tried to see if I could get a HELOC on these rental properties and the banks I asked do not do that on investment properties. Am now thinking I want to get 30 yr mortgages on them. Want to be conservative and only take about 40-50 % of the equity out of them.... There's a friend of the family that does mortgages. The questions I have are, should I go through a mortgage broker for this or a bank? If I go to a bank, will I have issues with the one under a Corporation? Do I ask for a commercial loan and try to lump them up? Just trying to get enough cash out to do the next one. Any additional tips or creative ideas from someone who has gone through this would be greatly appreciated.

House 1 :

Purchase price 42000

Rehab cost:   50000

Appraised Value : 145000

Thinking 30 yr mortgage of 60000

House 2:

Purchase price 60000

Rehab cost:  60000

Appraised Value : 177000

Thinking 30 yr mortgage of 80000

Thanks so much,

Chris

[Jack Bobeck]

@Chris B. I would NOT do a commercial loan that bundles them. Once bundled, and you want to sell one, its a nightmare to pull them apart. Let each stand on their own. 

I tried to see if I could get a HELOC on these rental properties and the banks I asked do not do that on investment properties.

Did you type in HELOC Newfoundland on Google? I was able to find a few credit unions willing to loan on a LOC on a secondary property. There are banks out there who do not mandate it has to be on the primary, just keep looking. I am meeting with some this week in my area of Jacksonville. I will let you know what they say.

[Aaron Cullen]

@Chris B. I've gone with 30yr mortgages in my name so far and have been getting 4.65 to 4.85 fixed. I've been going with small banks directly. For your S Corp property Jack has good advice to reach out to local banks, this one will be harder to get a low rate with a conventional loan. You will need to be more flexible on that one. One thing to ask a bank if get more conventional loans in your name is do they count the income of the rentals or do they have a 2yr seasoning period before they will count the income. If you make a lot of money it isn't a problem but will be very quickly if you don't. Good luck!

[Chris B.]

OK, I have an appointment with a loan officer at a small bank on Friday. Spent a while on phone with him. He said putting the house under a corporation was a bad call in terms of getting a mortgage as it now falls under commercial and will get killed with the rates. He suggested two options... I get a mortgage on my personal house to cover the HELOC which will give me the lowest rate.. Or just do a 30 year on the one investment property and get as much out as you can... This is another bank that doesn't do HELOC on investment properties... If anyone comes across one that does do HELOC on investment properties, let me know.

Thanks,

Chris 

[John Broussard]

Its is true you will get better rates using your personal name instead of buying under a corp or LLC. Investors are being more aggressive as far rates and LTV's when buying rental properties under a company name and you will not be killed by the rates. There are a lot of alternative lenders out here with competitive rates.

[Greg Downey]

@Chris B., I would consider bumping up the loan amount to at least $75k. That will intice more banks to give you term sheets. Also, closing costs are usually fixed under $75k whether the property is financed at $40k or $75k you shouldn’t see much of a difference In closing costs. So as a percentage of the loan amount, typically anything under $75k usually is not that efficient in regards to closing costs. Just something to consider

[Rich Hupper]

Not to hijack the thread but I plan to use my heloc to buy a rental property soon. My question is about long term financing. After I do a couple things to the property and get leases signed how soon after can I refinance with a 30 year loan? Also what would the rental property have to appraise at to get all or most of the heloc money out?

Thank you

[Anna Belov]

@Chris B. I am running into a similar problem with my properties in Canada. So far, I've been dealing directly with banks. The biggest problem is that I usually manage to get through one mortgage or re-finance, but then get stuck on the next one. I recently ran into a good broker who has a lot of experience with investors who own multiple properties. Her specialty is planning portfolio growth on financing side. I am trying this approach now. I hope it will give me more info, so I can plan my next steps better. I met the broker at a real estate meet up