Lender · Los Angeles, CA · Member since 2017 · 916 posts · 647 votes
We are in some unsettling times and many of you have questions about financing options available for investors. Others have questions about the lingo/structure of RE financing. Opening up this forum to send me all you questions you have. I'll do my best to answer all questions submitted here.
if I have a four unit rental property which I buy for cash, rehab and get fully rented out - is there any minimum time I need to hold before a conventional bank will refi? Thanks
First question is why would you sell your primary when you can refi/cash out and keep it as an asset to use for the next purchase? The collected rents from that property would help and I bet you have some equity being you have had it for 5 years. Having at least one property in your porfolio helps in investor focused loans. Is it a SFR or Multi?
Second, to address your question, that depends on the loan program you use, If its FHA owner occ, you can use 50% of actual rents collected, it was 75% but its become stricter. If its vacant then, as of this writing, the lender uses either the most conservative Comp Rents or 75% of comp rents. Again, this is based on my experience and can change rapidly in this current marketplace.
What do you mean by a certain amount of time between acquiring loans? My answer is the same, Depends. If you as an individual want to get a few loans at a time, its up to the lender but whenever an individual takes on debt, the credit score takes a hit and once you pay on time your score can rise. The credit score is important because lenders use it (along with other factors) to determine your interest rate. So you can but not recommended.
For your duplex, if you flip a property and turn around to buy another, thats how we do it to gain weather in REI. So not sure what you mean but yes, you can use the profits of one property to buy another.
IMHO, if you dont have the cash to put AT LEAST 3% down, you will have trouble. Lenders, including FHA loans, require borrowers to put their own cash down because it's too risky for a first time buyer (in the lenders eyes) to 100% finance their FIRST property.
Experienced investors who have a good portfolio CAN leverage that to acquire new properties without cash out of hand and so 100% financed properties are doable just unlikely with a first time borrower.
This is so new that I dont know right now. We should have an update on Furloughed employees in the coming weeks. Sorry I couldn't provide better info but as the dust settles we should see some clarity.
I am looking to BRRRR a single family home. Ideally I am looking to use hard money and then go to a bank to refinance (preferably a smaller local bank). Can you tell me the process of how I should get my financing lined up before I purchase something?
Should I get a pre approval letter from the hard money lender before I even make offers?
At what point do I contact smaller banks for the refinance? I haven't picked a property yet but I want to make sure that I can actually refinance once I buy and rehab a property. I do not want to do the BRR part and then go to refinance and I don't get approved for some odd reason or get the terms that I had estimated previously
What questions should I ask the hard money lender? I know to understand their interest rate, points, any other fees. Anything else?
Is the refinance loan considered a commercial loan even though it is a Single family home? Would anything change if I had the property in my name vs an LLC (Planning to put it into an LLC)
Are BRRRR refinance loans typically recourse or non recourse?
Thank you so much! I know that was a lot of questions but any information at all would be greatly appreciated!
Rental Property Investor · Boynton Beach, FL · Member since 2014 · 273 posts · 197 votes
6y
@Mike Marino to jump in on this being I BRRRR alot. Yes, you should get a pre-approval from the hard money lender as proof of funds to go with your offer, atleast that is how I do it.
As for the refinance part, first make sure that the numbers work as a rental after you have refinanced it out, i.e, run the numbers using the loan amount you plan to take vs rents, expenses etc. If you need a property calculator I have one you can use.
For the refinance loan I can tell you this, was much easier to get loans from banks (even local ones) when I had property in my own name and had a W2 job. Now I do everything in my LLC and am a full time investor and have to go with private lenders or some community banks (though they usually have extensive seasoning periods).
It is not a commercial loan, 5 units or more is where you get into commercial loans.
That is the key to the BRRR strategy, the refinance. I would talk to lenders so you have an idea of what you can qualify for. Ask about seasoning, ask what their requirements are. Any yes it will be a recourse loan.
Rental Property Investor · NJ (new jersey) · Member since 2019 · 113 posts · 16 votes
6y
With the COVID-19, I been reading a lot how banks are not doing cash out refinancing or HELOC... so I know all the investors are saying that in this time you need cash in hand .. though I have some cash I know it may not be enough. I have duplex that I bought for 200k 5 years ago and now I only owe 80k because I made several large principal payments throughout the years. My house was appraised a few months ago and it appraised for 270k .
My question is should I attempt to get a HELOC just to have some extra cash laying around just in case after the pandemic is over and some good deals come along ?? Or What other options can I use for my next deal ??
Also my bank ( Rocket Mortgage ) doesn't offer HELOC. So would it make more sense just to do a cash out refi with another bank that offers more. My current rate is 4.99%
Ridgewood, NY · Member since 2015 · 50 posts · 14 votes
6y
@Jonathan Taylor i used an FHA to buy a 3 family house Dec 2018. In Dec 2019 I did an FHA streamline refinance. Does that reset my 1 year self-occupancy timetable ? Or If I find another multifamily deal, can I use an owner occupant loan to get into it since its been more than a year living in this current property..
Rental Property Investor · Las Cruces, NM · Member since 2017 · 65 posts · 38 votes
6y
Jonathan,
I have always used conventional loans on my houses. I have 5 SFH's , one is my primary residence. One is paid off. I am being told that I can't get another conventional loan for another rental. Is the limit the same for all lenders? If so, after that limit what do most investors revert to? What is the most cost effective way to get another loan if i want to buy another property. My credit is 800 and I have enough to put 20-30% down if I need to.
Rental Property Investor · Montréal, QC Canada · Member since 2019 · 28 posts · 17 votes
6y
@Jonathan Taylor
Dude, first off thanks for making this thread. Financing is such an important piece of the puzzle and it's always great to learn more. I've really been enjoying your comments so far. My question is a little more complex but it sounds like you're the man for the job. I'm an experienced investor from Canada (brrrr's, buy and hold, Airbnb, property management, etc) I have great credit here in Canada with an above 800 fico score, six figure w2 income and some pretty good savings. I'm going to start investing in multifamily in the united states but everyone I've talked to so far says financing will be difficult as I don't have a US social insurance number or credit history. I will more than likely be putting these properties in an LLC, and possibly partnering with at least one US Citizen. Please guide me oh wise one.
Rental Property Investor · Fairhope, AL · Member since 2017 · 69 posts · 52 votes
6y
Have a hard money loan on a rental property. Was going to close and do a 30 year refinance and save $300 a month. The lender cancelled because of the coronavirus. I don't know of any other banks willing to take on this loan. The renters are still paying. Help.
Developer · Honolulu, HI · Member since 2018 · 111 posts · 93 votes
6y
@Brian Whelan You could also look at delayed financing under a conventional loan. They are still being offered and assuming your ARV is high enough you could refi immediately (no seasoning period) up to the purchase price plus closing costs, or 75% LTV, whichever is lower.
Rental Property Investor · Saint Petersburg, FL · Member since 2011 · 46 posts · 5 votes
6y
@Jonathan Taylor thank you for this thread. Wonderful of you to take the time to do this. We currently own 6 properties; primary with studio rental, 4 duplexes and one SFH. Looking to buy property 7. Is there anyway around the 20 to 25% down payment for another investment property? It's such a killer every time. Thanks!
Rental Property Investor · Brooklyn, NY · Member since 2020 · 1 post · 0 votes
6y
Hello @Jonathan Taylor,
Definitely in need of some advice on next steps. I’m currently under contract with a mixed-use property (2 rentals/ 1 commercial space) for about 50 days. The purchase price is $350k, I’ve already deposited the 20% down payment. My hard money lender just advised that they would require a 30% down payment instead of the initial agreement of 20% due to the pandemic. My funds don’t account for another $35k as this will definitely tap into my reserves and leave me completely cash dry. I’m concerned with losing my 20% deposit if I back out of the deal. How should I proceed if I don’t have the funds for this additional down payment without the seller retaliating?
Philadelphia, PA · Member since 2020 · 11 posts · 1 vote
6y
@Jonathan Taylor
lets take the current situation of this country out of this conversation for this question. Do hard money lenders have a seasoning time before I can refinance with a new lender after my brrrr method is started? Since I am just starting to dive back into real estate, I have not dealt with hard money lenders recently and I am not sure of their requirements/conditions on loans.
Investor · Port Townsend, WA · Member since 2014 · 103 posts · 50 votes
6y
@Jonathan Taylor Thanks for opening up this channel. I am originally from S. Korea. I have brothers & sisters in S. Korea who are hard blue color workers but they lack any financial intelligence. They are the perennial job holders who are completely dependent on their employers. I would like to bring some of their money into the US (I feel it's more stable market here) and help their money grow for their retirement. Do you know what is the rule for this type of action? Does this fall into Syndication even if it's among family members? Thanks ahead.
Investor · Port Townsend, WA · Member since 2014 · 103 posts · 50 votes
6y
@Jonathan Taylor I have another question. I am tinkering with the idea of buying small Apt. Do you know of anyone who has used their paid off SFH properties as collateral to scale up to Apt building purchases? I expect to have a few paid off SFH properties next few days but I do not want to sell those to buy Apt if I can help it. Again, Thank you.
Rental Property Investor · Enterprise, AL · Member since 2019 · 137 posts · 85 votes
6y
@Jonathan Taylor My wife and I have a 16 unit apartment building that we have now owned for one year. Sales price $540,000, Down payment $120,000. It is currently on a Seller-financed note at 5.5% 30 am with a 5 year term, but with a clause for an additional 5 year extension if needed. Monthly mortgage is $2,384.71. I believe these are favorable terms.
My question: Given the drops in rates (although I heard small banks aren’t lending right now), would it be wise to refinance to a lower rate? Also, I believe over the past year we have forced appreciation and I believe the property is now worth more than we bought it for. So the refinance might also give us a chance to pull out some equity and put it in the reserves account. Should I stay or should go... refi?
Realtor, General Contractor, and Developer · Redding, CA · Member since 2009 · 7k+ posts · 4k+ votes
6y
@Jonathan Taylor Great thread, one of the most popular topics on BP. You might want to update your profile to include DRE# so as not to get fined, and identifies you as an expert in the field.