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
What are some ways you would structure a syndication on a new construction property. Do you start paying as soon as money is drawn in the form of some interest/preferred rate, or do you defer until complete build out and stabilized cash flow? This project will take 10-12 months to complete.
Cleveland, OH · Member since 2020 · 18 posts · 6 votes
6y
I'll start by saying excuse my ignorance as I'm new to Bigger Pockets and real estate investing in general. I have a couple high level questions regarding financing rates when assessing a property. What's a good rule of thumb to use for a SFH mortgage rate and accompanying loan fees for a $100K home? I personally make over $200K per year, have zero debt outside my own home and have a credit rating of 800+. Don't want to see a big surprise on loan fees and high rate on the back end. I appreciate any help or advice.
Attorney · San Diego, CA · Member since 2020 · 40 posts · 11 votes
6y
@Jonathan Taylor
Hope all is well in this crazy time-
I’m a first time buyer in an expensive area but have found some great deals for multi units.
What’s the best way for me to line up conventional financing (30 yr mortgage) without needing mortgage insurance, and without being able to put more than 5% down on a property?
In other words, I'd like to bypass FHA because the extra fees will kill cash flow. Tough to make it work in my area of SoCal.
Is there a way for me to get a loan for part of the down payment, to get to like 20% down, and then a second mortgage for the remaining 80%?
Trying to figure out what is possible and what is realistic, and, of course, what makes most sense for me in context.
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.
Lets hear them!
Thank you in advance for taking your time to answer
there questions. I am currently pre-appoved by 3 different institution (Conventional 5% down) and
recently ran into a house that needs a lot of work, but has a lot of potential upside.
Would it be possible to flip this property to myself. Buy it all cash under my LLC, then
Rental Property Investor · Miami/Jacksonville Fl · Member since 2014 · 75 posts · 41 votes
6y
I have rental properties that are fully paid off and I would like to take cash out on at least one of them. What is the best way to do this, HELOC or cash out refinance. I don't want to make payments until I'm using the money for another investment. I was looking into a HELOC with a local bank but they are making me pull the money out at closing eventhough I can turn around an put it back in after 2 works but I'm little confused on how much this will cost me while I have it out for 2 weeks.. I just want to have the HELOC or cash available for when I find a good deal to buy.
Contractor · State College · Member since 2018 · 51 posts · 25 votes
6y
@Jonathan Taylor
I’m preparing to purchase my first real estate investment. I have 10k in mostly auto loans, and some student loans, and credit cards I pay in full every month. I have an 25k in savings and a few thousand in 401k/Roth. I have excellent credit.
Would it be better to pay off the loans or keep the cash and continue to build credit history? What is a more desirable position to be in for a lender?
Also is it better to have cash vs assets such as 401k/Roth?
Lender · Los Angeles, CA · Member since 2017 · 916 posts · 647 votes
6y
@Mike Marino Ill reiterate what @Mitchell Jaworski already stated. The refi is crucial and running numbers based on you loan you will have is important. I cannot speak for Mitchell here but I have closed loans on investment SFRs under an LLC.
Good questions to ask you HML is if there are any prepayment penalties and when is the balloon payment (basically whats the loan length). Business purpose loans are usually non recourse but again, with the changing environment, I cannot say for certain in the coming months.
Lender · Los Angeles, CA · Member since 2017 · 916 posts · 647 votes
6y
@Benjamin A Ersing Two things to understand about rates for commercial loan products are:
1. Rate is reflective of risk. There are BASE rates lenders advertise to attract borrowers but there are a many factors that determine the final rate. Im sure you have seen ads stating 'rates starting as low as X.99%'
2. The other major factors are FICO score and LTV.
Also, many lenders have reduced commercial loan products and tightened their belts. So I cant answer that question with any confidence as of this writing. I suggest waiting a few months for lenders to give us some clarity as this pandemic settles.
Investor · Patterson, CA · Member since 2015 · 20 posts · 4 votes
6y
@Jonathan Taylor where can I get financing for a 100k-150k rental property? Also after I get this financing what banks will let me use BRRRR? The banks I have talked to have minimum mortgage amounts and won't consider using ur income from the rental for 2 years.
The lenders I work with have non QM mortgage products designed with RE investors in mind. Conventional Loans with banks limit to 10 loans per borrower (as far as this writing, it may have changed in this challenging time). In the secondary or Non QM market (these loans are packaged and sold directly to investors, vs the primary market where FANNIE or FREDDIE buy them and resell on the private market) there isn't a strict limit on the amount of loans a borrower can obtain. Good news is there are products out there for you if the loan limits are met (most lenders have lower end loan limits of 100K). Bad news is lenders who offer these products are tightening their belts and as of this writing have don't have a lot of products out there that are cost effective. This changes daily so stay tuned.
Some lenders require sourcing for the DP and for small balance loans, lenders don't like properties that are 100% financed. This isn't a standard rule as there are exceptions but in my experience it could be a deal breaker. Another consideration is being highly leveraged in a potentially volatile market.
Rental Property Investor · Boynton Beach, FL · Member since 2014 · 273 posts · 197 votes
6y
@Wendy Lavana if they are making you take the line initially then just make one payment and then repay the line so it is open with a zero balance. You'll just need to make an interest only payment.
Obviously check that they don't have any minimums or timeframes they are requiring.
I have a HELOC on my primary that I use over and over to buy property and then repay when I cash out of the property. Only pay interest when I have it in use.
Any interest only calculator online can let you know what the payment will cost you. Good luck!
This is a broad question but the factors that garner better rates are a strong FICO, REI experience, liquidity, Low LTV, and strong W-2s. One thing to consider is rate is related to risk. Higher risk, the higher the interest rate pertaining to investor loan programs.
Lender · Los Angeles, CA · Member since 2017 · 916 posts · 647 votes
6y
@John Acheson I am not an SBA expert so I can only shed some light on the basics but Ill need to do some more research on the other questions. Here is the basic distinction between the two loans:
An SBA 504 loan is commercial real estate financing for owner-occupied properties. These loans require only a 10 percent down payment by the small business owner. And funding amounts range $125,000 to $20 million. (as of Feb 2018)
On the other hand, SBA 7a loans can be used to buy a business or obtain working capital. The maximum loan amount is $5 million. (as of Feb 2018)
The options are a cash out refinance on one of your properties to gather the capital to use for another purchase. One method that Im sure you have read about, is a 1031 exchange. Please consult an accountant for specifics to your scenario, but the basics are, sell a property and use that cash as a down payment to buy a larger property. The money you use is tax deferred but again consult an accountant who is an expert on 1031s.
HML are not regulated the same way big banks are. Usually there are a minimum payments that need to be made (like 3 or 6 months payments minimum) or a pre payment penalty if you pay off the loan early. This varies from deal to deal but as we all know, read the fine print of the contract and make sure you understand it.
Lender · Los Angeles, CA · Member since 2017 · 916 posts · 647 votes
6y
@Casey Rolland I cannot speak about syndicating money from family members who are abroad as I do not have experience in syndication, Does anyone here know?
To address your second question, you can obtain a blanket (sometimes called a portfolio) loan that include several properties under one loan.
Hey Jonathan, I recently found out i have substantial equity in my house. I was planning on using this equity to fund a flip in the future and wasnt rushing on setting up a HELOC, well now with the pandemic and the possibility of home prices to decline would right now be the best time do get the HELO while market prices are high allowing me to get the max creit line vs waiting 6 months?
Lender · Los Angeles, CA · Member since 2017 · 916 posts · 647 votes
6y
@Eric C Gunderson Are you asking about costs associated with obtaining a loan?
If so, they vary depending on what loan product you use and which broker/lender you chose to go with as fees charges vary. A ballpark of 3-5k for a loan amount in the 100k range (if you can find a lender who does those lower loan limits). Without more specifics, take that with a grain of salt.