Lender · Los Angeles, CA · Member since 2017 · 916 posts · 647 votes
Hello BP community,
I have observed a lot of confusion on the forums about financing options and the availability of programs for RE investors. As I have gained a ton of knowledge from the forums in my own journey, I would love to give back and answer any questions you have about the financing world. If I don't know the answer, I'm sure the community can step up and help as I am by no means the end all, be all of info.
I’m very new to all this and am in the “educate thyself” phase. I currently own two properties.
I appreciate your offer of information!
What I *think* I understand:
- there are MANY ways to finance deals.
- small banks/etc can be more flexible in terms
- there is a limit (10?) to the number of bank mortgages a person can have.
What I’m confused about:
So much of what I read/listen to is experienced investors (with way more than 10 properties) talking about buying properties with a variety of creative financing strategies) and then “Refinancing” the property into a “traditional” mortgage later on.
So- what kinds of refi’s are these? Don’t they count against the 10(?) loans you can have?
What am I missing? This is never explained in the podcasts or books...
@Jonathan Taylor hello, My name is Corey Pore. My brothers name is on this account as he, my father and I created an LLC and began REI.
1st thanks for your time. I have a chance at a FSBO that is showing me 5 properties. We already have one rental completed and cash flowing and also have just purchased two others and have begun the rehab on them.
Unfortunately we don’t have a lot of capital for down payments and our current lender doesn’t give us anymore than what we have put into a property when we refi.
So my question is, do you have any good advice on trying a seller finance?
Wondering if I should suggest seller finance on the portfolio or try each house as its on entity with the seller?
Also trying to think of the best terms to suggest to the seller?
I am seriously impressed, and let down/frustrated at the same time.
@Jonathan Taylor put out this lofty challenge to hit him with financing questions, no restrictions. Just stop and think how much time he is taking out of his day to field everyone's questions and give detailed replies.... Not to mention really good, accurate replies.
Jonathan is owed up-votes if he answers your questions.
I am asking everyone to show gratitude in the way available on BP, up voting. Click on that little green double up arrow. If you would like more resource experts to offer such information PLEASE SHOW YOUR APPRECIATION VIA UP-VOTES.
I AM THE OWNER & OCCUPY 1 UNIT OF OF A TRIPLEX IN [TRENDY] SILVERLAKE CA. I HAVE BEEN PAYING MY 30 YR FIXED DOUBLE PRINCIPLE TO MAKE IT A 15 YR W/ OPTIONS. I AM SELF EMPLOYED BUILDING CONTRACTOR, ALL MY UNITS ARE RENTED AND PAYING ON TIME ETC. I'M WONDERING IF THERE ARE ANY LENDERS THAT OFFER A HELOC LINE OR LOAN? PROPERTY APPRAISED AT $1.65 MIL ON 5/20/20 AND THE BALANCE ON MY LOAN IS $457,998.00 AT 3.9% WITH QUICKEN. WHAT IS BEST, CASH OUT REFI OR HELOC? NEED TO MAKE SOME REPAIRS ON UNITS AND WOULD LIKE $$$ TO LOOK FOR ADDITIONAL PROPERTY AS WELL. ANY/ ALL INFO & ADVICE IS APPRECIATED AND NEEDED. THANKS, EZ
@Jonathan Taylor , Thank you for sharing your knowledge with us. Can your share or give recommendations of some of the DSCR / bank statement programs you have utilized?
Hello! I am confused about all the financing options. Is it better to have more skin in the game (at least 20% for downpayment) or is it better to put down less so that you are not using up your own money?
If you put less than 20%, then you would end up paying more for PMI, correct?
@Jonathan Taylor thank you for your kind offer. With historically low interest rate, we are thinking about refinancing 2 properties. Lender recommended to consolidate meaning pay off one with cash out from another property to get the lowest rate. We like the idea but What do you think is the tax implication for this transaction? Are there certain items that we could no longer write off by owning one property free and clear? Thank you!!
@Jonathan Taylor hi and thank you. I have a 21 unit hotel with total debt of 1.875,000. (1,575,000 mortgage and 300,000 term loan. It’s valued at 2,650,000 currently between the land and business. Hotel does about $500,000 in revenue. Opened 3-1-2019. I need a new lender to pay this bank off to free of cash in their bank used to secure these loans originally. What are my best lenders to approach to do this?
Is there a rule of thumb when it comes to fix and flip on how much you should spend on rehab? I thinking about buying a property asking price is 59,900 (I'm going to get it lower) but it needs a lot of work, I'm thinking $60k or more.The are will be about 200k.
Hi @Jonathan Taylor thanks so much for taking the time to do this. Greatly appreciated.
I've been reading up and learning as much as I can about REI in general and specifically BRRRR. When I see examples on BP, they all make it seem like ReFi gets all your costs out. What I'm having trouble finding is an example with actual numbers from a real world example.
Usually I see holding costs/closing costs/origination fees/mortgage fees are left out of examples and make things a bit unrealistic when I go to run numbers on analyzing a property.
Do you have any recommendations on how to properly account for these costs, or is it just that they are covered because the property was bought so low and appraisal came so high, it was all covered? I thought BRRRR was to not have money left in the property compared to traditional method of financing one time upfront.
Thanks for offering to provide insight on financing.
I have good credit about a 720 but little to nothing saved for a down payment. I want to buy, possibly rehab if needed and rent out of state. Where should I go next?
I’m trying to refinance 4 investment properties. ( Texas , California , Kansas ). these are all 4plex propertie that are rentals.
I did a refinance 15 months ago on these properties and my rates are little high ( 5.375 % ). I have an 800 credit score. Prices have risen so I’m sure my equity position is more than last year.
Looking for a lender who can do ALL 4 properties at the same time. Or around the same time. hoping to get rates below 4% if that’s possible.
ive gotten quotes from Aim home loans for around 3.75% for a 30 year for my properties.
@Jonathan Taylor how can I finance a flip aside form a hard money lender and traditional bank? If I could find a hard money lender that could finance 85-90% of a flip that would be ideal. My headline here is, I want to flip but it takes a lot of money upfront.
@Jonathan Taylor I am currently house hacking and want to get another multifamily home to house hack, I hear you can only Use fha One time. What are my options to house hack another home without having to put a ton of money down?
As someone who’s about to buy their first property with my wife, we want it to be a rental property.
We currently rent. We have successful home based businesses and instead of buying a gone for ourselves, we rather start our real estate portfolio.
My issue is, our credit score is in the low to mid 600s due to not really owning anything to establish credit. Other than our car leases, we don’t have much debt. She has some student loans and I only have about 2500 in CC debt.
What do you suggest for married couple that are first time buyers who's going for a rental property? Not the best credit, but we have some cash and have good income. My wife also has a good W2. Can I do FHA on a rental? Should I? I'd rather save as much cash as possible obviously
Thank you for your response. People like you are the best ones to learn from.
A follow up question.
1. You said that it's harder to do business loan through LLC than getting personal traditional loan, why is that? Is it harder to qualify? More docs? Ofcourse it's a higher rate, right?
2. You opted to do umbrella policy instead of LLC for assets protection. Why did you choose that over LLC?
I have a rental right now through out personal name that we are planning to switch it to LLC until I read yours that you choose umbrella policy.
4. The last R, now you can probably use the money you got for another property. I wonder what kind of financing are you going to use.
@Jonathan Taylor My partner and I want to buy a SFH property soon on the central coast of California with a 3.5% FHA loan. We're recent college grads and have about 4k saved up for a down payment. We both have great credit, but the problem is looking like employment history and income verification. My partner just got a job last month that pays about 37k and I've yet to find anything during covid. Will we be able to qualify for a loan when I finally do find employment? I heard you need 2 years at the same job. Any tips for qualifying?
I am in the middle of a SBA loan for a Commerical property in Los Angeles and it has been the most trying experience of my life. They have gone through everything in my financial life multiple times prior to preapproval and now in underwriting. What is a better way to get Commerical financing in Los Angeles?
I have my primary residence and 2 rental properties. Self employed for 15 years cashflowing 250k a year. Goal is to acquire multiple rental income that will provide our family atleast 20k/month passive income.
Few questions for you :
1. LLC question. I had been running my business for the last 15 years and I always hesitant to change our rental entities into LLC because I heard about difficulties in refinancing. My reasoning to do LLC is for asset protection.
What are my options in refi for LLC properties ?
Bank statement loans use your credit score, positive Debt coverage ratio of the new property and your RE experience to qualify you. For full time RE investors this is one of the best loan products (in terms of ease to get, qualification standards and efficiency) to get the property under contract.
2. I just changed my business entity into S-Corp this year for tax purposes and this year we will get W2. My concern is that will I have a hard time qualifying a loan next year? Even though I'm in the same business fir 15 years. Do I need to be atleast 2 years to qualify for a loan?
If you are using your w-2 income to qualify you, the entity structure isn't the concern. The amount of time YOU have been doing your job is the main focus. So since you have been doing this for 15 years (5 years of track record for self employed borrowers is the min showing a stable or increasing income over the years) Is what lenders look at. You should be fine from what you have told me.
3. Home Path and Home possible is for first timers buyers. Its tough to get honestly, its not a program designed for hot markets or competitive bidding, There is a lot of paperwork and if the property has some issues (zoning, easments, liens, unpermitted construction, etc) those issues with transfer to you in the forms of headaches and frustration.
I have the opportunity to purchase a property as a second/vacation home that needs rehab. IN ESCROW. An REO purchase price is 450k, rehab amount 75k. Current assessment value 700k, ARV 850k
3.5% 30 year loan.
-Should I put down 20% down or put minimum down payment and refi later(BRRRR) so I have more liquidity for next project or put 20%.
For this scenario, your rate and term are so good I have two suggestions:
I would suggest you BUY with a DSCR based/bridge loan option THEN refi into the loan terms you have now because if you are using the Second home then you can used deffered financing to get the same loan you have now AND capitalizing on the forced appreciation.
OR
Buy with this rate and term you have, then use a HELOC to pull out the forced appreciation without changing your rate and terms.
Good news is you have options if the numbers your reported are accurate.
@Chad Pore Im going to focus on these two questions because seller financing is deal dependent.
Wondering if I should suggest seller finance on the portfolio or try each house as its on entity with the seller?
Are you asking if you want to Buy the ENTIRE portfolio and use seller financing (SF) to make this happen? This is HEAVILY dependent on what the seller wants. If the seller wants to off load the properties and cash out, SF wont do you much good as it does not benefit the seller. If he/she wants to avoid the tax hits of cashing out a portfolio and wants to get paid for the next X amount of years, then you have some negotiating power.
Also trying to think of the best terms to suggest to the seller?
I have seen 5% over 20 years Amortized as a common request but again, it really depends on the deal. Thats both the benefit and the detriment of Seller financing, its all negotiable.
But if you are short on funds, its going to be tough. You COULD do a first position lien with a DSCR lender (max 75% LTV on purchases) and have the seller finance 15% (off books), and come in at 10%. I have seen that done before.