Options for financing multiple units (4) on multiple parcels (6)

6 Replies

Hi everyone. Currently looking at a property for a STR investment in North Carolina. The subject property is 4 standalone buildings spread across 6 different parcels of land (3 parcels contain the 4 buildings, and the other 3 parcels contain surrounding land). I have spoken with multiple lenders offering DSCR/cash flow loans, only to be told that they cannot help me as soon as I mention it is technically the sale of 6 different parcels - their reason primarily being either that they can't bundle the underwriting of multiple parcels into one loan.

Any ideas for what could be my best approach to finance this? Would finding a hard-money lender to get into the deal and then refinancing out to a DSCR product (maybe some type of portfolio loan) be a viable solution? Or am I likely to run into that same issue when trying to refinance into a new loan? I am targeting something that will get me to 80% LTV min, but I will not be able to qualify using DTI, so looking for something I can qualify for with the asset alone.

Thanks for any ideas. 

Today you cannot mix and match up product ins and outs, so no you can't refinance either. I doubt there will be such a product in the future. Few to no lenders even Non QM loan on land.

You are asking to cross collateralize raw lots with units.

You can do seperate DSCR loans on 1 2 3 or 4 units on one parcel but NOT on raw land. It sounds like you have three loans and then you have land which is very difficult to get a hard money loan on raw land. Land does not have much investment value and takes years to develop. The risk on land for a hard money lender is to get back something that takes two years+ to dump.

"Buildings" by this you mean units that are inhabitable, right?

To get a hard money lender interested you demonstrate your exit strategy to sell in less than 10 months or prove you can refinance out- this you cannot do with land.

Originally posted by @Caroline Gerardo :

Today you cannot mix and match up product ins and outs, so no you can't refinance either. I doubt there will be such a product in the future. Few to no lenders even Non QM loan on land.

You are asking to cross collateralize raw lots with units.

You can do seperate DSCR loans on 1 2 3 or 4 units on one parcel but NOT on raw land. It sounds like you have three loans and then you have land which is very difficult to get a hard money loan on raw land. Land does not have much investment value and takes years to develop. The risk on land for a hard money lender is to get back something that takes two years+ to dump.

"Buildings" by this you mean units that are inhabitable, right?

To get a hard money lender interested you demonstrate your exit strategy to sell in less than 10 months or prove you can refinance out- this you cannot do with land.

Understood - thank you, Caroline. To provide more context, yes the buildings are all inhabitable and used as STRs right now. The second problem here that I've encountered with lenders that are willing to underwrite multiple parcels as separate to loans - two of the buildings are studio/small 1br cabins with footprints of ~500sqft. Lenders have mentioned that they have minimums for each loan's underlying asset - either a sqft minimum (750sqft) or an appraisal value ($150k), or both - neither of which those parcels meet on an individual basis. 

One of the three additional parcels is a private pond, which I would have to believe has some value. But the other two units are in fact raw land. 

I suppose I could approach the seller regarding the possibility of seller financing, as I can't imagine I would be the only potential buyer that is going to run into this issue. 

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I did a loan a little while back where the borrower owned the house and acreage but also wanted to buy the acreage adjacent to his lot. I structured it as a refinance with Fannie Mae and so long as the appraisal came in high enough it was workable, and it did. So we closed on the loan. 1 Home 2 parcels. 

That said, first I would need to know how many total units. I would also need to consult with the guidelines to determine if adjacent lots are acceptable on a program of that nature? Further, if you can find it, there may be some commercial loans that are also DSCR.

DM me with questions you may have, I'll do my best to help you. 

DSCR loan with STR that's another layer of risk, most use appraiser's survey of rents. DSCR has increased pricing and you will bump close to a HOEPA or high-cost loan with a small sales price which no one likes to touch. Here is the why: when exceeding our government High Cost rules the lender pays.

Pond? Flood insurance?

No the pond does not have any added value to a residential loan. It will add some value to view of other units but stand alone pond on a lot, very difficult to find a hard money lender for that piece.

Ask the seller to finance the whole thing with rate of 6% for 30 years due in 15. That's your best plan is to offer seller large down payment with great return.

It seems like your best options would be to get the sellers to get the lots surveyed into 1 lot/ 1 home. Second option would be to find a bridge loan who (for a suitably high interest rate) would let you buy it, then get the survey done yourselves, and refinance. If your client has a huge credit line they could do it themselves. Yes, high interest sucks, but for a short period of time can be useful.