Duplex Financing

5 Replies

I purchased my first duplex about 9 months ago, Im usually a Fix and flip investor of SFR but the timing and deal on the property seemed right.

After taking 90 days to rehab the units, I listed them for sale at a fair market value and since have reduced the price over the last 6 months to what I feel is  as low as I want to go.  At his point Id rather rent the units and collect the income than fire sale them.

That being said I have no mortgage on the property and a good deal of capital I usually use for my other "flip" projects tied up in this property.  My first thought was to get a loan on the property to extract the equity and the income from one of the two units would more than cover cost of Mortgage, taxes, insurance etc.

The problems I'm running into is,

A: The property is worth substantially more than I paid for it 9 months ago as I bought it as an uninhabitable bank owned foreclosure, which seems to throw up TONS of red flags with Mortgage Brokers / underwriters I'm told.

B: I current have it listed for sale, even if I pull it from listing, the mortgage brokers want to again red flag it

C: As my experience is Fix and Flip I don't have experience as a property Manager per se and the lenders I have spoken to all want you to have 2 years history.  I have been a landlord  10 + years ago, which is why I avoid it and will hire a Management company for the property if I rent it.

D: If I'm keeping the property, I would like to keep it in my LLC which seems to have its own set of financing challenges. I can accept the idea of higher interest rates but, feel like its the challenge of being 18 all over again with no credit.

Any Ideas or suggestion  ?

Thanks,

If you can't get the price you want now, I would think you could find a lender to give you a loan at around 75% LTV of the ARV with 9 months of seasoning. I would just do that if they aren't selling and turn them into rentals for the time being. Maybe you can find a tenant to sell it to on a rent to own basis.

Hi Travis,

I'm with a wholesale lender and I know we do 12 months seasoning but we also have an acquisition and rehab option where we would just lower the LTV and forget about the seasoning. I'm not sure of other lenders with as much flexibility but if you don't want to do that if I would just look for tenants in the interim until you can refi cash out.

Thank you both  for your input, it confirms the direction my thinking was heading.

Ariana, Ill probably be contacting you so we can discuss details and terms and see if one of those two options makes sense, I don't need too high of a LTV but if the terms make more sense for the 12 months seasoned option, whats another 2.5 months.

Tavis Ostman

@Tavis Ostman

If you are thinking of cash out refinancing...... The house would have to be off the market for 6 months. 

A couple things you can do are...... Get cash out private financing and then rate and term refinance it. Still, to refinance it, the house would need to be off of the market. 

You won't need a two year history if you one your own home. 

The house would need to be in your personal name for conventional financing. 

Put some renters in there and season it for six months. Most banks will give you 70-75% of appraised value. 

Just beware the appraisers are all over the map - high and low on what a property is really worth. 

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