Seeking advice on financing a rental

[Joseph Stern]

I want to get a loan similar to a 203k or FannieMae Homestyle loan where the purchase price and rehab are rolled into one long term loan and you just put a down payment on the single amount. A lender that will care more about the cash flow of the property and my credit score, not my DTI. This will be for a single family rental property with an ADU. Anybody know of or offer loans that may fit this criteria? I want to put 15-20% on the property.

[Dave Skow]

@Joseph Stern- as you likely already know - these  " rehab" type loans  are  normally  for  " owner occupied "/ Primary  residence  purchase  transactions .......you can  get get a rental loan  with  15% down  so  maybe  with the  additonal 5%  you would have  available - you can get  started  on some projects ?

[Joseph Stern]

Yes this would be non owner occupied, perhaps something like that would work. Curious if they had a 203k equivalent for investors on non owner occupied properties.

[Brian Orr]

Quote from @Joseph Stern:

Yes this would be non owner occupied, perhaps something like that would work. Curious if they had a 203k equivalent for investors on non owner occupied properties.

 I had a deal once where I negotiated a great price far below appraisal. The bank was willing to extend a line of credit for the difference, which was incredible, it funded most of the rehab and jacked the property value much sooner with no more cash out of pocket.

I've tried to work rehab loans in with lenders otherwise and it just doesn't fly. You may be able to do it with a hard money loan though.

[Joseph Stern]

I appreciate the advice! I would with hard money but looking for a longer term loan.

[Jessyka Mathews]

@Joseph Stern , There are definitely programs out there but it can depend on the property, location and your experience. Do you have assets or properties you already own? Private banks like it more when you have assets. I had a client that got an amazing steal of a deal on a property and he was able to purchase with an advance to pay for upgrades. 

[Joseph Stern]

Thanks so much Jessyka, I do own several properties. The property is in a really good area of Tampa, it will have very strong cash flow, and the comps are good. Perhaps presenting the investment to some local banks or credit unions is my best bet.

[Michael Kinsella]

Two routes that I see...

1. You can search for a bridge-to-perm type product from HMLs. Some HMLs that provide short-term financing also provide long-term financing. These types of lenders are unlikely to be as strict regarding DTI.

2. You can speak with local banks and see if they offer a similar product. Local banks are likely to be more strict than HMLs regarding DTI.

Best,

Michael

[Issac San Miguel]

This is pretty easy to accomplish with a hard money company - just underwrite your final value after you complete the rehab, and make sure the the income provides a good debt service coverage ratio compared to the monthly mortgage payment.

The lifecycle of this deal would be as follows - acquire property with a fix and and flip loan, which willy typically cover 65%-75% of the purchase price, and 100% of the rehab, and then refinance to a long term rental, DSCR loan.

[Kristina Kuba]

@Joseph Stern

I have seen hard money lenders do a 12 month term with a 6 month renewal option, does that work?

[Mike Klarman]

Find a good fix and flip program.  They include rehab funds.  It used to be 100% rehab funds across the board in the industry, some have cut leverage.  Some won't give 100% of the rehab until you have a certain amount of deals under your belt.