Refi mortgage from private lender

14 Replies

Hello all,

I did a BRR on a duplex a few months ago, and am now looking to complete the final R. I inked the deal right before watching the BRRR webinar, and I wish I had seen it first. I only secured 12 month terms from my private lender, so I have to refi within 12 months. What are my options for refi so I can pay off this note before the deadline? I'm concerned about 18 month seasoning requirements, but I also don't know if they would come into play in my situation. Here are my numbers:

$153,914 sale price

$75,000 loan from private lender

$78,914 cash payment for the balance

$30,000 renovations

$1100/mo 12 mo lease for one unit

$2000/mo month-to-month rental on Airbnb for the second unit - 25% vacancy so far

$950/mo private lender payment

$3000 annual property tax

$900 annual insurance

Ideally, I'd like to refi for enough to reimburse myself for the renovations and part of the cash I paid to buy the property.  I'm not really sure where to start.  I appreciate any advice you can give!

Thanks!

Hi Sacha,

Thanks for the info.  I really don't want to use another private lender or hard money lender.  Ideally, I want to refi about 70% of the purchase price into a conventional 15-30 year loan.  At minimum, I want to refi the $75,000 I borrowed from the private lender and am paying a very high interest rate for.

I just don't know if the LLC complicates things and if seasoning comes into play if we're dealing with purchase price and not current appraisal value. It's not like I'm saying this property is now worth $300k, and I want to finance 70% of that value. Does that make sense?

It does make sense. My firm is not a bank so as far as traditional guidelines are concerned, I do not know if your scenario (LLC, seasoning, etc.) will work. I suggest reaching out to a licensed mortgage broker and have them do the research fro you to earn their fee. It only will cost you time, not money. Be sure to never pay an upfront fee for a mortgage! Good luck.

I would talk to a credit union or small community bank for this. The loan amount at $75,000 is almost too small for a mainstream lending source. The CU or Smaller Community Bank will love this deal. With your cash flow on the property, I would look at a 15 year fixed note at whatever LTV they will give you. If you ever look for a better hard money lender again, let me know. All of my programs include the option to extend the term. Our rates are very reasonable and we do 1, 2 and 4 year programs...all payments are interest only, and we fund in 4-7 days :)

Good luck.

Charlie

@Erin N. just so you're not barking up the wrong tree...a conventional loan will not work. Conventional loans cannot be made to entities (i.e. your LLC). You're looking for a commercial or portfolio product.

So when you call around make sure you ask for that specifically...and if they don't seem to quite understand (which is not uncommon) ask to speak directly to someone in their commercial or business lending department. They will likely understand what it is you're asking for even if they're not the right person to talk to, and can at least point you in the correct direction.

@Erin N.  Not sure where you are getting the 18 month seasoning requirement? There is a 6 month seasoning requirement if you have traditional financing or if you want to do the loan with a new appraisal.

If its has been at least 6 months since you bought the property, then you should be able to get a 70-75% LTV residential conventional loan with the new appraised value. Being that you have the property in an LLC might complicate things. LLC loans are commercial loans. You will have better luck if you move the property out of the LLC, refinance it and then move it back into the LLC.

Good luck.

Upen Patel
Mortgage Banker

If your credit is decent and you have a day job, a small local bank should be happy to give you a commercial loan. Expect something like 70% of $200000 (assuming house appraises for 200k) gives you a loan for $140k for probably a 20 yr amortization @ 5% interest with payments @ 925/mo, so PITI would be about $1250/mo.

@Matt Devincenzo thanks for that info! I'm so irritated that I even set up the LLC. I did that to meet requirements of a hard money lender that ended up falling through anyway..but it was too late to change the paperwork to meet the closing deadline. Grrr.

@Upen Patel all the mortgage lenders that I spoke to right after I bought the property said their company had 18 month seasoning policies. That's where I got that from. I was thinking of taking the property out of the LLC, but I have no idea what the process is for that. I guess I have some research to do!

@Kelly B. that is exactly what I want to do. I have relationships with 2 local banks, so I can just start there for now. I have >800 credit score and high W2 income, so hopefully they will want to lend to me. I was just worried about the <12 mos seasoning issue and the fact that it's in my LLC.

Erin, you can always deed out of the LLC if it is a single member LLC. If a multi-member LLC, you can do it if all members agree to the distribution and other members are compensated per your Operating Agreement. If you do a deed-out, make it part of the (conventional) financing package. Your loan broker can help. Just make sure they (loan broker, bank) know the property will be in your name. The sequence is DEED (grantor: Your LLC, grantee: Erin N.) then Deed of Trust (D-T) or mortgage with Erin N as grantee. The underwriter may allow a second deed that puts the property back into the LLC. Ther eare no FNMA rules against it that I am aware of.  So, a deed-out, deed-in. DEED -> D-T -> DEED is the recording sequence.

Erin;

You can get a 5 yr fixed, amortized over 30 yrs and rates start at 5.99% via private funding---NOT a bank. 

Rates are dependent upon the final LTV (can be up to 75% in FL) and your real estates experiences--- priced on a Tier basis (the more documented real estate bought and sold recently as well as over your life time the better the rates) vesting in LLC is good. Borrower MUST have 640 FICO, can have guarantor with good scores to help, and above to qualify and must pass the background check. If all OK---closing is within 10 to 14 days on your initial loan and 7 to 10 days on subsequent loans. Will need to show 3 to 6 months bank statements as reserves.

There are NO LIMITS on the number of loans and or properties you financed and NO SEASONING. 

Do not forget about POINTS paid to HARD money/private funding (and early pay off penalties and penalties for extensions).  However they are a great alternative in the right circumstances.