Three Rentals - Three Problems

9 Replies

Ok I just wanted to make a catchy title but I do have three problems, Well more like good problems to have...

I have three condos in Las Vegas that are all paid off in cash. They are worth around 75k.

My problem is this, because of reasons I will not get into I would not be able to get a loan in the conventional sense. No not bankruptcy, short sales or anything big. 

I would ideally love to take advantage of these low interest rates and implement the strategy of buying properties all cash, fixing them, and then refi as long as the cash flow makes sense. 

So my question is this, has anyone, or heard of anyone using smaller banks or credit unions to get financing on residential homes that lend in house? OR even commercial lenders who are giving favorable interest rates and would be willing to work with as I acquire more than four additional properties? 

I buy in CA and Nevada. Any leads or recommendations would truly help. I am at the point in my real estate investing career where I need to start leveraging my money to really take my business to the next level. 

Thank youuuuuuuuuuuu

@Amir Pasha Esfandiary , are you saying you "would not be able to get a loan in the conventional sense" because they are Condos, or would that still be the case regardless of what sort of properties they were? If so, welcome to every wannabe investor's nightmare - the banks won't lend enough!

Can you post your numbers regarding why your condos are worth keeping (vs other properties that may have better net cash flow)? Cheers... 

As I woke up this morning I realized I did not post some important details. 

The Loans are because I have not shown enough income on my returns for the last two years. And my debt to income ratio is too high. 

I have enough liquid asset's to make any lender feel comfortable with giving me a 200k loan. Well at least in my opinion I feel like It would make them feel comfortable. 

My credit is also in the 700+ 

@Brent Coombs There are many reasons why I like the condos. I should state I never intended to keep any rentals until I have snowballed my liquid into a certain amount. But, the cap rates were too good for me to pass up and I kept getting really good deals on these condos. I am averaging 10% cap rate on all three condos. (One is around 8%, another one is 11%, and the other is 10%) Area is good enough to get good tenants in constantly. 

@Michael S. Helton thank you I will follow up with him. I apperciate the referral. 

@Amir Pasha Esfandiary , thanks for clearing that up. But if you "would ideally love to take advantage of these low interest rates and implement the strategy of buying properties all cash", isn't borrowing the needed funds a contradiction to "all cash"? In the meantime, if Lenders will loan you $200k, where is your problem? Maybe more clarification needed? Cheers...

@Amir Pasha Esfandiary

You should speak to B2R Finance who does asset based lending, they have a new 30y fixed program, the rates are not as low as conventional, but better than nothing.

You can also try Clark County Credit Union in Las Vegas. They do have portfolio programs for non owner occupied in Clark County but I don't know what their guidelines are. I expect they would still be interested in DTI (like any bank) but maybe your liquidities could help. I also don't know if they do condos, some banks don't like condos in LV

If all else fails, have a look at Lending Home, they have an asset based program at 7 to 8% for buy and hold. Again, not the low conventional rates, but I'm pretty sure they care less about DTI...

Jean

@Jean G.

I spoke to B2R a while back, they seem like a solid option, but they had a minimum loan amount of $300k ($400k in assets @ 75% LTV), but had very favorable DSCR and several loan terms available. I don't think that will work for @Amir Pasha Esfandiary , as he needs something around $200k.

In addition to CCCR, you can also talk to Meadows Bank. Both offer investor portfolio loans and do lower loan amounts. At Meadows, terms were 5.25% (adj) 6.0% (fixed), 25 year loan, 5 year balloon, 1.35 DSCR, 0.75 points, and you must maintain a banking relationship with them. I plan to use them later this year, but haven't pulled a loan yet.

All these finance companies look at the business income/assets to offset the loan amount. If your personal DTI ratio is really bad, I don't know if that will or will not affect your ability to get a loan. I suspect it will depend on the type of debt you hold and their confidence that you do not need to draw money from the business to stay afloat.


-Christopher

Christopher Brainard, Real Estate Agent in NV (#177490)

When I started investing in real estate I would rather hide expenses than income.  I saw the value of paying taxes and showing a profit on my income taxes.  The value was to borrow and generate 20+ loans.

Frank

Frank Romine, Real Estate Agent in CA (#01957844)

@Christopher Brainard

B2R has a new "single property" product where the loan minimum is only $75k or $100k and they even give 30y fixed rates on that. They told me a few times during the summer that the product wasn't ready in NV yet due to licensing issues, but it might be ready now...

@Frank R.

Definitely agree with you. If you show profits, you can pretty easily convince a bank to give you a business line of credit. Also I'm working on a larger multi family right now where the previous seller was deducting whatever he could in order to reduce profit and taxes. I know that a lot of the expenses are nonsense, but I know have to convince the bank to underwrite based on my reworked financials rather than the financials provided by the seller, which is not easy. So yes, you can think of it as everything you show in profit (and on which you pay taxes) can be leveraged 4 or 5 times, so it's a goof investment to pay the taxes, at least in the beginning.

Jean

@Jean G. I want to thank you so much for the recommendation, that is exactly what I have been looking for in B2R. 

@Christopher Brainard thank you for the recommendation of Meadows Bank I will be giving them a call shortly to compare products. I do not mind parking some of my money there as long as they give me a great rate for my investments. 

@Frank R. I completely understand and that is the plan for the future, yet these last few years because of different situations I wrote off whatever the IRS allowed me to write off.

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