Investor · Waukesha, WI · Member since 2015 · 23 posts · 2 votes
Hello!
I'm new to BiggerPockets, but it was highly recommended that it would benefit me.
I am pretty established, for a small fish, in the real estate game.
I own several properties and am at the point where I want to either pull money out of some properties, or I want to borrow to privately to continue growing the business.
I'm sour on banks because they all laughed me off when I pitched them my real estate business idea 5 years ago, I pitched to six financial institutions too. Now that I have assets, rental properties, the same assets they found funny and "not invest-able" at first, they'll beg to work with me, but their fees are crazy....when I do the math, private investing almost seems like it would be a better way to go. Since my properties are inner city my closing costs alone were almost $3k on a 10 year mortgage loan around $50k, that's insane for a property that generates the rent it does.
If anyone has any advice or links they could send my way I'd appreciate it!
I'm sure I'll be online for the next three days looking over this site...good stuff on here.
Real Estate Broker · Chicago, IL · Member since 2013 · 6k+ posts · 5k+ votes
10y
Well, seeking funding on the general forums is against the rules and could result in the post being removed. That being said, as the owner of 26 properties in WI - I can tell you about my financing experiences.
I personally use a commercial bank. The terms I see are 5 year loans around 5% on a 25 year amortization. We generally pay city/county/title fees plus a $200 loan fee, $19.50 flood certification fee, and $150 appraisal fee. We have a pre-pay penalty of $200 and that's it. In the world of commercial, your ability to run the business is just as important as the numbers on the property. If you have had them for 5 years and have the profitable tax returns to prove it, you should be in a good position for this type of lending.
In my experience, private lenders want at least 8% interest and hard money lenders want at least 10% interest plus a min of 2 points.
You could also do a residential loan depending on how many properties you have. Once you have loans on 5 or more properties, you are no longer able to cash out refi on anything that isn't your personal residence.
I would personally never do a HML with a long term hold property. I would do private money if the person fully understood my long term strategy and the terms were right. And I would do bank loans all day long.
Sherman, TX · Member since 2015 · 37 posts · 14 votes
10y
I sure wish someone would give you advice as well instead of just welcoming you. I would love to hear info on this subject as well. The banks around me are not open to making business loans on mortgages I have approached them with either. Welcome, by the way.
Investor · Peachtree Corners, GA · Member since 2014 · 1k+ posts · 1k+ votes
10y
I suggest you keep looking for banks doing portfolio loans. Also, other WI investors such as @Brie Schmidt may be able to steer you in the right direction.
I will say that I can find loans here fairly easily for most areas, but there are a few areas where banks loathe to provide loans in.
Real Estate Broker · Chicago, IL · Member since 2013 · 6k+ posts · 5k+ votes
10y
Well, seeking funding on the general forums is against the rules and could result in the post being removed. That being said, as the owner of 26 properties in WI - I can tell you about my financing experiences.
I personally use a commercial bank. The terms I see are 5 year loans around 5% on a 25 year amortization. We generally pay city/county/title fees plus a $200 loan fee, $19.50 flood certification fee, and $150 appraisal fee. We have a pre-pay penalty of $200 and that's it. In the world of commercial, your ability to run the business is just as important as the numbers on the property. If you have had them for 5 years and have the profitable tax returns to prove it, you should be in a good position for this type of lending.
In my experience, private lenders want at least 8% interest and hard money lenders want at least 10% interest plus a min of 2 points.
You could also do a residential loan depending on how many properties you have. Once you have loans on 5 or more properties, you are no longer able to cash out refi on anything that isn't your personal residence.
I would personally never do a HML with a long term hold property. I would do private money if the person fully understood my long term strategy and the terms were right. And I would do bank loans all day long.
Investor · Waukesha, WI · Member since 2015 · 23 posts · 2 votes
10y
Thanks Brie!I appreciate your response!
I really am just seeking some advice, or to hear others experiences regarding financing at this point…so please done deleat this post!? ;)I didn’t realize when I first got on this site that there is a lot of money lending taking place. And I agree Brie, Hard money lending seems like a bad choice for me, I feel I'm too far established to "give it away."
I'm going to go off topic a bit for one second;Should I have my properties in an LLC before I approach banks again?I ask that because I'm wondering how they will treat the loan differently, i.e. any there additional benefits to me?Is a business loan easier to work out?
Like I stated in my original post.I did my first loan on an owned property thru a local credit union, any big bank branches I have approached don’t work in the neighborhood I invest in.My closing costs there were $3200!
I have two big negative factors against me;
1-Most of what’s selling in my area is completely distressed and is selling for cheap, not any comps around for a completely remodeled property like mine.Banks don’t like that, or at least give me a hard time about it.
2-I spend more in a year than I make, all on materials for remodeling my houses, I’m not in any debt but my write-offs put me at making very little money annually.My last lender had a hard time wrapping his head around it…He told me “ on paper youre going broke” I almost couldn’t stop laughing.
From what I’m seeing now, if I did 3 year private loans I could pay around 8% and in the end I’d be paying about the same costs, total, but could help out a fellow investor instead of a bank…A bit higher payment, but the new property can cover it. I really have some ill feelings towards big banks after my experiences trying to start my business 5 years ago, and they are constantly killing us all with fees, especially their poorer customers.
One last thing for anyone in local Milwaukee;Do you recommend an accountant who is very familiar with our business?I’ve been using turbo tax and probably need to amend my last 5 years of returns. Or at least review them and make a plan for the future.
