Can't find a bank to cash out refinance our BRRR

21 Replies

We have finished our second BRRR and can't find a lender to do a cash out refinance for us. It is actually our first rental property and has been rented for 1.5 years. Lenders are saying our income is too low. Our personal income is extremely low, but we have 4 single family's rented and are almost done with our third BRRR (not rented). Any advice on a lender who can refinance for us? We live in rural Iowa and the ARV for these two houses will be 70k and 90k. We'd love to get our money back out to purchase more houses. Thanks!

There is a program called the Investor Cash Flow program. You don't put any income or employment on the application. The subject property must have rents that equal or are more than than the PITI payment of the cash out refinance. One of the programs will even do it down to rents equaling 80% of the PITI.

I would look into that program in your area. PM if you need info. as to who can do that in your area?

Originally posted by @Jessica Roland :

We have finished our second BRRR and can't find a lender to do a cash out refinance for us. It is actually our first rental property and has been rented for 1.5 years. Lenders are saying our income is too low. Our personal income is extremely low, but we have 4 single family's rented and are almost done with our third BRRR (not rented). Any advice on a lender who can refinance for us? We live in rural Iowa and the ARV for these two houses will be 70k and 90k. We'd love to get our money back out to purchase more houses. Thanks!

 Try a local bank or credit union.  That's going to be your best bet.  Most of the alternative lenders that would do the loan with no income verification would say no because of the rural nature of Atlantic, Iowa (6700 people and 50 miles or so from Omaha and 75 from Des Moines).

@Jessica Roland  We do this quite a bit and I’m actually finding it’s easier now to find longer term financing then it was  few years ago. I recommend Starting with the local small banks. Get your personal finances organized into a folder with your tax return and a personal income statement and balance sheet. Also include the BP calculator printouts on your current properties as well as the property you’re refinancing.

If you can’t find a small local bank there are many stated income or no doc lenders out there and many here on BP. The rates will be a little higher but they won’t care much about your income. LendingOne is pretty good at this 

^^^ Such a great idea, to bring the tax return, income, and the proforma for properties.  Listen to this guy!

@Jessica Roland some of the issue is the loan on the 70k property will be under 50k more than likely, these are more difficult and most lenders have a min loan amount between 50-75k. Small local banks and credit unions are a good suggestion as they will consider smaller loans to help the local community they are in and sometimes have flexibility with portfolio loans.. Also try Cash Call mortgage they have alternative loans for landlords

This is the "dark side" of BRRRR that no one seems to talk about. If you are a W2 wage earner (or self employed, for that matter) your DTI can quickly limit your ability to cash out. Conventional lenders will only credit you 75% of your rents, and that's after a minimum of two year's experience as a landlord. As your portfolio grows, your DTI comes down, and before long, you won't be able to get a conventional loan.

There's some great advice from @Adam Anderson above- if there's a chance, it's with a local bank who will let you make a case for yourself. Good luck getting Chase to hear you out.

This is one of the many reasons that it's best for W2 earners to start slowly as investors, not to say that you aren't doing that, but in general, the learning curve is great. If you start slowly, it gives you time to learn and network, and in the meantime, you increase rents and your mortgage stays the same, which opens that gap in your DTI.

Good luck!

Thank you everyone for your help! We are talking with a mortgage broker from @Kevin Romines above. They look at just the income from the property which is exactly what we were looking for.

https://angeloakms.com/investor-cash-flow-program/ This is the website I found if someone is interested. @Paul Holtham They connected me with someone in Iowa, maybe they would know of someone in NY.

I have checked local banks and they seem to be the worst option. Maybe it's our location. The credit union requires 75k loan minimums which most of the houses in this area wouldn't even qualify for. Our current loans are with State Farm and Wells Fargo. Wells Fargo would probably do it, but we didn't like the terms.

@Jessica Roland let me know how it works out? 

Angel Oak is just one of our many investors that have this program. I'm closing on one as we speak, but I'm not using Angel Oak. I'm using another investors program due the fact that they each are slightly different on things like the reserves required. If your pulling cash out, will the investor allow the cash out to count for the reserves? Slight credit score differences and also slight seasoning differences. If Angel Oak doesn't work out for you, I can recommend several others with the same program.

Cheers to your new opportunities.  

Originally posted by @Jessica Roland :

Thank you everyone for your help! We are talking with a mortgage broker from @Kevin Romines above. They look at just the income from the property which is exactly what we were looking for.

https://angeloakms.com/investor-cash-flow-program/ This is the website I found if someone is interested. @Paul Holtham They connected me with someone in Iowa, maybe they would know of someone in NY.

I have checked local banks and they seem to be the worst option. Maybe it's our location. The credit union requires 75k loan minimums which most of the houses in this area wouldn't even qualify for. Our current loans are with State Farm and Wells Fargo. Wells Fargo would probably do it, but we didn't like the terms.

I'm interested to see how this scenario will play out with the variety of lenders Kevin provides.  From his posts I see, he definitely  appears to be a knowledgeable guy so I'm sure he's got his finger on the pulse of the real lenders out there.

Your loan sizes are small and the properties are rural.  I'm betting a local bank or Wells Fargo will be the only place that would entertain it.

Best of luck

Stephanie

@Kevin Romines

I'm sure something will work out with his contacts.  Three of our houses currently have Wells Fargo loans. They would probably do the current house but take a long time, have expensive fees, and the local mortgage officer doesn't know anything about investment properties.

@Stephanie P. , Yes it is true, most lenders have minimum loan amounts, but they can be as low as $75,000.00 which may not work for all her properties, but can work for some. Not all lenders have a restriction on rural properties as they must comp. out anyway?

There are also bank statement programs. You can prove your income using bank statements versus the traditional tax returns (personal & business) , W2's and 1099's. So if that helps resolve the income issue, you then are still looking at minimum loan amounts of $75,000.00

Also, its best to look at the tax returns and officially determine there is a debt ratio problem before going to these programs. Many lenders have different ways they calculate income, especially business income. So best to run it through the calcs and see the details for your self, as a loan officer anyway? 

Also, she may have some debts that can be paid off in a cash out refinance, or restructuring the overall debt. By doing this, getting the debt ratio's in line with a loans guidelines? Its hard to say what the total picture is until you have enough info in front of you to walk through the various loan options?

Originally posted by @Kevin Romines :

@Stephanie Potter, Yes it is true, most lenders have minimum loan amounts, but they can be as low as $75,000.00 which may not work for all her properties, but can work for some. Not all lenders have a restriction on rural properties as they must comp. out anyway?

There are also bank statement programs. You can prove your income using bank statements versus the traditional tax returns (personal & business) , W2's and 1099's. So if that helps resolve the income issue, you then are still looking at minimum loan amounts of $75,000.00

Also, its best to look at the tax returns and officially determine there is a debt ratio problem before going to these programs. Many lenders have different ways they calculate income, especially business income. So best to run it through the calcs and see the details for your self, as a loan officer anyway? 

Also, she may have some debts that can be paid off in a cash out refinance, or restructuring the overall debt. By doing this, getting the debt ratio's in line with a loans guidelines? Its hard to say what the total picture is until you have enough info in front of you to walk through the various loan options?

 You've had conversations with the borrower and I have not, so you're in a much better position to guide her.  You're right that many lenders calculate debt ratio different and it's best to see the total picture before knowing where to send the loan.  We agree.

Make it a great day

Stephanie

@Jessica Roland have any of the lenders you’ve spoke with given you your current debt to income ratio?  Reason I ask is that you mentioned one property that is not currently rented. If your ratios are close it is possible that a new lease on that property might give you the income needed to qualify. 

I asked one of the lenders if getting that other house rented would make a difference and they said no. Whenever I've calculated the ratio, it looks fine, but the banks get a different one. :) I think what we need is an investment banker who looks at the property itself. That's what we are trying to find now. The local bankers don't know anything about investments and we've had to basically tell them what to do during previous purchases. And we're new at this and would love to find a bank that could tell us what to do instead of the other way around. :)

A bank I s the last place to for most of the dayyor customwrs.  You have a probably heard many of the negatives about them. Your sellers can finance it themselves and get closer to the list price, they will make more money with the financing, be more flexible, possibly and take a second note on the down payment which can be shorter, spread out to their income, and possibly sell it quicker.  It will work better when you show the seller the results on paper.  There is also many Private Money Lenders the buyer can get.  They may have to pay a little higher rate but it does not mean much money.  A Hard Money is usually not very good either and the loan is usually short term.  Good luck!