Creative Financing Ideas for new Buy, Renovate, Hold
I have 2 condos in the san diego area that each have about 150-200k equity. One is rented long term and cash flow positive. The other will also be cash flow positive based off what current trends are showing in the area. I am locked in with very low rates on both and do not want to cash out refi as that will wipe out my cash flow.
I have my eyes set on another property that I would like to make a move on. I am hoping you all can lend some suggestions, contacts, experiences on some other types of creative funding that have worked for you or worth looking into. HELOCs, portfolio loans, etc??
Any and all help is greatly appreciated!
If one is currently your primary you can get a .99 plus prime heloc from Quorum Credit Union on up to a 90%LTV. They can do HELOC's on investment properties but they are not as lucrative.
Hi @Ben Capone, there are a few options here.
1. Cross-collateralization loan. This is where you take the equity that you have in the current property and use that as collateral rather than a down payment.
2. Second lien. Get a second mortgage. These have higher rates since they are riskier but could be worth it.
3. HELOC. The issue is that rates are rising and they are adjustable rates so you run the risk of paying really high interest rates if you do not repay it fairly quickly.
Hope this helps! Please let me know if I can be of any assistance.
@Nathan Grabau Yes, this would be on my primary residence. I will have to look into the .99 plus prime Heloc. Have you used this before?
Thanks for the info
@andrew
@Andrew Garcia Where would I look for a Cross-Collateralization loan? That sounds interesting, have you used one previously? If so, would love to hear some feedback on how that went and what the details are.
Quote from @Ben Capone:I have used this before, just did an increase on mine. Essentially it’s a adjustable rate .99 plus prime, 10 year interest only, then it rolls to a 20 year regular payback schedule.
@Nathan Grabau Yes, this would be on my primary residence. I will have to look into the .99 plus prime Heloc. Have you used this before?
Thanks for the info
It has a maximum increase of 2% a year too, so if the feds have to go hard fast, it won’t go from 4.5 to like 10% overnight.
Hi @Ben Capone, I'm an advocate for renovation loans and used one myself - it wraps the repairs into the loan and financed. They are great products. It gets investors into primary residences that they can fix up on the front end and gain the immediate equity, while also taking advantage of the best possible financing - primary residence rates/term.
"Fix Up" can be as simple as paint and carpet, or a full kitchen renovation.
Without knowing your full financial profile, I assume you will be using conventional. But to reveal all your options, it's best to have a more detailed conversation.
Lastly it appears you are a sophisticated buyer. I suspect you are aware of the rising rate environment we are in at the moment. Take a look at an adjustable rate (I know, I know). These are often fixed from 6 months - 10 years and are offering more competitive rates at this point in time. You MUST refinance when rates drop in the future, however.
-
Lender
- (707) 595-7574
Quote from @Ben Capone:
@andrew
@Andrew Garcia Where would I look for a Cross-Collateralization loan? That sounds interesting, have you used one previously? If so, would love to hear some feedback on how that went and what the details are.
Typically, private lenders are the best for those loans. I do not personally know any lenders that do them.
Quote from @Erik Browning:
Hi @Ben Capone, I'm an advocate for renovation loans and used one myself - it wraps the repairs into the loan and financed. They are great products. It gets investors into primary residences that they can fix up on the front end and gain the immediate equity, while also taking advantage of the best possible financing - primary residence rates/term.
"Fix Up" can be as simple as paint and carpet, or a full kitchen renovation.
Without knowing your full financial profile, I assume you will be using conventional. But to reveal all your options, it's best to have a more detailed conversation.
Lastly it appears you are a sophisticated buyer. I suspect you are aware of the rising rate environment we are in at the moment. Take a look at an adjustable rate (I know, I know). These are often fixed from 6 months - 10 years and are offering more competitive rates at this point in time. You MUST refinance when rates drop in the future, however.
Hi @Erik Browning thanks for the response. I have looked into renovation loans previously as my current residence was a complete gut and remodel. Luckily, I work in the construction industry so have some good connections for cheap materials and labor so never needed to follow thru with the loan. Maybe I misunderstood, but based off your comment it sounds like I can pull a renovation loan to act as part of a down payment to get me into this next move?
Correct. I have previously done conventional loans on my two properties, which I am not opposed to doing again at all. My biggest hurdle right now is finding the best and smartest way to access the equity I have built and use that to get into this next property.
I am not completely against ARMs by any means, but if I can figure a good way to tap into the equity and use as buying power I don't really think I will need to stray too far away from conventional lending.
Quote from @Nathan Grabau:
Quote from @Ben Capone:I have used this before, just did an increase on mine. Essentially it’s a adjustable rate .99 plus prime, 10 year interest only, then it rolls to a 20 year regular payback schedule.
@Nathan Grabau Yes, this would be on my primary residence. I will have to look into the .99 plus prime Heloc. Have you used this before?
Thanks for the info
It has a maximum increase of 2% a year too, so if the feds have to go hard fast, it won’t go from 4.5 to like 10% overnight.
@Nathan Grabau really appreciate the info. I will look into these and see if I can make this work.
Quote from @Ben Capone:
Quote from @Erik Browning:
Hi @Ben Capone, I'm an advocate for renovation loans and used one myself - it wraps the repairs into the loan and financed. They are great products. It gets investors into primary residences that they can fix up on the front end and gain the immediate equity, while also taking advantage of the best possible financing - primary residence rates/term.
"Fix Up" can be as simple as paint and carpet, or a full kitchen renovation.
Without knowing your full financial profile, I assume you will be using conventional. But to reveal all your options, it's best to have a more detailed conversation.
Lastly it appears you are a sophisticated buyer. I suspect you are aware of the rising rate environment we are in at the moment. Take a look at an adjustable rate (I know, I know). These are often fixed from 6 months - 10 years and are offering more competitive rates at this point in time. You MUST refinance when rates drop in the future, however.
Hi @Erik Browning thanks for the response. I have looked into renovation loans previously as my current residence was a complete gut and remodel. Luckily, I work in the construction industry so have some good connections for cheap materials and labor so never needed to follow thru with the loan. Maybe I misunderstood, but based off your comment it sounds like I can pull a renovation loan to act as part of a down payment to get me into this next move?
Correct. I have previously done conventional loans on my two properties, which I am not opposed to doing again at all. My biggest hurdle right now is finding the best and smartest way to access the equity I have built and use that to get into this next property.
I am not completely against ARMs by any means, but if I can figure a good way to tap into the equity and use as buying power I don't really think I will need to stray too far away from conventional lending.
You're right, I misinterpreted the question. I was assuming you were wanting to buy a new home with the least amount of $$ down - I was suggesting a renovation loan @ 5% and gain equity at the completion of the project. But yes, a HELOC is your best bet. Finding one for your primary is simple, however an investment property HELOC is challenging to find lenders that will do it.
-
Lender
- (707) 595-7574
Quote from @Erik Browning:
Quote from @Ben Capone:
Quote from @Erik Browning:
Hi @Ben Capone, I'm an advocate for renovation loans and used one myself - it wraps the repairs into the loan and financed. They are great products. It gets investors into primary residences that they can fix up on the front end and gain the immediate equity, while also taking advantage of the best possible financing - primary residence rates/term.
"Fix Up" can be as simple as paint and carpet, or a full kitchen renovation.
Without knowing your full financial profile, I assume you will be using conventional. But to reveal all your options, it's best to have a more detailed conversation.
Lastly it appears you are a sophisticated buyer. I suspect you are aware of the rising rate environment we are in at the moment. Take a look at an adjustable rate (I know, I know). These are often fixed from 6 months - 10 years and are offering more competitive rates at this point in time. You MUST refinance when rates drop in the future, however.
Hi @Erik Browning thanks for the response. I have looked into renovation loans previously as my current residence was a complete gut and remodel. Luckily, I work in the construction industry so have some good connections for cheap materials and labor so never needed to follow thru with the loan. Maybe I misunderstood, but based off your comment it sounds like I can pull a renovation loan to act as part of a down payment to get me into this next move?
Correct. I have previously done conventional loans on my two properties, which I am not opposed to doing again at all. My biggest hurdle right now is finding the best and smartest way to access the equity I have built and use that to get into this next property.
I am not completely against ARMs by any means, but if I can figure a good way to tap into the equity and use as buying power I don't really think I will need to stray too far away from conventional lending.
You're right, I misinterpreted the question. I was assuming you were wanting to buy a new home with the least amount of $$ down - I was suggesting a renovation loan @ 5% and gain equity at the completion of the project. But yes, a HELOC is your best bet. Finding one for your primary is simple, however an investment property HELOC is challenging to find lenders that will do it.
Thanks for clarifying @Erik Browning. I do ideally want to purchase the new place with the least amount of $$ down. So now you have me thinking that if I can get in with minimal cash that I have liquid and then pull a renovation loan, I wont need to have the cash for renovating necessarily...
Something for me to look into. Thanks again.