Lender · Los Angeles, CA · Member since 2017 · 916 posts · 647 votes
I have learned so much on these forums when I started in Real Estate and always appreciated when folks here would help me learn. So in this uncertain market, Im sure there are folks here with questions about financing for a property. I have done this a few time in the past but I am opening the door to anyone who wants to know more about the loan process, the loan market and anything financing related.
I have learned so much on these forums when I started in Real Estate and always appreciated when folks here would help me learn. So in this uncertain market, Im sure there are folks here with questions about financing for a property. I have done this a few time in the past but I am opening the door to anyone who wants to know more about the loan process, the loan market and anything financing related.
What are your questions?
Hi @Jonathan Taylor: I just bought a 5 bed 3 bath with pool in N Phoenix, nice house, nice neighborhood with a value of $775,000. I'm buying it for $640,000 and it needs about $15,000 in love. So, in your creative financing world, if I took over the existing mortgage of $315,000 as Subject To, would you lend $350,000 in 2nd position and I'll turn it into a STR with a monthly cash flow of $5,600 assuming a 75% occupancy rate.
Lender · Los Angeles, CA · Member since 2017 · 916 posts · 647 votes
3y
@Account Closed a few questions first, is the property currently operated as a STR earning 5600/month? If not where did you get those numbers? Second, do you know if the current mortgage is assumable? Lastly, why is the current owner selling at such a discount?
On the second position question, almost all of my lenders/table funds who may entertain this, they would want you to have some skin in the game, at least 10% of value. Is that possible in your position?
@Account Closed a few questions first, is the property currently operated as a STR earning 5600/month? If not where did you get those numbers? Second, do you know if the current mortgage is assumable? Lastly, why is the current owner selling at such a discount?
On the second position question, almost all of my lenders/table funds who may entertain this, they would want you to have some skin in the game, at least 10% of value. Is that possible in your position?
It's a probate & a minor fixer and they want to move back east. (I'll DM you the address) I always take over the mortgage using Subject To. I went to VRBO and found the STR comps nearby, saw what they were getting for bookings, industry average is 80% occupancy so I settled on 75% occupancy to be conservative and to see if the numbers work.
@Joe S. Seconds are a case by case basis with my company but for deals we can do, vesting in an LLC isn't an issue.
@Jonathan Taylor could you give an example of a case where you did a 2nd on an investment property vested in an LLC?
I've got a couple properties with conventional loans at sub 4% and ~50% equity. I don't want to do a cash out refi and lose those great rates but I'd like to access the equity.
Help! How do I access the equity in my 3 paid off single family rental homes?
Cash out "refi". If you don't have an interest rate to protect, then you can shop around :D Basically you just get a mortgage. Look for DSCR loans and apply using your LLC(s).
Lender · Los Angeles, CA · Member since 2017 · 916 posts · 647 votes
3y
@Eliott Elias sounds like you had an interesting experience. Would you mind sharing what happened? My lenders allow cash out refi up to 75% LTV after 3 months seasoning. The issues where we have to decrease the LTV is when the property forms debt cover, lower than expected FICO, rates increase while the loan was floating or unforeseen issues that came up in title search.
Would be happy to offer clarity on your situation.
Attorney at Law · New York City, NY · Member since 2015 · 40 posts · 26 votes
3y
@Jonathan Taylor I have a 4-unit mixed-use property in Westchester County, NY (3 resi, 1 bodega). The current loan on it is the hard money interest-only loan under which I bought it a long time ago, at a pretty exorbitant rate. Given the small loan amount (about $455K to pay off existing loan, maybe cashing some out if possible due to quite an increase in value), and the non-traditional building setup (not 4 resi, not big enough for true commercial), I've had trouble finding financing at a reasonable rate, despite the fact that I've been able to cover the mortgage even with the very high monthly payments (minus a few late payments because of Covid). Do you have any advice on finding long-term funding for that type of property? Or how I can get out of this loan very quickly? I know this property will cash-flow very well once I'm out of this loan, which is strangling the cash flow of the property.
Cedar Hills, UT · Member since 2019 · 64 posts · 43 votes
3y
@Jonathan Taylor do you have any experience with "Subject to" paperwork/legal considerations? I'm looking to work with a few sellers in my market and would really like to become familiar with this process. I'm also looking for seller-financing deals so would love to chat about that as well.
Rental Property Investor · Ellsworth, ME · Member since 2021 · 1k+ posts · 2k+ votes
3y
What is the biggest "easier said than done" practice or tool when it comes to lending? What is it that gets casually thrown around on BP but is actually hard to pull off? Not necessarily looking for the 1 magic thing...perhaps a few regular items that are tougher to pull off than one would think based on commentary on the internet.
Lender · Los Angeles, CA · Member since 2017 · 916 posts · 647 votes
3y
@Mary El Second positions are usually closed ended, same a as first mortgage, and rate is higher. We funded a close ended second position for a client in CA who had 35% LTV on his first mortgage and wanted to tap into the remaining equity. At the time, we put him in an 8% 15 yr am second position with a CLTV of 58%. Recorded in the name of his LLC, which was the same LLC ownership of the property. Rates now are in the 10s +/- depending on the scenario.
Lender · Los Angeles, CA · Member since 2017 · 916 posts · 647 votes
3y
@Carissa Avery if you don't have any mortgages on your properties, a cash out refi is the first step. If you have first positions on all three, then a second position would be the next step. Min loan amounts, FICO, CLTV, are the main factors to consider.
Lender · Los Angeles, CA · Member since 2017 · 916 posts · 647 votes
3y
@Scott Schreiber Mixed use is a harder bucket to fill, as you have experienced but DSCR based lending is the next step as I am not aware of Non OOC conventional lending. You are correct that the loan amount would be problematic for commercial lending, loan limits vary by lender but my lenders are usually 500k. What is your rate and when is the note due?
Lender · Los Angeles, CA · Member since 2017 · 916 posts · 647 votes
3y
@Duane Richards Sub-to is a very broad category and varies by state. So in terms of experience, yes, I have dealt with these types of transactions but can you clarify your scenario? I have a lender who can do up to CLTV of 90% on purchases to include seller financing but all my lenders require the buyer to put money into the deal.
Lender · Los Angeles, CA · Member since 2017 · 916 posts · 647 votes
3y
@Travis Timmons the easier said than done is 100% financing. In my career I have seen three deals done with '100% financing.' All three were highly specific and unicorn/right place right time scenarios and by experienced/dedicated investors. IMHO This is not a strategy that should be relied upon nor advertised.
The other is Wholesaling for beginners. I know there are very good wholesalers out there but for someone to start out and think that the cash can flow easily is unrealistic. I have closed deals with wholesalers and do have respect for their roles in this world but its a really really hard way to go about making a living/quick cash as a newbie.
@Scott Schreiber Mixed use is a harder bucket to fill, as you have experienced but DSCR based lending is the next step as I am not aware of Non OOC conventional lending. You are correct that the loan amount would be problematic for commercial lending, loan limits vary by lender but my lenders are usually 500k. What is your rate and when is the note due?
Rate is 11%, note was due quite a while ago, but most recently I got an extension to October 1, 2022. I'm not sure how lenders will react, considering I've been paying every month, but it sounds like they've run out of patience.
The value of the property is probably close to $800K, and the outstanding balance is $455K, so depending on the possibilities, we'd be interested in getting a $500K loan, especially as that would give us an opportunity to clean a few things up and raise rents a bit, have a little more in reserves.
Minneapolis, MN · Member since 2019 · 11 posts · 6 votes
3y
@Jonathan Taylor
Newbie here, currently looking at multi family properties. The “loan shopping” process has me a little confused- I don’t think I know enough about them to really “shop.” What should I be shopping for, exactly? Length of loan? Interest rates? Points? Down payment requirements? All of the above, and/or more? And how exactly do I find out this information from lenders without filling out 10 applications within a 30 day period… or maybe that’s just what I should do? That doesn’t sound right though 😆
@Eliott Elias sounds like you had an interesting experience. Would you mind sharing what happened? My lenders allow cash out refi up to 75% LTV after 3 months seasoning. The issues where we have to decrease the LTV is when the property forms debt cover, lower than expected FICO, rates increase while the loan was floating or unforeseen issues that came up in title search.
Would be happy to offer clarity on your situation.
Sure, I take out DSCR loans because 1. I don't qualify myself 2. I can get as many as I want under my LLC. I was promised by this one particular mortgage broker that I was getting 75% LTV cash out after 3 months of seasoning, great. We went through every hoop and even made me pay for the appraisal, which came back great. I had 4 deals lined up to close the same week I was getting funded to put down payment on hard money. The day of closing the lender came back to me and said she can only give me 40% of what i PUT IN!! Instead of receiving 150k they offered 45k THE DAY OF CLOSING because the seasoning period was too short
@Eliott Elias sounds like you had an interesting experience. Would you mind sharing what happened? My lenders allow cash out refi up to 75% LTV after 3 months seasoning. The issues where we have to decrease the LTV is when the property forms debt cover, lower than expected FICO, rates increase while the loan was floating or unforeseen issues that came up in title search.
Would be happy to offer clarity on your situation.
Sure, I take out DSCR loans because 1. I don't qualify myself 2. I can get as many as I want under my LLC. I was promised by this one particular mortgage broker that I was getting 75% LTV cash out after 3 months of seasoning, great. We went through every hoop and even made me pay for the appraisal, which came back great. I had 4 deals lined up to close the same week I was getting funded to put down payment on hard money. The day of closing the lender came back to me and said she can only give me 40% of what i PUT IN!! Instead of receiving 150k they offered 45k THE DAY OF CLOSING because the seasoning period was too short