Financing Cheap Houses

19 Replies

I've been purchasing a number (4 so far) of cheap houses (<$50k) with cash, and now I'd like to get my equity back out of them to buy more. I'd also like to figure out a plan for being able to do this smoothly in the future. By a cheap house, stabilize it with repairs and a tenant, and get all or most of the equity back.

Regular residential mortgages don't seem to make sense, because I can only seem to get 4 of them and anyway the costs are so high relative to the amount of the loan.

I can't be the only one. Where should I be looking for money?

Thanks,

Michael

@Michael D.

You can get more than 4 mortgages -- you just have to find a bank that lends with their own funds (called "portfolio" lenders because they lend from their own portfolio). I have 7 mortgages myself and other people on the forum have even more than me.

I have commercial lines of credit on my < $50k houses. I actually prefer LOCs to mortgages as I can pay extra on the loan to reduce interest costs and still have access to the cash when I need it instead of it disappearing in a mortgage. Talk to some local bank's commercial department.

And I should add that I know someone who just got a loan on a $29,000 property, so those lenders ARE out there.

Call around to some local banks and ask if they do a multiple collateral mortgage (aka stacked collateral). I've used banks that will do one loan with several different properties. It's set up with the loan in your business/LLC name and you personally guarantee the loan. You will have to deal with a commercial/business banker most likely, and that's who I would ask for when I called. Seems like it will work for you, 1 mortgage on 4 properties.

Where in San Jose are you finding all these less than $50k in San Jose?

@David Krulac - I'm actually finding them over in your neck of the woods (sort of). I'm buying properties in the Pittsburgh area. Great cash-flow, but too cheap for regular mortgages.

@Dawn Anastasi , thanks for the advice.

@Bob Hines , I like the commercial LOC idea. I'll look into that.

I also just read another post about Blackrock's B2R program. I'm going to check into that as well.

@Michael D. , after 6 months, B2R can go up to 100% loan to cost (hard costs not soft), as long as you are not over 75%, and do not exceed the cash flow requirements.

@David Krulac - which banks in Pittsburgh have you used? I'm looking to leverage my equity with either LOC or refinancing.

@Steve Salvatore and @Michael D. i just refinanced out of a property i bought in the Pittsburgh area for $32k in December (based on 75% of cash purchase price + 75% of repairs, up to appraisal) with a local bank/portfolio lender for a commercial loan (in my LP) like @Dawn Anastasi and others mention above. If you want, PM me and i will email you the guys info directly. you can't compete with me though! :) I kid, I kid.

Originally posted by @Tim Herriage :
@Michael D. , after 6 months, B2R can go up to 100% loan to cost (hard costs not soft), as long as you are not over 75%, and do not exceed the cash flow requirements.

Tim on the B2R website it states

Minimum of 5 Properties and Loan Size of $500,000

Michael has stated he has 4 properties each less than $50K so would you still be able to refi him into? Just want to make sure I understand B2R loan program better. Thanks!

@Gautam Venkatesan , good question. He was looking for a reliable solution to rinse and repeat. We actually had a good call. He can combine other properties he owns, even multifamily.

Right now, yes, we are at a minimum loan amount of $500,000 and 5 units. We are working hard to lower that. Our goal is to be a constant and dependable growth tool for investors that want to buy to rent.

For those that have cash, and/or recyclable lines, we can help. Many of our borrowers will be back once a year.

Thanks Tim. What is a recyclable line do you mean a LOC?

Has anyone used B2R, FirstKey, or Colonial?  If so, please provide your feedback to me directly?  I don't like their terms... I've been looking for direct portfolio lenders, but haven't been able to locate any in NC and SC.

Thanks in advance.

Originally posted by @Jon Strishak:

Has anyone used B2R, FirstKey, or Colonial?  If so, please provide your feedback to me directly?  I don't like their terms... I've been looking for direct portfolio lenders, but haven't been able to locate any in NC and SC.

Thanks in advance.

 What are the terms like and what do you dislike about them?

I closed a loan with B2R several months ago and was pleased with the results.  I financed 7 units at just under $600k, which is a fairly small loan for them.  That being said, the staff was great to work with and everyone gave their best effort to close on time (took about 50 days).  I must admit that there is A LOT of admin that goes with these loans, so be prepared to spend time working on spreadsheets, updating insurance policies, etc.  Other than the 4.5 year prepay, I think the loan terms were pretty good and I will plan to use them again in the near future unless a better product comes out.  

Okay, maybe a newbie question, but would I be correct in assuming you would need to have a minimum 6 months PITI held on reserve for each property in this "rinse and repeat" plan? Also, I would think it would only be a portfolio or commercial type lender that would even think about such a setup, correct?

Thanks.

Tony, my loan with B2R has 12MO reserve accounts for taxes and insurance which can be financed into the loan package if the equity is there.  They also require a small reserve account for repairs that must be contributed to monthly, which should be considered when projecting net cash flow.  These portfolio loans are non-traditional which means you will be dealing with a commercial lender or possibly a regional bank.  Hopefully B2R and others will continue to create new loan products to fill the gap for small investors!

Speaking of new programs via B2R:

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I received an email today stating new  "Loans for landlords "

Good luck with your refi