Rental Property Investor · Charlotte, NC · Member since 2018 · 35 posts · 6 votes
I'm at a loss on my best options on financing our next deal. We currently own two single family homes on a VA loan. One is our primary residence and the other is a rental. I inquired about refinancing the rental and could pull about 50k of cash out but would cost 13k of fees/closing cost plus increase our interest rate by 1.5%. We don't have enough cash to put down on a conventional loan. We've asked friends and family about partnering, however, no takers. I've always heard syndication is typically not for beginners and hard money should be a last resort because of how expensive it is. Any ideas on other creative financing ideas? I'm open to anything.
Finding a JV partner sounds like a good avenue to follow. Reflect on how you're presenting the idea to people you've talked to...there's likely something you're missing or could frame better, or maybe you're just approaching the wrong people.
I'm at a loss on my best options on financing our next deal. We currently own two single family homes on a VA loan. One is our primary residence and the other is a rental. I inquired about refinancing the rental and could pull about 50k of cash out but would cost 13k of fees/closing cost plus increase our interest rate by 1.5%. We don't have enough cash to put down on a conventional loan. We've asked friends and family about partnering, however, no takers. I've always heard syndication is typically not for beginners and hard money should be a last resort because of how expensive it is. Any ideas on other creative financing ideas? I'm open to anything.
Refinance the current VA loan onto a conventional loan and get a HELOC on the other. Then use the full entitlement to buy the next property. Of course, you have to move in and live there, but that's the least expensive way to do it without much cash out of pocket.
Rental Property Investor · Charlotte, NC · Member since 2018 · 35 posts · 6 votes
7y
@Tom S. Our current lender does not offer HELOC in North Carolina (where the property is located). Sorry, I forgot to mention that. That was initially our first preference.
Rental Property Investor · Tampa, FL · Member since 2015 · 1k+ posts · 969 votes
7y
JV, creative financing (seller financing, lease option, etc.), or good ole' saving up your money until you can afford the 25% down payment.
You've done a few deals, so you should be able to attract passive investors for more SFRs. As @Seth Ferguson mentioned, your friends and family might be saying no because you aren't presenting the opportunity to them properly. Why are they saying no?
Rental Property Investor · Wormleysburg, PA · Member since 2018 · 20 posts · 16 votes
7y
You say you've asked friends and family members to partner, but did you actually have a deal to show them? I've found that its hard to talk to people about money if they don't think about real estate the same way you do. I was in your shoes starting out too. The way I got my first person to invest with me was by having a deal and showing them the numbers and how it worked. Once they saw that and it started making sense they were more willing to opening their wallet.
All the options @Seth Ferguson & @Theo Hicks provided are great opportunities to consider leveraging.
Also, have you tried talking with several different banks? I've found that other banks love the opportunity to win your business and would be willing to give you a better rate on the refinance to do so.
If you haven't already, try calling 2-3 additional banks for rates, then compare.
Lender · Fort Worth, TX · Member since 2016 · 8k+ posts · 6k+ votes
7y
@Andrea Chester as mentioned above I would certainly speak to another lender about a Line of Credit on that investment property. I would guide you though that you would need about 30% equity to even have a chance at one. Not sure if that's the case there. But if you do then post in the North Carolina forum to see if anyone has any suggestions for you with that type of a product.
Also, $13,000 in fees to refinance your primary home seems REALLY high to me. Again, not sure of the actual details so it might be worth speaking to another lender about that as well.
Don't forget that Hard Money should be ONE of a few different ways you buy investment properties. The main benefit to Hard Money is that it can close quickly. As in, REALLY QUICK. But if you find a rental property where you have some reasonable amount of time to close then a community or small, local bank will have a better option for you. Likewise, hard money has the ability to get you in a property with no out of pocket costs. In theory at least. So if you buy a property has the purchase price and renovation costs of 70% or lower then you may only come out of pocket a VERY small amount. So who cares about fees then?
My main point here is that you need more options/lenders. As an investor you should have about 4 different lenders at your disposal. Now, it might take you 200 calls interviewing different banks, etc. but that's why we should reach out to local people to see why they use. Also, since you live in a major metro area there should be some good real estate meetups around town.
Severna Park, MD · Member since 2013 · 7k+ posts · 7k+ votes
7y
If your next deal is a rental , thats difficult to do on hard money its expensive . i would make the next deal a flip , use Hard money , make a profit , use the profit for the next deal . Either a flip or buy and hold .
Rental Property Investor · Tampa, FL · Member since 2015 · 1k+ posts · 969 votes
7y
@Jorjio Hopkins Exactly. Don't pigeon hole yourself with one of anything (mortgage broker, commercial broker, property management company, etc.). Every deal is difference, therefore every deal will thrive with a different combination of team members. Build relationships with at least 3 mortgage brokers so that you have at least 3 quotes for every deal.
Rental Property Investor · Charlotte, NC · Member since 2018 · 35 posts · 6 votes
7y
@Andrew Postell thanks a lot, that's really helpful. Most of the $13k were VA funding fees because the home doesn't qualify to refi into a conventional.
Lender · Fort Worth, TX · Member since 2016 · 8k+ posts · 6k+ votes
7y
@Andrea Chester ohhhhh. That makes WAAAY more sense then. Then the fees are actually very normal. You are likely paying a 3.3% fee for using a VA loan again. I'm surprised that they offer a cash out VA loan option that has a lower rate. That's kind of unusual. I was assuming a conventional loan for the cash out loan and that's why I thought the fees were high. Now it seems more reasonable. But the other items in my post would still apply. Let me know if you have any other questions. Thanks!
Investor · Portsmouth, NH · Member since 2016 · 75 posts · 33 votes
7y
@Andrea Chester I think a Master Lease Option or Owner-Financing strategy would be your best bet.
In both cases, if you can improve the NOI of the property, you may be able to refinance without putting capital as a down payment. Being picky on your deals will be crucial with these options