Refinancing to cash out my capital partners

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Refinancing to cash out my capital partners

Fred Tonsing
Charlotte, NC · Member since 2018 · 2 posts · 1 vote

Hello y’all! I’m new to bigger pockets and have been listening to the podcast 5 nights a week, 8hrs for almost a month now. I’ve been a real estate agent for a little over 2 years now in Charlotte NC where I was a police officer for 8 years before starting my real estate career. I have been searching for possible investment properties and have run hypothetical scenarios to see how I could make a deal. I’ll sum up and say things haven’t gone as I planned and my personal credit has taken some hits and is embarrassingly low. I’ve developed relationships with great clients and have family that has money to invest! I also want to begin building passive income for myself. My question is, if I have other people finance deals, either the purchase and reno or just Reno if I can get owner financing, how can I refinance the property to get them their investment plus return if I can’t use my personal credit to do the refi? On a flip I can just sell it and use that money to pay them but what if I want to hold it for rental income for myself? I hope this all makes sense, I’m trying not to be too lengthy. Thanks!!

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  • Benjamin Piecenski
    Lender · Columbus, OH · Member since 2019 · 114 posts · 61 votes
    7y

    Hey, Fred!

    Normally, using someone else (and not disclosing upfront) to obtain a mortgage while you are the one that intends to own the property and make payments, is a type of mortgage fraud called using a Strawbuyer.  What current issues are you running into on your credit?  Late payments, high credit utilization, derogatory public records, collections?  

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  • Fred Tonsing
    OP
    Charlotte, NC · Member since 2018 · 2 posts · 1 vote
    7y
    Originally posted by @Benjamin Piecenski:

    Hey, Fred!

    Normally, using someone else (and not disclosing upfront) to obtain a mortgage while you are the one that intends to own the property and make payments, is a type of mortgage fraud called using a Strawbuyer.  What current issues are you running into on your credit?  Late payments, high credit utilization, derogatory public records, collections?  

    Hey Ben thanks for the response. I was thinking more of refinancing it through an LLC or S-corp of my company that is buying the homes. More of a joint venture I guess to obtain the home with other peoples money and then fixing up and managing the properties myself once the ARV is higher and I can cash out the people who put the money in. I didn't even know if that was possible, I'm thinking the proper way to go is to flip a few, get my personal score up and then refinancing myself and paying the other parties their investment plus return then own it alone and manage it for the cash flow. Was just wondering if it was possible to refinance it as a "company" and use the appraisal value of the property along with the projected cash flow as the collateral needed for the refinance.

    Typing it out now and thinking more about it, it would make sense that a conventional lender would still have to either see a steady profit/income of the business to be able to do something like that or just run the credentials of the person who owns the small business to make sure they could lend to that person/business anyway so it would have to show a history of profits to be able to sustain the property during times of vacancy with a track record of on-time payments. I deal with more traditional lenders on the residential side so I don't even yet know of anyone in the lending world I could even ask about this locally. I'll ask some of the commercial brokers in my office for good lenders to talk to and treat a few to lunches or find another networking event where I could meet some savy lenders.

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  • Shaun Weekes
    Loan Officer / Processor / Life & Health Agent · Rancho Cucamonga, CA · Member since 2014 · 1k+ posts · 757 votes
    7y
    Originally posted by @Fred Tonsing:

    Hello y’all! I’m new to bigger pockets and have been listening to the podcast 5 nights a week, 8hrs for almost a month now. I’ve been a real estate agent for a little over 2 years now in Charlotte NC where I was a police officer for 8 years before starting my real estate career. I have been searching for possible investment properties and have run hypothetical scenarios to see how I could make a deal. I’ll sum up and say things haven’t gone as I planned and my personal credit has taken some hits and is embarrassingly low. I’ve developed relationships with great clients and have family that has money to invest! I also want to begin building passive income for myself. My question is, if I have other people finance deals, either the purchase and reno or just Reno if I can get owner financing, how can I refinance the property to get them their investment plus return if I can’t use my personal credit to do the refi? On a flip I can just sell it and use that money to pay them but what if I want to hold it for rental income for myself? I hope this all makes sense, I’m trying not to be too lengthy. Thanks!!

     In the last 2 years the loan market has really opened up. You now have access to loans with fico scores as low as 540 with full documentation and around 600 with no documentation.

    You also have the Hard Money loan route if you absolutely must move forward with the deal.

    If your family has money, why not use that monies to fix your credit and in turn you can pay them back when you run into a good deal or share profits on a good deal.

    Cash is king but like in the game of chess, credit represents a Queen which is the most powerful asset you can have in this game called RE.

    Just keep pushing forward relentlessly and you will be fine.

    I hope this helps and have a good one.

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