So heres the scenario,
Ive got 400k crowdfunded and am looking at seller financing deals because my job history is sporadic and I get paid cash a lot of the time so getting conventional financing wont be happening.
My question is are there private lenders who will work with me at say an 75% to 80% LTV, regardless of job history or credit (650 and going up) knowing that i have private funds i have to pay back?
They would consider the debt-to-income ratio, since that money isn't technically "yours" and you have a loan/repayment schedule for it. I would expect that it would hurt your position instead of help it.
@Cody Reilly the answer here will be slightly different depending on if you are looking to buy 1-4 unit properties or 5+ unit properties. But I'll assume that it's 1-4 for the time being.
Essentially, yes, a Private Lender should be significantly easier to qualify for than a lender. You should even be able to receive a portfolio loan from a lender based on what you wrote above. Let me know if you have any other questions. Thanks!
The loan I'd be looking for would be commercial, 5+ and closer to 30 units. Between 800k and 1.5m per deal.
Do the same principals apply? I figured the borrowing of the down would hurt me.
I would also be doing seller financing to get myself in the door and using the OPM to fund the down payment.
The second part is once the time comes and the building is paid down 25% or more, would I be able to get a refi based on the value of the property alone? I would be the only owner but i figure with it paid down it should be easier to get approved.
Any and all input is appreciated.
@Cody Reilly Hi. I am interested to know how did you raise funds through crowdfunding? Are these really people who you do not know in person and invested through an online platform, OR are they all your friends/family/acquaintance. How do you plan on sharing profits/benefits with those who invested? Am very much interested to do the same. Also why would you only raise partial funds and why not raise all the funds required for your investment? Appreciate your PoV.
I have shared this with Cody off of BP, but for the fourm's sake. Lenders and private money are going to look heavily at the experience of the borrower. They are all going to look at the deal via DSCR among other things, the borrower via FPS they are also going to want the borrower to have some skin in the game as well. Last thing that comes to mind is that a lender is going to want to see some sort (it varies) of liquidity within the holding entity and/or among the key principals to cover some expenses. Just some food for thought when planning.
Curious, who do you plan on holding the second mtg....the crowd funding or the seller?
@Wayne Brooks to make things even more complicated, i am doing this combo with seller financing. LOL its insanity because it works due to the fact I dont need bank financing initially and can pay down the balance and get to a favorable LTV for when the time the refi happens.
So for the time being the seller holds paper, then when I refi back I will just be on paper with the lender.
Ive already done this a couple times, just at a smaller scale so I've always been able to not use bank financing.
Happy new year!
@Cody Reilly If you have $400,000 for a down payment and the total deal is $800,000 then you should be able to find a seller to finance the other $400,000. They might also be quick to foreclose.
Are the people that gave you the $400,000 for the down payment going to have an interest in the property or did you just ask your friends for $400,000?
That is what i am doing exactly. More like 300k and 1.2m but same idea. As for foreclosures ive got it written up through legalese by my lawyer that that doesnt happen.
The investors will be getting a 40% equity in the property at 25% down payment. We will also be doing 50/50 splits on all costs.
Depending on the CAP its a 30% plus Cash on cash return a year between equity and cash flow so for more hands off investors its golden. I take the 60% ownership because i dont cap them at what they can receive cashflow. I want to make myself and my investors wealthier, and get referrals for all my future deals.
Basically they get a great short term deal, 5-7 years I refinance the deal so I'm the sole owner besides the lender, my investor makes a ton in cashflow and lump sum after the refi, and i re-use them again and again for every property in the future. They get cashflow and equity back as cash, or i just keep 1031ing their investments into bigger and bigger deals.