I purchased a rental in New Britain, Connecticut about two months ago. I have since been busy doing renovations to the property and getting it rented out. These processes are nearing completion now. I am currently paying a hard money lender 10%, as he is holding my note on the property. I am looking to do a cash out refinance, so that I can simultaneously lower my interest rate on the note and pull cash out.
Does anyone know any really good lenders in the area that I should speak with?
@Scott Hollister should be able to provide insurmountable amounts of value on this one... ;)
@Ryan Deasy Do you own the property in your personal name or LLC?
@Michael Noto I own the property in my name still. One lender I spoke with said that they couldn't do anything with a property in an LLC.
@Ryan Deasy That is good advice you received. Refinancing in a LLC is very difficult unless you have a lot of experience and/or a lot of cash in reserves. It's possible, but takes a lot of contacting banks, etc...
@Ryan Deasy this has been the hardest part, the refinance. Here are 3 viable options:
- Conventional Financing.
- Commercial Financing.
- Private Financing.
@Michael Noto is well versed in what you're trying to accomplish. Owning it in your own name is a good thing for conventional financing purposes, typically what I've found in CT is that lenders like to see a minimum of 6 months seasoning. NOW you have to season it in your OWN name if you are seeking conventional financing, which is a new rule in the last few months. You can imagine my excitement when I went to apply at 6 months and this rule magically appeared... Its ok, my HML enjoyed the extra 6 months of interest payments:)
Other issues you may run into are reserves, debt to income ratio, and loan to value if you are considering the conventional financing route.
Commercial mortgage route:
- Your terms won't be as good (5% +/-)
- They will need a 1.2 DSCR minimum.
- They want to see minimum of 1 year seasoning
- Current leases for tenants are required
Another option you may consider, however I don't recommend because it DOES not solve your problem of long term financing. However, if you're in a pinch for cash, it may be a viable resource for you. The Rate and Term refinance. This allows you to pull out what you have into the property but leaves you with no additional cash above what you have into the property. What I understood from this, I may be wrong, is that it only pays off the 1st mortgage. I then asked my conventional lender, why don't I ask my HML lender for additional funds? He got quiet and said it only pays of the first... That was just me thinking outside of the box.
Again, like Michael was referring to. Depending on your relationships and cash reserves, you may get "special treatment" by getting better rates and lower seasoning requirements. But typically this relationship is built over time and does not help the new investor.
I find it interesting that you were able to take a HML in your personal name, typically they don't allow this? (Dodd-Frank)
I have two local commercial banks that will loan in New Britain if you need good recommendations. I have also called EVERY credit union in the state to see if they do portfolio lending, only a few said yes but still underwrite to fannie/freddie just in case then need funds. And they both wanted the seasoning requirements you see above.
What are your numbers? I can run options for you to see what the best option is, I focus on creative financing options.
- Purchase price
- Taxes, insurance, and expenses.
- Gross rent per unit
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