Market Turned - Need to Refi this FIX/FLIP - HELP!
Cassidy KlundtPro Member
Investor · Las Vegas, NV · Member since 2023 · 22 posts · 17 votesMarket Turned - Need to Refi this FIX/FLIP - HELP!
Most Popular Reply
Real Estate Agent · Kansas City · Member since 2018 · 4k+ posts · 3k+ votes
9moFrom the refinance part there's not much you can do since they look at the ARV and base it purely on numbers. Your listing does look solid. All the photos are well done. When I looked at what's available there is a ton on the market. I don't think dropping the price will add much value since people have options. Your best bet to sell is getting more eyeballs on it. That can be open houses, social media ads, door knocking neighbors, etc. The market is tough so it's part of it. Buyers have options which means longer DOM
13 Replies
- Real Estate Agent · Kansas City · Member since 2018 · 4k+ posts · 3k+ votes9mo
From the refinance part there's not much you can do since they look at the ARV and base it purely on numbers. Your listing does look solid. All the photos are well done. When I looked at what's available there is a ton on the market. I don't think dropping the price will add much value since people have options. Your best bet to sell is getting more eyeballs on it. That can be open houses, social media ads, door knocking neighbors, etc. The market is tough so it's part of it. Buyers have options which means longer DOM
- Investor · Las Vegas, NV · Member since 2023 · 22 posts · 17 votes9mo
Thanks Caleb - helpful, we too believe it's a matter of time. However, our hard money (construction loan) is now up. So we need to figure that out too.
- 9moFrank PyleBusiness MemberSpecialist · USA · Member since 2024 · 279 posts · 130 votes
Yeah, that’s a rough one – you’re not alone getting clipped by new builds and shifting comps right now.
In situations like this, I've seen a few things help: sometimes it makes more sense to refi into a long-term rental loan (DSCR or conventional) and let time, rents, and amortization bail you out instead of forcing a big check at closing. If you've got equity in another property, I've also seen people cross-collateralize so they're not dropping 40–50k into this one deal just to get out of the construction loan.
On the "move it" side, I'd be looking at investor buyers and treating it like a turnkey rental instead of a retail flip – solid rent comps, DSCR, cash flow story – or even playing with things like seller credits/rate buydowns or a lease-option structure.
What are realistic rents on this one, and is your current lender open to any kind of extension or modification if you show them a rental/long-term exit plan?
- Investor · Las Vegas, NV · Member since 2023 · 22 posts · 17 votes9mo
Quote from @Frank Pyle:
Yeah, that’s a rough one – you’re not alone getting clipped by new builds and shifting comps right now.
In situations like this, I've seen a few things help: sometimes it makes more sense to refi into a long-term rental loan (DSCR or conventional) and let time, rents, and amortization bail you out instead of forcing a big check at closing. If you've got equity in another property, I've also seen people cross-collateralize so they're not dropping 40–50k into this one deal just to get out of the construction loan.
On the "move it" side, I'd be looking at investor buyers and treating it like a turnkey rental instead of a retail flip – solid rent comps, DSCR, cash flow story – or even playing with things like seller credits/rate buydowns or a lease-option structure.
What are realistic rents on this one, and is your current lender open to any kind of extension or modification if you show them a rental/long-term exit plan?
Great advice. Yeah they're open to extending but of course at a premium. We've extended through February, with the assumption that if we're past the holidays and there's still no offers, there's a good chance we just need to refi it and convert to rental until market allows for recapture.
- 9moFrank PyleBusiness MemberSpecialist · USA · Member since 2024 · 279 posts · 130 votes
Quote from @Cassidy Klundt:
Quote from @Frank Pyle:
Yeah, that’s a rough one – you’re not alone getting clipped by new builds and shifting comps right now.
In situations like this, I've seen a few things help: sometimes it makes more sense to refi into a long-term rental loan (DSCR or conventional) and let time, rents, and amortization bail you out instead of forcing a big check at closing. If you've got equity in another property, I've also seen people cross-collateralize so they're not dropping 40–50k into this one deal just to get out of the construction loan.
On the "move it" side, I'd be looking at investor buyers and treating it like a turnkey rental instead of a retail flip – solid rent comps, DSCR, cash flow story – or even playing with things like seller credits/rate buydowns or a lease-option structure.
What are realistic rents on this one, and is your current lender open to any kind of extension or modification if you show them a rental/long-term exit plan?
Great advice. Yeah they're open to extending but of course at a premium. We've extended through February, with the assumption that if we're past the holidays and there's still no offers, there's a good chance we just need to refi it and convert to rental until market allows for recapture.
That's the right way to think about it. If you're already extended through February, I'd get the refi-to-rental plan fully mapped out now so you're not paying another premium out of urgency. What do you think realistic rent is, and what's your current construction loan balance/rate/payment and monthly taxes/insurance/HOA?
- 9moPeter MckernanBusiness MemberResidential Real Estate Agent · Irvine, CA · Member since 2013 · 2k+ posts · 1k+ votes
You can extend for sure, but I think you are in the right mindset to drop and sell for a loss. The refi sounds like it will not work, and you will have to sell for a loss or dump personal capital in to keep it afloat. That is what a lot of people are doing these days.
These deals these days are really seeing huge price drops, or large competition with the wave of inventory that has hit the market.
The McKernan Group4.957 Reviews
- 9moStacy RaskinBusiness MemberLender · Member since 2022 · 1k+ posts · 505 votes
Have you thought about holding on to it as a rental? You could flip the construction loan to a DSCR loan. I often see clients do that. More on that: DSCR loans won't use your income to underwrite the loan. DSCR loans are based off of down payment, credit score and either actual or market rents so it helps to supercharge an investor's real estate goals and net worth.
Here's a bit more in detail about how rates are calculated for DSCR loans:
1. Credit score- the higher the better. 760-780+ generally gets best pricing for investment property loans with most lenders. From there every 20 point increment affect pricing differently. So for example, a 761 credit score will be in the 760-779 credit category, then going down to 740-759 and so on.2. Loan to value ratio: The higher the loan to value ratio (LTV) is, pricing takes a hit. So your pricing will be higher for a 80% LTV loan than for a 60% LTV loan.
3. Prepayment penalties- usually 1-5 year terms. The shorter the prepayment term has an impact on increasing the rate.
4. Are you cash flowing the property? More on how that is calculated below. Is your DSCR ratio greater than 1-meaning are you cash flowing (according to the lender's criteria of mortgage, property taxes and insurance (and HOA) if applicable). Many lenders will not do a DSCR loan unless cash flowing. If they will do a loan with less than 1, the pricing takes a hit. This criteria is for 1-4 and 5-8 unit programs.
I've included an example below to help illustrate this.
So different lenders have different rates (which do vary even for DSCR loans) but these are factors they all consider.
See example below:
DSCR < 1
Principal + Interest = $1,700
Taxes = $350, Insurance = $100, Association Dues = $50
Total PITIA = $2200
Rent = $2000
DSCR = Rent/PITIA = 2000/2200 = 0.91
Since the DSCR is 0.91, we know the expenses are greater than the income of the property.
DSCR >1
Principal + Interest = $1,500
Taxes = $250, Insurance = $100, Association Dues = $25
Total PITIA = $1875 Rent = $2300
DSCR = Rent/PITIA = 2300/1875 = 1.23If a purchase, you also generally need reserves / savings to show you have 3-6 month payments of PITIA (principal / interest (mortgage payment), property taxes and insurance and HOA (if applicable). If a cash out refinance, many lenders will allow the cash out to satisfy the reserves requirement.
DSCR lenders generally let you vest either individually or as an LLC. It's a great way to increase your net worth and these loans can also be used to pull cash out of a property as it appreciates allowing you to reinvest money into new deals.
Happy to connect to discuss further.
Bright Skyline518 Reviews- Investor · Las Vegas, NV · Member since 2023 · 22 posts · 17 votes9mo
Quote from @Stacy Raskin:
Have you thought about holding on to it as a rental? You could flip the construction loan to a DSCR loan. I often see clients do that. More on that: DSCR loans won't use your income to underwrite the loan. DSCR loans are based off of down payment, credit score and either actual or market rents so it helps to supercharge an investor's real estate goals and net worth.
Here's a bit more in detail about how rates are calculated for DSCR loans:
1. Credit score- the higher the better. 760-780+ generally gets best pricing for investment property loans with most lenders. From there every 20 point increment affect pricing differently. So for example, a 761 credit score will be in the 760-779 credit category, then going down to 740-759 and so on.2. Loan to value ratio: The higher the loan to value ratio (LTV) is, pricing takes a hit. So your pricing will be higher for a 80% LTV loan than for a 60% LTV loan.
3. Prepayment penalties- usually 1-5 year terms. The shorter the prepayment term has an impact on increasing the rate.
4. Are you cash flowing the property? More on how that is calculated below. Is your DSCR ratio greater than 1-meaning are you cash flowing (according to the lender's criteria of mortgage, property taxes and insurance (and HOA) if applicable). Many lenders will not do a DSCR loan unless cash flowing. If they will do a loan with less than 1, the pricing takes a hit. This criteria is for 1-4 and 5-8 unit programs.
I've included an example below to help illustrate this.
So different lenders have different rates (which do vary even for DSCR loans) but these are factors they all consider.
See example below:
DSCR < 1
Principal + Interest = $1,700
Taxes = $350, Insurance = $100, Association Dues = $50
Total PITIA = $2200
Rent = $2000
DSCR = Rent/PITIA = 2000/2200 = 0.91
Since the DSCR is 0.91, we know the expenses are greater than the income of the property.
DSCR >1
Principal + Interest = $1,500
Taxes = $250, Insurance = $100, Association Dues = $25
Total PITIA = $1875 Rent = $2300
DSCR = Rent/PITIA = 2300/1875 = 1.23If a purchase, you also generally need reserves / savings to show you have 3-6 month payments of PITIA (principal / interest (mortgage payment), property taxes and insurance and HOA (if applicable). If a cash out refinance, many lenders will allow the cash out to satisfy the reserves requirement.
DSCR lenders generally let you vest either individually or as an LLC. It's a great way to increase your net worth and these loans can also be used to pull cash out of a property as it appreciates allowing you to reinvest money into new deals.
Happy to connect to discuss further.
Great details here and thanks for taking the time to spell it out. We've thought about DSCR too and might go that route. Tricky part is, the business will dissolve once we identify next steps, and it's two of us. LTV is 90%, so inevitably we'll be coming out of pocket to convert it to a DSCR loan on that valuation. DSCR is at 1.02 on this one... unless we pushed it on the rental side and it would be a BIG if... I'm afraid if a buyer doesn't come along, much like my previous reply to similiar advice - we'll just be out of pocket more and will have to recuperate when market allows. Property is in San Antonio. At the time of renovation, we had an ARV confidently at 399k (argument for 415k). In 6 months it reversed to 350k, and now 325k. Pretty wild swing. One of those classic examples of buy at 70% MAO before renovation costs, thinking it was going to be a cosmetic flip, and then it over-ran estimates with a foundation repair and the delay was enough to hit the 'window' of market reversal, or miss the sale window at a respectable ARV. You and another likely spelled the only likely two options at this point a) turnkey rental advertising to an investor or b) DSCR and be ready with money out of pocket.
- 9moStacy RaskinBusiness MemberLender · Member since 2022 · 1k+ posts · 505 votes
Quote from @Cassidy Klundt:
Quote from @Stacy Raskin:
Have you thought about holding on to it as a rental? You could flip the construction loan to a DSCR loan. I often see clients do that. More on that: DSCR loans won't use your income to underwrite the loan. DSCR loans are based off of down payment, credit score and either actual or market rents so it helps to supercharge an investor's real estate goals and net worth.
Here's a bit more in detail about how rates are calculated for DSCR loans:
1. Credit score- the higher the better. 760-780+ generally gets best pricing for investment property loans with most lenders. From there every 20 point increment affect pricing differently. So for example, a 761 credit score will be in the 760-779 credit category, then going down to 740-759 and so on.2. Loan to value ratio: The higher the loan to value ratio (LTV) is, pricing takes a hit. So your pricing will be higher for a 80% LTV loan than for a 60% LTV loan.
3. Prepayment penalties- usually 1-5 year terms. The shorter the prepayment term has an impact on increasing the rate.
4. Are you cash flowing the property? More on how that is calculated below. Is your DSCR ratio greater than 1-meaning are you cash flowing (according to the lender's criteria of mortgage, property taxes and insurance (and HOA) if applicable). Many lenders will not do a DSCR loan unless cash flowing. If they will do a loan with less than 1, the pricing takes a hit. This criteria is for 1-4 and 5-8 unit programs.
I've included an example below to help illustrate this.
So different lenders have different rates (which do vary even for DSCR loans) but these are factors they all consider.
See example below:
DSCR < 1
Principal + Interest = $1,700
Taxes = $350, Insurance = $100, Association Dues = $50
Total PITIA = $2200
Rent = $2000
DSCR = Rent/PITIA = 2000/2200 = 0.91
Since the DSCR is 0.91, we know the expenses are greater than the income of the property.
DSCR >1
Principal + Interest = $1,500
Taxes = $250, Insurance = $100, Association Dues = $25
Total PITIA = $1875 Rent = $2300
DSCR = Rent/PITIA = 2300/1875 = 1.23If a purchase, you also generally need reserves / savings to show you have 3-6 month payments of PITIA (principal / interest (mortgage payment), property taxes and insurance and HOA (if applicable). If a cash out refinance, many lenders will allow the cash out to satisfy the reserves requirement.
DSCR lenders generally let you vest either individually or as an LLC. It's a great way to increase your net worth and these loans can also be used to pull cash out of a property as it appreciates allowing you to reinvest money into new deals.
Happy to connect to discuss further.
Great details here and thanks for taking the time to spell it out. We've thought about DSCR too and might go that route. Tricky part is, the business will dissolve once we identify next steps, and it's two of us. LTV is 90%, so inevitably we'll be coming out of pocket to convert it to a DSCR loan on that valuation. DSCR is at 1.02 on this one... unless we pushed it on the rental side and it would be a BIG if... I'm afraid if a buyer doesn't come along, much like my previous reply to similiar advice - we'll just be out of pocket more and will have to recuperate when market allows. Property is in San Antonio. At the time of renovation, we had an ARV confidently at 399k (argument for 415k). In 6 months it reversed to 350k, and now 325k. Pretty wild swing. One of those classic examples of buy at 70% MAO before renovation costs, thinking it was going to be a cosmetic flip, and then it over-ran estimates with a foundation repair and the delay was enough to hit the 'window' of market reversal, or miss the sale window at a respectable ARV. You and another likely spelled the only likely two options at this point a) turnkey rental advertising to an investor or b) DSCR and be ready with money out of pocket.
Having it be a rental could make sense if you are ok with being a landlord for some period of time. Trying to sell and market as a turnkey could make sense but if the appraisal comes in low, then you will have the issue you mentioned about the LTV being potentially too high.
Bright Skyline518 Reviews - 9moJay HinrichsBusiness MemberReal Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes
Quote from @Cassidy Klundt:
Quote from @Stacy Raskin:
Have you thought about holding on to it as a rental? You could flip the construction loan to a DSCR loan. I often see clients do that. More on that: DSCR loans won't use your income to underwrite the loan. DSCR loans are based off of down payment, credit score and either actual or market rents so it helps to supercharge an investor's real estate goals and net worth.
Here's a bit more in detail about how rates are calculated for DSCR loans:
1. Credit score- the higher the better. 760-780+ generally gets best pricing for investment property loans with most lenders. From there every 20 point increment affect pricing differently. So for example, a 761 credit score will be in the 760-779 credit category, then going down to 740-759 and so on.2. Loan to value ratio: The higher the loan to value ratio (LTV) is, pricing takes a hit. So your pricing will be higher for a 80% LTV loan than for a 60% LTV loan.
3. Prepayment penalties- usually 1-5 year terms. The shorter the prepayment term has an impact on increasing the rate.
4. Are you cash flowing the property? More on how that is calculated below. Is your DSCR ratio greater than 1-meaning are you cash flowing (according to the lender's criteria of mortgage, property taxes and insurance (and HOA) if applicable). Many lenders will not do a DSCR loan unless cash flowing. If they will do a loan with less than 1, the pricing takes a hit. This criteria is for 1-4 and 5-8 unit programs.
I've included an example below to help illustrate this.
So different lenders have different rates (which do vary even for DSCR loans) but these are factors they all consider.
See example below:
DSCR < 1
Principal + Interest = $1,700
Taxes = $350, Insurance = $100, Association Dues = $50
Total PITIA = $2200
Rent = $2000
DSCR = Rent/PITIA = 2000/2200 = 0.91
Since the DSCR is 0.91, we know the expenses are greater than the income of the property.
DSCR >1
Principal + Interest = $1,500
Taxes = $250, Insurance = $100, Association Dues = $25
Total PITIA = $1875 Rent = $2300
DSCR = Rent/PITIA = 2300/1875 = 1.23If a purchase, you also generally need reserves / savings to show you have 3-6 month payments of PITIA (principal / interest (mortgage payment), property taxes and insurance and HOA (if applicable). If a cash out refinance, many lenders will allow the cash out to satisfy the reserves requirement.
DSCR lenders generally let you vest either individually or as an LLC. It's a great way to increase your net worth and these loans can also be used to pull cash out of a property as it appreciates allowing you to reinvest money into new deals.
Happy to connect to discuss further.
Great details here and thanks for taking the time to spell it out. We've thought about DSCR too and might go that route. Tricky part is, the business will dissolve once we identify next steps, and it's two of us. LTV is 90%, so inevitably we'll be coming out of pocket to convert it to a DSCR loan on that valuation. DSCR is at 1.02 on this one... unless we pushed it on the rental side and it would be a BIG if... I'm afraid if a buyer doesn't come along, much like my previous reply to similiar advice - we'll just be out of pocket more and will have to recuperate when market allows. Property is in San Antonio. At the time of renovation, we had an ARV confidently at 399k (argument for 415k). In 6 months it reversed to 350k, and now 325k. Pretty wild swing. One of those classic examples of buy at 70% MAO before renovation costs, thinking it was going to be a cosmetic flip, and then it over-ran estimates with a foundation repair and the delay was enough to hit the 'window' of market reversal, or miss the sale window at a respectable ARV. You and another likely spelled the only likely two options at this point a) turnkey rental advertising to an investor or b) DSCR and be ready with money out of pocket.
this is why I stopped funding deals in Texas foundations property tax's hail storms and older homes built when there was no real licensing for contractors. And new builds being built as cheap as you can build a home in the US>. Its very much a locals market in my mind.. 20% or better devaluation is pretty wild.. I dont think it gets better.. prop taxs hard money / investor rehab loan interest etc etc going to make things worse.. to me pick a lane and run with it and get that loan retired ASAP is what I would do.. or just lower price and sell take your lumps and move on.. we have all had to do this in the fix and flip world. - Investor · Las Vegas, NV · Member since 2023 · 22 posts · 17 votes9mo
Quote from @Jay Hinrichs:
Quote from @Cassidy Klundt:
Quote from @Stacy Raskin:
Have you thought about holding on to it as a rental? You could flip the construction loan to a DSCR loan. I often see clients do that. More on that: DSCR loans won't use your income to underwrite the loan. DSCR loans are based off of down payment, credit score and either actual or market rents so it helps to supercharge an investor's real estate goals and net worth.
Here's a bit more in detail about how rates are calculated for DSCR loans:
1. Credit score- the higher the better. 760-780+ generally gets best pricing for investment property loans with most lenders. From there every 20 point increment affect pricing differently. So for example, a 761 credit score will be in the 760-779 credit category, then going down to 740-759 and so on.2. Loan to value ratio: The higher the loan to value ratio (LTV) is, pricing takes a hit. So your pricing will be higher for a 80% LTV loan than for a 60% LTV loan.
3. Prepayment penalties- usually 1-5 year terms. The shorter the prepayment term has an impact on increasing the rate.
4. Are you cash flowing the property? More on how that is calculated below. Is your DSCR ratio greater than 1-meaning are you cash flowing (according to the lender's criteria of mortgage, property taxes and insurance (and HOA) if applicable). Many lenders will not do a DSCR loan unless cash flowing. If they will do a loan with less than 1, the pricing takes a hit. This criteria is for 1-4 and 5-8 unit programs.
I've included an example below to help illustrate this.
So different lenders have different rates (which do vary even for DSCR loans) but these are factors they all consider.
See example below:
DSCR < 1
Principal + Interest = $1,700
Taxes = $350, Insurance = $100, Association Dues = $50
Total PITIA = $2200
Rent = $2000
DSCR = Rent/PITIA = 2000/2200 = 0.91
Since the DSCR is 0.91, we know the expenses are greater than the income of the property.
DSCR >1
Principal + Interest = $1,500
Taxes = $250, Insurance = $100, Association Dues = $25
Total PITIA = $1875 Rent = $2300
DSCR = Rent/PITIA = 2300/1875 = 1.23If a purchase, you also generally need reserves / savings to show you have 3-6 month payments of PITIA (principal / interest (mortgage payment), property taxes and insurance and HOA (if applicable). If a cash out refinance, many lenders will allow the cash out to satisfy the reserves requirement.
DSCR lenders generally let you vest either individually or as an LLC. It's a great way to increase your net worth and these loans can also be used to pull cash out of a property as it appreciates allowing you to reinvest money into new deals.
Happy to connect to discuss further.
Great details here and thanks for taking the time to spell it out. We've thought about DSCR too and might go that route. Tricky part is, the business will dissolve once we identify next steps, and it's two of us. LTV is 90%, so inevitably we'll be coming out of pocket to convert it to a DSCR loan on that valuation. DSCR is at 1.02 on this one... unless we pushed it on the rental side and it would be a BIG if... I'm afraid if a buyer doesn't come along, much like my previous reply to similiar advice - we'll just be out of pocket more and will have to recuperate when market allows. Property is in San Antonio. At the time of renovation, we had an ARV confidently at 399k (argument for 415k). In 6 months it reversed to 350k, and now 325k. Pretty wild swing. One of those classic examples of buy at 70% MAO before renovation costs, thinking it was going to be a cosmetic flip, and then it over-ran estimates with a foundation repair and the delay was enough to hit the 'window' of market reversal, or miss the sale window at a respectable ARV. You and another likely spelled the only likely two options at this point a) turnkey rental advertising to an investor or b) DSCR and be ready with money out of pocket.
this is why I stopped funding deals in Texas foundations property tax's hail storms and older homes built when there was no real licensing for contractors. And new builds being built as cheap as you can build a home in the US>. Its very much a locals market in my mind.. 20% or better devaluation is pretty wild.. I dont think it gets better.. prop taxs hard money / investor rehab loan interest etc etc going to make things worse.. to me pick a lane and run with it and get that loan retired ASAP is what I would do.. or just lower price and sell take your lumps and move on.. we have all had to do this in the fix and flip world.@Jay Hinrichs you nailed it - I most likely won't be investing the same way in Texas for the next couple years as a result. Not a market that I am local to or familiar enough to want a second dose.... that said have thought about renting it and would be okay, but not okay if it's upside down each month and that's how it's looking. So it's an awfully precarious position all things considered. I do believe 3-4 years and market recapture or atleast investment recapture will be there - but not sure I want to dump more capital to refinance.
- 9moFrank PyleBusiness MemberSpecialist · USA · Member since 2024 · 279 posts · 130 votes
Brutal spot but it happens fast when new build supply floods a submarket. On the refi side most lenders are going to cap you at 70 to 75 percent of appraised value and if the appraisal is coming in closer to 325k to 354k you either bring cash, take a second lien, or negotiate an extension with the construction lender. I'd look hard at two paths right now renting it for 12 months and doing a DSCR refi once you have a lease and seasoning, or dropping price to be the best deal against the new construction and offer a real buyer incentive like a rate buydown or closing cost credit instead of chasing list price. If you share your current loan balance, interest only payment, expected rent, and what comps are truly closing at, I can sanity check whether a DSCR takeout or a price cut is the cheaper move. What's the monthly carry and what rent do you think you can get on it today
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