First Flip(s) Financing Question

[Paul Wakim]

Hello everyone, I am brand new to bigger pockets and have decided to join and make this post to get some help from the rest of the members. 

I have not done a deal yet but I have my team set up and ready to go once the deal is found and financing is set up. 

Financing is my primary question. I have decided to go to a family friend who is a mortgage banker at Wells Fargo to get pre-approved for a traditional mortgage. I am expecting that I will get approved for a $400K loan.

The deal that I'm currently vetting and hopefully acquiring involves 3 properties (row houses) side by side. My plan is to purchase all 3 from the owner at the same time, renovate 1, move into it and renovate the two others next door. Once renovations are done on one I will put it on the market and sell. Then I will do the same for the two remaining properties. 

These 3 houses are all in similar shape and are listed for $50-$65K each. I know without a doubt they will sell for $200K+ each. They will each require roughly $60-$75K in renovations, possibly more. I will be doing some work myself. 

SO, here's my question... My mortgage lender knows that I will be buying to renovate and flip and has offered me a loan that covers both the home mortgage and the renovations for 1 flat fee. However, that loan process involves other contingencies like the bank vetting the general contractor who will be doing the work and the cost of the renovations which could possibly extend the closing time to 60 - 75 days.  

I see this situation as having two paths. 1, I take the loan for both renovations and mortgage and run the risk of closing the deal slowly. I am worried about doing this because I feel like that time frame is unrealistic for investment properties where multiple parties are interested. Couldn't the deal be taken out from under me in the case the closing takes 60 - 75 days?

And 2, I take a loan out as just a mortgage, use a contractor who is not vetted by the bank and get a traditional loan from the same bank or another to cover the renovation costs. 

I have not given private lending or hard money any thought at this point due to my lack of experience.

Has anyone had any experience with financing options such as this?

Should I be worried about the extended closing time? 

Any advice is greatly appreciated!

[Patti Robertson]

@Paul Wakim - I think you need to talk to the mortgage guy and his underwriter more specifically. You didn't mention the loan product, but most people who call themselves mortage bankers write owner occupant loans, not loans for flips. The most popular buy/construction loan is an FHA 203K, which is only for owner occupants, not investors. There is another product called the Homestyle Renovation loan, but it is for a single property, not a blanket of three. If your friend is a traditional lender, he is the guy who can help your eventual seller, but not the right lender to help you on the business side.

It sounds to me like you need to find a commercial banker at a local bank.  Wells Fargo is not an investor friendly bank, nor are any of the national players.  Local and regional banks are lending to flippers.  If you would qualify for a traditional mortgage with Wells Fargo, it is likely you will qualify for a commercial loan. Commercial loans are designed to do what you are trying to accomplish. There are many types of products.  If you have assets to pledge, you may be able to get a credit line or guidance line.  That is the least restrictive.  If you have to use the property you are buying, you can probably do that too, but the bank will be more involved in your decisions and will have to inspect before you receive construction draws.  Either way, you need to disclose fully with any lender that your intention is to flip, and you don't intend to live in these long term.

Good luck!!!