Bouncing from bank to broker after private money pulled back.

9 Replies

I have been finding out that the people that get "interested" in investing their money in real estate seem to cool down by the time I put a deal together. I am currently going through the process of getting loan through the bank. In the long run it's good and it's been my plan to refi after purchase and minor updates anyway but, I had hoped to buy with cash and do the BRRR strategy Brandon Turner talks about.

I had three people on board to "go in on" buy and hold property. I went to my bank to get pre approval and my dti was 51%. That's fixable, I've got stuff to sell and it's busy season at work so I'll buckle down and payoff some debt and add some cash to my savings.

The relationship with each of these people goes back at least one year or more and the real estate investing idea goes back six months or so....

1st person got so excited about real estate after we talked that they purchased a house on there own and are hiring a property management company to get it rented.

2nd person refered me to there friend that might be able to help me. As it Turns out he is an Independant mortgage broker. No!

3rd person was cautiously optimistic and interested. We talked the deal through on the phone, he asked me 100 questions for an hour and twenty minutes and the next day refered me to his banker who had me bring all my financials in and we sat down for an hour and a half and talked through everything in my finances and never even discussed the deals equity, cash flow, or purchase price. He connected me with a mortgage broker who called me the next day and we are working through an application now. I had to push the closing back 30 days and luckily my renters are moving out from the parents so they can stay put one more month.

I have a HELOC with $35,000 available. I planned to use $20,000 for down payment and keep 15k for closing costs and an emergency cushion.

I was seeking $60,000 for 6 months and willing to pay 10% on that loan and secure it with the property. Yes! their name on the title as the first secured party. Also list them on insurance as first loss payee. After 6 months the note escalates each month and forecloser at month 15.

Am I missing something here?

Sellers signed a purchase agreement for this 2bed 1 bath house. 

Purchase price $79,000

Down payment $20,000

Rehab costs  $1000

Rent is $900 and includes water and trash. Tenant pays gas and electric.

AND...I have renters ready to move in as soon as we close. 

It seems like people like the idea of investing in passive real estate but any body that I've met (so far) that actually has 60-100k available is very conservative and seem to stay on the side of caution when it's time to deal.

What can I do to lock in private money for future deals?

Do well on this one and continue networking,

Then you can tell people about "what you do" instead of "what you think you can do using THEIR money"

Financing is approved, we are closing in our first income property Monday!

36 hours of paperwork, phone calls, emails and meetings with lenders has paid off.

Persevere,  Persevere, Persevere.

Keep in mind that most Hard Money Lenders prefer to see to LTV be 60-65% and will stretch to 70% in good circumstances. The 75% can be done based on the rental income but they are going to discount the predicted income considerably based on occupancy rates, management fees and numerous other factors mention here many times. I congratulate you on getting this one done but keep in mind that some of your parameters are outside the norm. The good thing is that as @Bryan O. mentioned, the more of these you accomplish the more likely you can find other lenders who will give you more favorable terms.

Purchase price $79,000

$19,061 closing costs paid using my home equity line of credit at 5.5% APR

Amount financed $64,000

30 year fixed rate mortgage 

4.68% interest rate 

Rent $900 plus tenant pays all utilities including water 

Mortgage payment $551

HELOC payment. $249

$100 per month left for everything else. It ended up kinda tight at the end. I didn't think the HELOC payment would be so much.

Are property taxes and insurance included in the mortgage payment? If not, you're going to have to chip in every month to float this place.

What type of lender did you find that allowed you to use a HELOC for the down payment? Based on the rate and term it feels like a traditional lender?

Looks like a great setup, congrats @Chad Zaback

@Chad Zaback , congratulations on getting the deal done but this looks like an alligator. You will have to feed it. You seem to be counting the $100 spread between your monthly debt payments and rent charged as a cushion. I suspect your "cushion" will not cover the insurance and taxes on your property. You have not accounted for vacancy. One vacancy for even 1 month and the expenses to get the property rent ready will easily consume your "cushion". You have not included maintenance charges. Replacing a water heater will probably consume your "cushion". What if your tenant fails to pay the water bill? Does it become a lien against the property? What if you have a non-paying tenant that you have to evict? Before you add more properties like this make sure you will be able to cover the monthly expenses or you may find yourself in a position where you may have to sell them at a loss to keep your head above water.

@Kevin Trumbull the HELOC is on my primary residence and through my local bank.

 We used a mortgage broker for the  traditional fixed rate mortgage.

@Chad Zaback , interesting, so the traditional mortgage lender did not care that you were using a HELOC for down? I assumed you seasoned the funds for 2 months, but did you tell them the down was coming from a HELOC, or was it a 'they didn't ask, I didn't tell' scenario? :)

Some of the traditional lenders I've spoken with will not allow you to leverage 100%, even with seasoned funds... am I talking to the wrong lenders?

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