How to tackle these personal loans?

6 Replies

Hello BP community! Hope somebody could enlighten me with my situation. I purchased these properties with personal loans. My question is, how should I tackle these loans?

The values of the loans are as follows:

A. 35K 10% APR (monthly $745) 5 year loan

Property ARV 60K

Rehab 15K

Monthly Rent of $750

B. 40K 8% APR (monthly $786) 7 year loan

ARV 60K

Rehab 5K

Monthly Rent of $800

Won't these loans affect my refinancing options? And what are my refinancing options in the first place?

Any opinions/ suggestions/ criticisms will be appreciated.

Thank you again BP community!!!

Jan I'm questioning why you put the term limits so short and yet still have a high interest rate.  Your cash flow is very minimal to say the least so I hope you don't have any repairs, vacancy, and are self managing.  I would allow the houses to season for a year and the refinance into a 15  or 20 year note.  This will allow you have cash flow in the units.  Plus you should have some equity you could cash out if you'd like as well.  Most lenders will do a 70% arv some will go 80% even as an investment property.  With the numbers you've presented I think this is your best option due to being so tight after all fees associated with flipping them you'd barely walk away with much of a profit.  If you can safely say there wouldn't be repairs or vacancies keep the loans longer as to gain more equity but 1 vacancy wipes out all profit for 3.5 years not to mention any other expenses.  I'm assuming you haven't taken taxes or insurance into these numbers.  To refinance you will probably have to do a balloon loan as the values are below 50k and a lot of lenders don't lend on such small  mortgages.  Hopefully this helps and good luck.

@Justin Marshall thank you for the feedback! I was just wondering, which is more considerable;

A. Finish the loans and have the houses free and clear. I can split the monthly payments between me and the rent while I am under the loans.

Or B. Cash out for 15-20 years, pay the personal loans and earn a little cash flow.

Property taxes for both should be $2400/ year and insurance is $1200 / year.

Again, thank you for the suggestions.

@Jan Michael Ronquillo Depending on how quickly you want to re-invest into more properties would dictate what avenue I would suggest.  If you aren't looking to buy soon and can swing the payments with both units empty then I'd lean heavier to leaving the terms as they are.  If you are looking to leverage what you have and continue to grow your portfolio I would refi to a lengthier term and generate cash flow for capitol and the ability to carry the loans without you needing to back them as heavily and also to allow for vacancy and other expenses.

@Justin Marshall , so basically it's cash vs brrrr, right? 

I'm leaning towards brrrr as I'm quite confident with the ARV of the properties. And I'm hoping I could fast track my property acquisition.

Is it possible I could get a 70% ARV loan for both properties combined? Hopefully I could get back purchase + repair cost more or less within 70%.

Thank you again for the expert opinion!

@Jan Michael Ronquillo yes you can find lenders that will do portfolio lending or commercial based loans.  This allows you to borrow against a percentage of the properties but it also wraps them into a single loan unless you specify.  If you do a portfolio loan it is more difficult to sell individual properties as they are listed is collateral on the whole loan as aposed as separately.   I.e. make your lender aware of what you are wanting to do before moving forward or find a lender that will accommodate whichever method you want.  Also know most commercial lending is at 20 year terms as a max.

Thank you again! After 6 months, I will definitely ask around for portfolio lenders and see what they offer. Hopefully everything goes smoothly with the refinance and more acquisitions.

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