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Reviews B2R Finance

Wally Johnson
Sherman, TX · Member since 2014 · 4 posts · 0 votes

Requesting feedback from the wise RE Investing Yodas in this forum.

Current status: Nearing retirement (3 to 4 years). Current portfolio provides (net) twice the W-2. Will reach three times within five years. I am considering ‘going to the next level’ with my investments.

Situation: I recently received a flier from B2R Finance (some of you may have also). I read a couple of articles on this commercial lender. I am considering talking to them.

Feedback: I would like this group’s feedback as to whether 1) it might be a good move (pros/cons) to take the plunge at this point, 2) what reviews might you have on B2R Finance.

Thanks everyone for your input.

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Daniel Mohnkern
Investor · Titusville, PA · Member since 2015 · 298 posts · 150 votes
11y

I, in this topic, a wise RE investor Yoda am not, for, experience with this lender, I do not have.  But I just couldn't help myself when given the opportunity to respond like Yoda.

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  • Josh Caldwell
    Investor · Dallas TX, United States · Member since 2014 · 1k+ posts · 1k+ votes
    11y

    Your approach sounds solid.  As long as you are willing to be at least a semi-active investor after you retire.  IF no it sounds like you can coast for the rest of your life right now.

    I have done business with B2R and they are fine.  The only problem is the appraisal. They charge $500-1000 per appraisal, and their values came in low.   This didnt bother me bacause I was using them to buy a big portfolio with no money in the deal.   what I did was have the seller cash out with B2R and I took over his new payments like a subject-t deal then I had him carryback the rest in 2nd position with his property as collateral.  That way I was able to offer him full appraied value (from a 3rd party, which he paid for), and get 100% financing on a cash flow portfolio. 

    To your success

    Josh

    3Reply
  • Daniel Mohnkern
    Investor · Titusville, PA · Member since 2015 · 298 posts · 150 votes
    11y

    I, in this topic, a wise RE investor Yoda am not, for, experience with this lender, I do not have.  But I just couldn't help myself when given the opportunity to respond like Yoda.

    6Reply
  • Ralph R.
    Real Estate Agent · Milwaukee, WI · Member since 2014 · 114 posts · 30 votes
    11y

     I heard their ad on the podcast so I am thinking of using them and am also looking for feedback about B2R.

    1Reply
  • Jay HinrichsBusiness Member
    Real Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes
    11y

    @Wally Johnson

      Feedback I have gotten is the same as above they hammer on values.

    If you have owned your properties for years and are not looking to squeeze every dime out of them or set up a no money deal like @Josh Caldwell  did I think they could be a great fit.

    there are other hedge funds competing in the space you may want to ping Colony capital and a few others as well.  If was and still is a very under served segment of the lending world.

    @Josh Caldwell  Just got to love were RE has gone back to full leverage no money into the deals... !!!   hopefully we don't all build another house of cards were no one has any real equity into anything... The scenario you describe is pretty risky for a seller... If you defaulted for some reason they could be in a world of hurt  :)

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  • James Miller
    Investor · Marshall, MO · Member since 2014 · 29 posts · 19 votes
    11y

    I recently talked to B2R and sent them a complete list of property owned and rent rolls for 25 properties ; I have better than 500,00 in equity in property and B2R offered to loan me 50,000 on my complete portfolio as a first position lender on every property. I have more equity in one piece of property than that. Needless to say that wasn't a very good deal

    Jim Miller 

    JSM Properties LLC

    1Reply
  • Jay HinrichsBusiness Member
    Real Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes
    11y

    @James Miller

      seems to me they could have just said pass.

    If I was underwriting what these loans... I would do what they are doing.. I know borrowers especially in low value rental assets think they have all this equity when in fact I do not believe they have any in most cases... At least with low end mid west rentals.

    These lenders are not looking at fico as the driver they are looking at assets and cash flow.

    For me I would look at what a wholesaler is paying for these in pre rehab shape..

    So for a 50k rental in the mid west that brings in 750k for instance.. I know that house will sell probably at 8 to 15k or may even up to 25k pre rehab. And I know if my borrower walks on my non recourse loan.. that by the time I foreclose the value of my collateral will be bulk wholesale.. it will not be ARV when everything is perfect.. so I would back in and want to make sure my loan was not more than bulk value and back off some for cost of the foreclosure etc... I think that is why you see people frustrated with values.

    if your in low B to C and D markets an astute lender who has no control over the asset is going to give you a very low number.. and one who thinks they have some great amount of equity its just equity on paper the only ones that can turn that paper equity to cash are TK companies with high priced marketing campaigns selling to West coast folks that just have to own a rental because they are priced out of CA.  Not always but many times this is the scenario.

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  • James Miller
    Investor · Marshall, MO · Member since 2014 · 29 posts · 19 votes
    11y

    I do not have low end midwest rentals. Most of my properties are what I call late model construction. They are newer style SFH . They also have professional appraisals done on them.Just one of the properties I submitted has a 90,000 appraisal with a 35,000 balance owed. That's just one of the examples.Another is for 137,000 with a 89,000 bal. 5 year old house. I dont own low cost junk If that is what you are inferring

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  • Jay HinrichsBusiness Member
    Real Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes
    11y

    @James Miller

      not inferring your portfolio ... as I don't know what it is.

    I am commenting on the many folks I know that own these types of assets who have tried to go to B2R and had those results.

    your assets for them to only offer you 50k seems strange as the least... did you pay for apprasials to have them offer you this amount ... Strange

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  • Jay HinrichsBusiness Member
    Real Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes
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    @James Miller

    although I have owned my share of mid west almost new construction and ARV had no bearing on what I could actually sell it for if I had to cash out in 60 days.. a sale was usually substantially less than 3P professional appraisals.. usually 10 to 30% less is my experience. My point is this mid west market except for some very hot pockets is and has always been tough on values precieved value and what you can actually sell something for

    the success we are having now is with totally renovated to the 9's homes.. existing rentals that are in typical rental shape do NOT bring full ARV at sale.. that's our experience.

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  • Josh Caldwell
    Investor · Dallas TX, United States · Member since 2014 · 1k+ posts · 1k+ votes
    11y

    @Jay Hinrichs

     Sadly we are building another house of cards.  I just read that they are creating a new way to calculate FICO scores for people who dont qualify for loans.  Can anyone else see the bubble that will cause?

    The good news, is that investors like us make piles of money from that chaos.  Money is never really lost, if just gets transfered to people like us. 

    I love real estate

    Josh

    4Reply
  • Jay HinrichsBusiness Member
    Real Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes
    11y

    @Josh Caldwell

      transfer some of that money out here to the West coast we could use some!!

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  • James Miller
    Investor · Marshall, MO · Member since 2014 · 29 posts · 19 votes
    11y

    B2R wanted to loan on the cash flow of the properties not on the actual value of the assests

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  • Jay HinrichsBusiness Member
    Real Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes
    11y

    @James Miller

    just like any other commercial lender lending on multi family.. its cash flow based.. and then with SFR scattered you need to add in bulk value in a default situation.

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  • John T.
    Dayton, OH · Member since 2014 · 52 posts · 5 votes
    11y

    from what I have read there interest rates can be higher like 7+% than you may find elsewhere which is a deal killer for me.  I haven't tried reaching out to them once I read this so call it heresy

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  • Mike H.
    Rental Property Investor · Manteno, IL · Member since 2009 · 2k+ posts · 2k+ votes
    11y

    I'm in the process now of checking on one and going thru the usual suspects, B2r, firstkey, Colony American Finance, and then after that I tried a broker. Broker came back with the same companies, same terms plus they tacked on an additional fee. 

    But, yes, everything is based off the income in terms of getting the LTV's up there on these loans.

    I initially submitted a handful of properties and the best they could do was 65% LTV. I'm already at 65% LTV with better terms. So that was a nonstarter. Finally, I just asked them, whats your formula to get to 75% LTV???? Is it the loan amount? What is it?

    This is what I found:
    Firstkey uses DTI as the basis for their formula. 65% DTI or better to hit 75% LTV.
    So rent minus PITI (based on the new loan amount/payment). Rates for 5 year balloon amortized over 30 are 6%.

    B2R uses DSCR. Not sure what the number is but its fairly similar to the DTI ratio. But their 5 yr balloon, amort over 30 is running at 6.5%.

    Ultimately, I cherry picked some different properties and took the ones with the super low taxes - relatively speaking. And was approved for that 75% LTV.

    Haven't heard back from Colony Finance yet. But I'm guessing they'll be the same (between 6 and 6.5%).

    For me, I wanted the cash to continue to grow. I'm looking at 7 houses allowing me to pull out about 80k. Because my current loans are already commercial on those homes and have a higher rate 5.5 to 6 and most are amortized over 20 years, this cash out refi won't affect my cash flow much at all. I think my total payment might go up $300/mo. But I will be losing about $600/mo in principal paydown.

    Definitely a bit pricey when you think about it. 

    Then again. The real value for me is that I can take that 80k and buy 10 more homes (my typical out of pocket is 4 to 7k - but lets just say worst case its 8k).  The income I'll make off those 10 homes will more than make up for the lost 300/mo in cash flow and 600/mo in principal paydown.

    My typical deal averages:
    $225 to 250/mo net cash flow
    $150 to 200/mo principal paydown
    $200 to 250/mo appreciation (figure 2%)

    And to me, thats simply a tradeoff that I'm willing to make. I wouldn't want to leverage myself to 75% on all my properties. But I have 42 now (adding one more next week) so if I can use a little bit of it to bump myself up another 10 houses, its worth it.  I just don't see this price point being this good for too much longer.  One last run.......

    And if I can give up 300/cash flow and 600/mo in principal paydown to gain 2k to 2,500 in cash flow and 1,500 to 2,000/mo in principal paydown - plus I get an additional 2,000 to 2,500/mo in apprection, then its well worth the investment....

    2Reply
  • Ervin Page
    Wholesaler · woodbridge, VA · Member since 2013 · 1 post · 0 votes
    11y

    WOW!!!  This was very helpful.  I've been reviewing info and doc's to reach to them.

    Ervin

    0Reply
  • Rich N.Pro Member
    Investor · Haverhill, MA · Member since 2015 · 761 posts · 328 votes
    11y
    Originally posted by @Jay Hinrichs:

    @Josh Caldwell

      transfer some of that money out here to the West coast we could use some!!

     Noooooooo... transfer it the other way to the East in Massachusetts.

    0Reply
  • Fernando Aires
    Boulder Creek, CA · Member since 2015 · 3 posts · 7 votes
    10y

    @Mike H 

    1. I was under the impression that a Broker would shop around for you and use his connections to find a local bank with good rates willing to do a commercial loan for your properties. If the properties are spread over separate regions, you would work through the Broker and perhaps get loans from different local banks.  In other words, this would be the main reason for using a broker... maybe you found the wrong  Broker ?
    0Reply
  • Kerry BairdPro Member
    Rental Property Investor · Melbourne, FL · Member since 2011 · 3k+ posts · 2k+ votes
    10y

    @Mike H. Thanks for that detailed comparison.  Did you use a source of funding?  

    1Reply
  • Mike H.
    Rental Property Investor · Manteno, IL · Member since 2009 · 2k+ posts · 2k+ votes
    10y

    @Fernando Aires You could be right. I had already shopped it to the big 2 and then went to the broker. Broker didn't tell me who the lender was until we were halfway in and then it turned out they wouldn't honor their LTV so I went on my own again. None of the local banks by me are really interested in doing blanket loans. And none of them do 30 yr am. I didn't want to pull that money out and take the hit on cash flow.

    @Kerry Baird I ended up going with FK. Its been a huge back and forth with them on the LTV. And the key was really me getting the direct contact so I could ask them how they were calculating their numbers which allowed me to cherry pick my properties to make them work.

    Before that, all I kept getting was it wasn't something they would share. Made no sense.   Why not lay it out there to save us all the trouble.

     Appraisals came out much better than my estimates. I typically estimate low so I don't miss and so the bank doesn't think I don't know my numbers.  

    I am "this" close to getting a closing date actually. All the conditions have been met on my side. Title company just needs to put together a couple of items (payoff letters and the hoa letter showing its been paid for the year) and we're good to go on the closing.

    The amount of paperwork I had to pull together for this loan though really wasn't worth the money I'm pulling out. And now I'm going to have to deal with the separate entity for the next 5 years at a minimum.  

    Still. I needed more cash given how much I've grown in the last two years and how much I want to continue to grow.  And, ultimately, my overall "business" should be much better balanced. The net effect of the deal is: About 95k more cash (higher appraisals bumped that up), about $600/mo less net cash flow and another 600/mo or so less principal paydown.

    And that may seem like expensive money (1,200/mo for 100k), but I'm looking at it as an overall portfolio so that I'll have a ton more cash and my portfolio will still have a net cash flow of roughly 11k to 12k/mo and a principal paydown of roughly 7,500/mo.

    I figure I have plenty of cash flow and principal paydown. And getting that 95k or so is a great way to boost my ability to grow and/or take advantage of other opportunities should one arise.....

    In a perfect world, I would sit out buying for a year and build up that 100k thru rental income alone.  But the constant fear I have is that while I'm currently buying a house a month, that may eventually come crashing to a halt any day now. And would I rather have 10 more of these deals or not?   For me, I'll give up 1,200 a month (600/mo in rental income and 600/mo in principal paydown) and about 120k in equity  to get myself 10 more houses....

    With those 10 more houses, I should be able to make 2,500 a month more in net income and 2k a month more in principal paydown. Not to mention an additional 400k to 500k in equity capture. 

    It still comes back to the ability to grow my income/net worth exponentially with growth. i.e. 10 houses worth 1.4million will make 42k a year thru appreciation (at say 3%). But 50 houses worth 7million will make 210k a year thru that same 3% appreciation.

    Rental income for 10 houses at $250/house will make 2,500/mo.
    But 50 houses at $250/house will net 12,500/mo.

    Principal paydown...... etc.

    So I'll choose to keep growing. And when the music finally stops and the prices on the houses no longer represent the kinds of numbers/deals I need, I can look back and not have any regrets that I missed out on something like this.  The key along the way though is to do it in a way that mitigates my risk as much as possible. And adding 95k to my reserves, in my mind, goes a long way towards doing just that. :-)

    1Reply
  • Kerry BairdPro Member
    Rental Property Investor · Melbourne, FL · Member since 2011 · 3k+ posts · 2k+ votes
    10y

    Thank you!  So grateful for the thoughtful response~

    0Reply
  • Jeremy Crooks
    Investor · Cooranbong, New South Wales · Member since 2015 · 11 posts · 11 votes
    10y

    Be very careful with B2R.   I took out a 5 year loan with them over 5 of my homes.   They have a release clause that you can transfer homes in and out after 6 months, so I expected to have the option to sell my homes during that 5 year period.   However, in the fine print, I a liable to pay the full 5 years worth of interest even if I sell after 6 months.   The whole thing was very misleading and now I am stuck.

    3Reply
  • Steve Vaughan
    Rental Property Investor · East Wenatchee, WA · Member since 2014 · 10k+ posts · 16k+ votes
    10y

    Thanks for the warning @Jeremy Crooks.  Fine print gotcha's can get ya every time!

    Sick of getting B2Rs mailers.  They're mailing to my LLCs as well.  At the same time. I'll get 2 or 3 at once.  Heard on a podcast their best rates are in the 7's.  Some in the 9's.

    @Mike H. posted his nightmare with FK on a different thread.  Was curious Mike, if you are allowed to sell any of the portfolio now under the blanket? Is the release process easier than the initial loan I hope?  After all the pain and suffering I imagine your hands are tied as to future liquidity events as well?  

    No way am I paying any lender a freakin' thousand bucks per appraisal to tell me what I already know and what they should be able to figure out.   I'll just continue to save for future purchases or find my capital elsewhere like always. Cheers!

    0Reply
  • Mike H.
    Rental Property Investor · Manteno, IL · Member since 2009 · 2k+ posts · 2k+ votes
    10y

    I do have a release clause built in there. I think its 110% of the allocation for each house.

    So if the house appraised at 160k, they lent 120k on it. If I sell it, I would need to pay down the loan 132k......

    These places are just way too much work. But it was a necessary evil. Strangely enough, after venting about the loan and posting what my "dream" loan would be, somebody contacted me on BP and set me up with a fairly sizable line of credit. Not a true LOC as it still goes off the ARV and you pay points off the draw down. But rates are nice (7%) and they do lend 100% of the purchase/rehab up to 70% of the ARV.

    We'll see how it plays out.......  I have a couple new ones under contract. Lets see if they close. Then I'll be telling you how great that Firstkey nightmare turned out. 

    i.e. The nightmare led to me venting on BP, which got me a line of credit, which saves me lots of money. :-)

    0Reply
  • Kerry BairdPro Member
    Rental Property Investor · Melbourne, FL · Member since 2011 · 3k+ posts · 2k+ votes
    10y

    @Mike H.  That's not such a bad situation to be in!  Keep on a'blazing down the trail, and we will continue to root for your success. 

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