All Forum Posts by: AJ Exner

Quote from @Ram Gonzales:

I have a property in Austin that I acquired recently for cash. Value is $475K+. Looking for an asset-based lender for an interest-only loan of around $250K for up to 5 years. I'm leasing to a family member for minimal rent, certainly no where close to market, so I don't think it would work for DSCR. I plan to use the proceeds to purchase another property. Any ideas of lenders who could do this? 650 credit score.

Ram,
Actually, I think you are really going to struggle to find a lender for a deal like this, but not due to a lack of options.

Analyzing the situation, I see a couple of potential lender implications that would make it tricky from a lender's perspective:
-Having it not DSCR is a decent sized hurdle to overcome, and in TX it is a little trickier due to the higher than average property tax. Having that tenant in there helps, but the other issue is..
-Leasing to a family member. Its a little thing, but for a lot of lenders if they are aware of that fact they won't lend. This is because most people would rather lose the property than lose the relationship with their family member
-That's a decent amount of money to payback, especially on a 5 year balloon. You would really need to show some kind of a payback/refinancing strategy to make most feel comfortable
-The 650 credit score is tricky as well, not impossible, but tricky.

Its a tough spot, but its especially tricky when you compound issues. I think there might be some options, but it might not be what you are hoping.

Good luck! Happy to help where I can.

Quote from @Tyler Herman:

Quote from @AJ Exner:

Hey Tyler,

I know of a few that require a certain leverage on the lower amounts, and I'm sure they would want to know your experience in spaces like that. That being said, I can certainly work within the 90k-120k refi.

Depending on the area, I'm not surprised that banks/CUs would struggle. Just shot a DM, happy to help if I can.

Good luck!

Thanks. Yeah the DSCR out is a lot easier. It's the initial loan that's more the issue. Would be nice to work with one person for both.

Totally understand,

Generally that initial purchase-rehab loans will also be driven by your experience in the area. So any additional exceptions, whether for purchase price or even total loan amount, would be more likely if you can show a healthy SREO. 

Hey Tyler,

I know of a few that require a certain leverage on the lower amounts, and I'm sure they would want to know your experience in spaces like that. That being said, I can certainly work within the 90k-120k refi.

Depending on the area, I'm not surprised that banks/CUs would struggle. Just shot a DM, happy to help if I can.

Good luck!

Quote from @John Semioli:

Hello, community! I'm looking for advice on refinancing a STR property in Pennsylvania. About a year ago, I took out a mortgage and recently added significant value to the house. However, I'm hitting a roadblock with traditional lenders, as my loan-to-value ratio (LTV) isn't matching their criteria. This seems to be a result of some smart accounting moves on my part, thanks to an investor-savvy accountant. As luxury vacation short-term rental hosts, has anyone faced a similar situation or have suggestions on how to proceed? Our goal is to pull out some of the rehab money we put into the property. Thanks in advance!

Hey John,

Sounds like the answer would be to utilize a DSCR lender that utilizes either pre-established STR rental income (if you can prove with AirBNB/VRBO statements) or a few that are still UW with AirDNA or a similar STR income projection program.

I am aware of a few still doing it at this time, and if you can show that you know what you are doing you shouldn't see much of a cut in LTV if at all.

Happy to connect and see if we can help.

Good luck!

Quote from @Maurice Smith:

Found a good hard money lender but they don’t lend on anything above 4 units.

any recommendations for some good hard money that lend on 5+ units in the  Ohio area  or nation wide would be appreciated. 

Maurice, 

Most are going to specialize in 1-4 units (as I'm sure you've come across) and within the ones doing 5+, you'll have to keep an eye on minimum purchase price/loan amounts and even minimum price per unit.

Do you have any experience doing 5+ unit rehab? That might help if you had.

Just shot a DM, happy to help where I can.

Thank you,

Quote from @Philip Jones:

Hey guys I am a Landlord out of Metro Detroit area. I am wondering who has done the BRRRR method as an investor and what institutions are investor friends for multiple BRRRS. Should I check into local smaller banks here or Credit Unions?

 Hey Philip,

It’s kind of tricky up in Det. I would check with a few different groups to make sure that they can operate in Detroit, and also to make sure that they will lend to the property in question based on the value. Many groups will have minimum property value/loan amounts that will probably need to be upfront with.

Quote from @Dominic Richardson:

I’m looking for recommendations on hard money lenders that are willing to finance properties purchased at auction.

I've encountered some challenges, as certain lenders require interior photos, but many auctions do not permit entry. Any suggestions on how to navigate this process and successfully close on these types of properties would be greatly appreciated.

Additionally, would a bridge loan be a viable option to help me close the transaction and then transition to a fix-and-flip loan when I have access to the interior?

Thank you for your assistance!

Dominic,

Auctions can be pretty tricky here. So I would argue that it has less to do with knowing the lender's requirements (bring on a broker or flexible group) and more to do with what the auction company requires. 

From my experience, the biggest factor is how the auction company works. It is very regional and differs by group, but some would say that you can't have interior access but you can have 30 days to close (quite a few lenders can do this), while others would allow interior access but you only have a week or less to have the funds (or same day in some instances). 

I would get to know the auction company first and what they will allow, and then work with either a couple of programs that would work or use a broker. 

The other option (if you have the capital) is to utilize an 'Unseasoned Refinance' or a 'Delayed Purchase' to essentially purchase in cash and then recoup those funds with a second closing. You won't get the full seasoned-ARV, but you can free up some capital after you purchase it and utilize a rehab-escrow to do the work. Not every lender does it, but it give you the bargaining power of cash while still maintaining some liquidity.

Good luck, happy to help where I can!

Quote from @Jay Hinrichs:

Geez I would be talking to your HML right now as I doubt they want to take it over.

and try to get a workout with them ASAP.. sounds like its going to be  a loss anyway you cut it and I have to think you put up cash for a down payment as well.

maybe someone else will have some pearls for you.

Wholesaler is going to low ball you for sure.

Absolutely 2nd Jay on this one, reach out to them and talk to them about the situation. They might request to re-process some aspect of the loan or to show some proof of some things, but most lenders don't want to deal with all of the back-end stuff on something like that. 

Unfortunately, it is likely a loss if you were planning on keeping it, but hopefully it won't be a true loss for you.

Good luck!

Quote from @Corey Crowley:

I am new to Bigger Pockets and this is my first post, so I apologize if these questions may seem very basic to some.

I own 7 single family homes and 2 duplexes which are all paid and have no outstanding loans. I have not purchased a property in a few years, but I am closing on a new single-family house this Friday that I am paying cash for. I am thinking about actively trying to grow my investment portfolio and use my existing properties as leverage to acquire more properties. I have a couple of questions about ownership structure and a couple about possible cash out finance options for my existing properties.

Right now, all of these homes are in personal name, and I realize how much of a mistake this is and I plan to move them into LLC's before the end of 2024. If I am about to search for some kind of cash out refinancing options, is it best to keep the properties in my personal name for now or should I move them into LLC's before searching for financing options?

My next question is about financing options. If I am looking to pull money out of a total of 10 properties to make new investments, what are the options here? Are there loans that I can take out against the entire 10 property portfolio, or do people usually get a single loan per property? If these are both options what are the pros and cons to each of these financing options?

Any advice or personal experience that you can share would be greatly appreciated.

Corey

Corey,

Sounds like you are in great position right now. Honestly, the conversations I've had with my clients that are debating the portfolio v. single asset refinances have landed on how much do you value flexibility. I would recommend doing a "reduced" (~60%-70%) leverage refinance which would help drive your rate down as much as possible and hopefully still maintain the cash flow that you would like to have, especially since they are free and clear.

If you were to go the portfolio route, I would confirm with the lender you use what their 'occupancy requirement' is. If you have a property or two that are currently vacant, you might run into some issues there. You will also need to keep a close eye on the price per property requirement that any lender would require to make sure that one (or two) don't get bounced. The appraisal costs on something like that would be pretty high as well.

If you go the single asset route, you might get a nice little discount on fees by doing multiple at once. Make sure that they only check credit once (or soft inquiries) to make sure you are not hit with 10 different hard inquiries all at once. That would take quite a bit of time to repair on the back end if that happens.

Happy to help where I can, and good luck!

Quote from @Jason Smith:

@AJ Exner. Many of the loans I have are DSCR loans. Since my business is structured as an LLC the taxes have them all reported together as LLCs are a pass through tax structure.
So what I am finding is that when lenders see this they lump all the debit and not all the income. It’s crazy!

Yeah, that is on the nose with how they function. You will get all the 'credit' for the debt that they incur but not of the income. So unfortunately, as you scale, finding creative solutions like my colleagues above have suggested will be the name of the game. 

Personally, I tend to see it more with my clients when they are buying vehicles as they are scaling (crushes DTI/FICO in the short term), but that sucks that its impacting what you can do with your family. Of your 10 properties, what would you say is the ratio you have of conventional vs. non-conventional/DSCR?