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All Forum Posts by: AJ Exner

AJ Exner has started 1 posts and replied 549 times.

Post: How do Hard Money Loans work?

AJ Exner
Posted
  • Lender
  • Springfield, MO
  • Posts 574
  • Votes 285
Quote from @Annwar Matani:

Hi everyone

Can someone explain to me from start to finish how does a HML work? I always get scared when someone suggests HMLs... I literally think of loan sharks or getting your house or assets taken away from you when I hear it LOL.

What does points mean? How much are closing costs? And I understand (I think) your making interest only payments until you pay back the loan? What if I finish the project in 3 months do I owe any more interest on it?

Debating to use a HML for a flip or a BRRR. I'm trying to pinpoint my financial strategy in attaining these projects and HMLs are always suggested to me.

My goal this year is to buy my first investment. I want to operate from a place of logic, not fear. This forum so far has helped me very much in learning.

Thanks in advance


Annwar,

Most credible HM Lenders are far from predatory, because if they do, they don't do it for long. 

Its a way to scale up without battering your own personal ability to buy personal real estate. They tend to be more lenient than traditional lenders (banks, etc.) and focus on the details of the deal more then anything. Many lenders will just focus on your ability to pay them back in the time and allow you to 'lather, rinse, repeat' as much as possible, without the same type of underwriting procedures. 

For example, instead of tax returns and W2s they will check bank statements and the After Repair Value (ARV) to underwrite the loan. This allows many groups (I know the crew at Easy Street can do this) even close a loan in a week or less.

They'll stay off of your personal credit, while not impacting your personal debt to income which is valuable as you start to scale. Then, they will fund a portion of the purchase price (80%-100%) and usually 100% of the rehab on a reimbursement basis. 

HERE is a link that might help you find a lender. There are some bad ones out there, for sure, but there a lot of good ones that, if leveraged property, will help you scale and grow your portfolio sooner than you think.

Good luck!

Post: Investment property rates

AJ Exner
Posted
  • Lender
  • Springfield, MO
  • Posts 574
  • Votes 285
Quote from @Sam Chan:

Hi all,

where are investment property rate at today? 500k property with 20% down? 


DSCRs are high 7s, low 8s for a 30 year fixed from what I've been seeing.

Post: Own 2 homes free and clear wanting to scale.

AJ Exner
Posted
  • Lender
  • Springfield, MO
  • Posts 574
  • Votes 285
Quote from @Byron Paille:

I currently own 2 homes free and clear. One older I bought at an auction  and a new build. I have a large lot and approval to build a duplex. I am done spending my money and am looking to scale. 

Do yall do a refi for this or get a heloc? With rates at this level I an not sure places will cash flow at 80% loan value. 

One home is worth 125k and new build is hitting the 230-250k mark.


Hey Byron,

So the advantage of doing Refi compared to a HELOC is that the heloc is personally backed to some degree while a DSCR refi is backed by the (hopefully) cash-flowing asset. Especially if you don't refinance at maximum leverage and do 60-70%, it optimizes rate and terms, while still getting you the cash you need.

I hope that helps, happy to assist where I can.

Post: Putting existing properties into an LLC

AJ Exner
Posted
  • Lender
  • Springfield, MO
  • Posts 574
  • Votes 285
Quote from @Robert Dunbar:

Hi,

If someone has existing properties in their name. How do you transfer them to an LLC? What implications does that have when trying to get a new loan or refinancing an existing one once it's in an LLC? Would rent payments need to be paid to the LLC?

Thanks,

Robert


Robert,

Would either have to look into some kind of a Quit Claim Deed to transfer it into your entity, or just fully refinancing either cash-out if you have any equity, or doing a rate and term refinance where you just transfer the existing debt in the property into your LLC.

Payments could go either way, by being a member of the LLC, any rent payments could be linked to you pretty easily.

Post: How to refi cash out when you are an investor with limited income on paper?

AJ Exner
Posted
  • Lender
  • Springfield, MO
  • Posts 574
  • Votes 285
Quote from @Adrian Jones:

Good day Bigger Pockets family,

Question for my seasoned investors. I left Corp America 2.5 years ago. I now have a portfolio of 11 condo's in Southeast Washington DC, and 2 tenant occupied SFH's in Charlotte. I have about 175k in equity in one of my Charlotte properties that I would like to tap into that via HELOC or cash-out refi. But with showing minimal taxable income over the last 2 years, it's now hard to qualify for any type of traditional bank refinancing. It's a vicious catch 22. Anyone have any remedies for a situation like this, as investors?

Thanks,

Adrian Jones

Agree with @Devin Peterson on this one, you are absolutely describing a DSCR loan.

The additional advantage to a DSCR loan is that they do not impact your DTI and you can keep them inside of an entity to help provide an additional layer of liability coverage if you would like

Entities would also allow you to be flexible in your ownership structure, if you need to add someone like a credit partner to help get better terms.

Just shot you a DM, would love to see how we can help.  

Post: Looking for a good hard money lender in Iowa

AJ Exner
Posted
  • Lender
  • Springfield, MO
  • Posts 574
  • Votes 285
Quote from @Andrew Jones:

We're looking to buy a multi-family property in Scott County Iowa to rent out for long term passive income. Does anyone know of a good hard money lender that offers a 90% LTV for a multi-family long term rental purchase?


Hey Andrew,

Might have some luck with lenders who would be okay with 90% combined LTV on something long term, but you would have to work with the seller to do some seller financing. Would your seller be willing to do something like that?

Might have some issue with it being in Iowa as well, is it located in Davenport? 

Post: Cash-out Refinance on rental property ( small mortgage)

AJ Exner
Posted
  • Lender
  • Springfield, MO
  • Posts 574
  • Votes 285
Quote from @Mica Moore:

I have a single family house in Corpus Christi, TX that is my rental property. The only loan on it is a $40K HELOC from BoA. It has a high adjustable rate of 10.5% & climbing.

I live in San Antonio, but this rental is in CC. I want to do a cash- out refinance of $60K ( $40k to pay off HELOC, $10K for new roof, & $10K for my personal purposes). Obviously a fixed rate mortgage would have a lower APR - & that's my main reason to re-fi.

I have good credit & income - & I always qualify. The issue is as I was calling around - I haven't found a lot of banks that will lend on a rental property ( at least in CC). Another issue is that if I could find a bank that lends on rentals - they often have minimum loan amounts ($80K for example). Which, I don't want or need that much. ( yes I know the house will qualify because it would be less than 50% LTV- I just don't want higher payments on money I didn't want to borrow).

The other thing is how much higher is the fixed rate, because it's a rental? And how much do closing cost run? Because I paid 0 closing costs when I got the HELOC 2 years ago. So if the rate is high & the closing are high & the loan minimum causes me to over- borrow -- then the payments would be higher & it would not make sense at that point to cash- out refi at all.

Any lender recommendations who have good, rates, low closing- costs& a minimum loan amount of $60K or less?


Mica,

Yes, that is a very unique situation and BP is probably the place to find someone to help. A DSCR loan on something like this is probably the way to go, but you could also do a bridge loan while you do the repairs (for the roof). The downside is that you would need to do two closings (which brings additional closing costs). I assume its vacant while you work on the roof, so this type of loan would lower your payment a bit, still get you cash out through a refi/rehab bridge loan, and then refinance into something long term (30 year fixed).

I do have some programs that could help either way with a bridge or a 30 year fixed at that amount and would love to help where I can.

Good luck!

Post: DSCR Loans in Rural Areas?

AJ Exner
Posted
  • Lender
  • Springfield, MO
  • Posts 574
  • Votes 285
Quote from @Shavin Patel:

Good evening,

I am looking for lenders who can provide loans in rural areas for fix and hold as well as refinancing into DSCR once renovations are completed.


Shavin,

You will generally see more flexibility in the 'fix' part as long as the comps are there. Lenders know that you are only in those type of bridge loans for a short period of time, so you won't have as many issues there.

But the 'Hold' part of that, or the DSCR lending, is going to be the issue. Most lenders want to see reliable rent/tenant demand not just over the course of a couple of years, but potentially over the course of 30 years. So you will either see DSCR minimums, or reduced leverage (most true rural leverage that I've seen is maxed out at 65%).

As others have said, different lenders have some flexibility in this, but the biggest element I've seen is what the actual appraiser says about it. If you think that it is rural, but the appraiser calls it 'suburban' then you would be fine. However, if you think it is suburban, but it gets flagged as rural, you are stuck.

Good luck! Happy to help where I can.

Post: Draw Fees While Rehabbing a House Using Hard Money

AJ Exner
Posted
  • Lender
  • Springfield, MO
  • Posts 574
  • Votes 285
Quote from @Ryan Horne:

Hey All,

I have gone full time into rehabbing & selling houses over the last year. In that time I've used several different funding options. My own cash, local community banks, & hard money. I've also used GC's to complete full rehab jobs & depending on how much work a house needs and how comfortable I am with the rehab, often times I will sub out the work to different painters, handymen, electricians, plumbers, etc instead of using a GC.

The more I do this the more comfortable I am managing the jobs myself and it often times saves me significant amounts of money on the rehab costs to just sub out the work vs using a GC for the full rehab. With all that being said, I'm hoping to start using sub contractors to handle the majority of my jobs moving forward, but I'm running into a small snag.

The majority of the houses I'm buying right now I'm using hard money to fund. With pretty much every lender I've used they charge a draw fee whenever I pull a construction draw to pay out a contractor. They're typically $150-$300 per draw depending on the lender. This is typically not a huge deal when I'm working with a GC. They're usually fine getting 2 draws throughout the construction project and it just costs me an additional few hundred dollars in fees. However, in working with sub contractors it is going to require more frequent payments to them vs the one or two draws I would request when working with a GC. I'm trying to figure out how to navigate this without increasing the number of draws I'm requesting from the hard money lenders. 1-2 draws/project I can handle. 5+ and that starts to really dig in to the profit margin on a deal. Has anyone navigated this scenario? Any recommendations for how to best handle this? I could, in theory, just keep some money in savings to float these costs, but I'd really rather that money go to buying another property instead of sitting their floating money to pay contractors.


Ryan,

I know of a lender that automatically budgets 4 draws into the budget which might save you a little bit on that end, plus they defer the monthly interest payments which might keep you more liquid.

As you get going there are definitely a few options, just shot you a DM and would love to help if I can.

Good luck!

Post: BRRRR startegy when you do a refinance cash out

AJ Exner
Posted
  • Lender
  • Springfield, MO
  • Posts 574
  • Votes 285
Quote from @Karim Smail:
Quote from @AJ Exner:
Quote from @Karim Smail:

Hello Community team,

When you do a BRRRR, I am finding out that there is a 6 months seasoning waiting period ( DSCR ) before you can cash out refinance, so we can evolve our funds to go to the next property to purcahse and redo a BRRRR.


Thanks for your input and advise for a solutions.


 Correct, many lenders require a 6 month seasoning period, but there are a growing number of lenders doing 90 days or less right now, especially if you can show that rehab has taken place.

Are you currently looking for one in Detroit? Just sent a DM but happy to help if I can!


Hi Aj,

Thanks for your reply, would you please send the lenders contact info that do 3 months seasoning ?


Sure, just sent you a DM