All Forum Posts by: Eric Loya

@Dan Krupa Hey Dan, I feel your pain with the tightened lending regulations traditional lenders have with self employed individuals. Because of this gap period, perhaps a bridge loan would help accomplish this goal - as current asset value carries more weight than income verification with these types of loans.

As a direct lender, we offer bridge lending programs (1-3 years) with the ability to cash out refi up to 65% of value in as little as 5 days if you are seeking to access funding for more projects. Message me for more details if this seems of interest.

@George Bronson Wow! That's unfortunate, looks like the lender has dropped the ball, or is dragging their feet to collect that fee.. 60 days to refinance (even for a conventional loan) is a long time. 

Most hard money lenders will operate within this closing window (5-10 days). I'd say Transactional Funding could be another option, or even seeing if another title company could take over the file. I don't have any contacts in this space, so I'd say going through google would be your best bet.

@George Bronson Hi George, looks like you have an interesting situation on your hands. What type of 'massive fee' are we talking about- and what's your ultimate goal in the end with this property - i.e. sell or traditional refi? 

Anyway you look at it, this is an urgent request for funding, and even if you're able to refi with another hard money lender there will be origination fees there as well. Perhaps it may be the best to just eat the cost if it's around the same of what a new loan origination may cost, unless you have a private lender willing to step in.

I work with a direct bridge lender in California and we are able to close files in as few as 5 days. Let me know if you'd like to talk.

@Andrea F. Hi Andrea! Glad to hear you're making moves on taking action with your real estate investment career.

I think the best and safest option is C- take on a rehab of your in-laws place. I'm sure the debt you'd have to service on this loan would be less expensive than a hard money loan, also this option keeps your cash reserves higher thus your risk exposure down - as you would only have to make monthly payments and come out of pocket for the renovations.

Just make sure to do the necessary renovations to get the dollar value you are seeking on the sale and I'm sure this opportunity could be the one to get the confidence under your belt to continue investing down the road! It's always a good idea to scope out recently sold properties and see the type of work done on those properties to feel confident about your resale value.

Best,

@Mary Ann Shlim Hi Mary! Through my career in real estate, I've been both the borrower for these types of loans, as well as the lender.

In regards to the process, it's actually a lot easier than trying to obtain a traditional mortgage. Since these loans are typically short term and higher interest, I'd recommend having an exit strategy in place (sell or refinance) when securing this type of financing. 

Here's how I would break down the process:

1) Discuss Your Situation w/ Lender (i.e. looking to purchase/rehab/sell property, cash out refi, or bridge a purchase that cannot go conventional)

2) Discover Lending Parameters (3 primary questions to ask)

- what is the range of interest rates (typically 7-13%)

- what are the origination fees and out of pocket expenses (typically 2-5%)

- how are LTV's calculated - is it based on purchase price or resale value (lenders are usually 65-75% of resale value) - also, some lenders have max LTV on purchase price, include/exclude rehab costs, so that's important to note as well

3) Get a Few Quotes

Most lenders can move quickly on closing (5-14 days), as this is primarily an asset based loan - meaning not many times will the lender request tax returns or income statements. 

I hope this sheds some light for you! Let me know if you have any other questions as we do provide this type of financing in Illinois.

@Account Closed Hi Stephen! I like your mindset on using leverage to accelerate your personal real estate ventures- that's exactly how I began flipping properties. 

Using a personal loan could serve as a good tool to bridge into your first project. I'd recommend using it for a flip if you can secure enough of a personal loan, and possibly leverage with hard money- as most lenders want skin in the game on projects. Of course, it's a bit risky, but if you analyze the numbers on the flip, you could have that loan paid off and a chunk of equity in your hands within 6 months or less (pending the resale of the flip). From there you wouldn't be as leveraged and could continue growing as you wish from there.

A personal loan to secure rental property could work as well- but holds more risk as troubles could arise with flakey tenants or repairs to be done during the hold time. I'd recommend the flipping route so you can secure more cash to use as you see fit as you grow your investing career!

@Jake K. Hi Jake,

Hard money loans are not that difficult to secure, but they will require skin in the game as someone had mentioned earlier. This type of financing is best used for distressed real estate (i.e. fixer) with equity in the deal (a good deal will make up for the financing cost - usually 8-12% and then some). 

Keep in mind, these loans also come with origination fees anywhere around 1-3% of the loan amount. Since these loans are short term in nature, almost all are interest only payments. If you have a buyer lined up to payoff the lender as an exit strategy, this could be a good deal for you.. just keep in mind the fees and see if there are any pre-payment penalties if you intend to hold it for a short amount of time.

JaNae Anderson Welcome to BP and Happy Thanksgiving! It sounds like you’ve got a few obstacles to overcome to land this investment opportunity- but I do see a way to make it happen. Aside from the gift funds not being allowed to fund the deal, the biggest issue I see is the timing of when these ‘future’ rents can count towards your income- ultimately effecting the DTI ratios. As someone mentioned in this thread, most lenders want to see a lease in place, or seasoned tenant before including that revenue.. and since the lease won’t take place until the turn of the year, your current mortgage is most likely included in DTI along with the purchase of the new duplex. A bridge loan/hard money loan would help you secure the property if it’s something you really want. Yea the costs are higher, but you can refinance after the lenders ‘seasoning period’ hits and you can use the gift funds to make the purchase- plus most are interest only payments, making it easier to handle cashflow situations during the gap period. Send me a message if you have questions or need reputable lenders in this space!

Hi Thomas, Welcome to BP and Happy Thanksgiving! It looks like you’ve got a great opportunity on your hands. Based on the guidelines you mentioned, a bridge loan will help you accomplish this goal. These are typically shorter term loans (1-2 years w/ interest only payments) and are loans based primarily on the asset itself. They’re designed to work for real estate investors with the intention to refinance or sell once the term is complete. Based on what you’re saying, we can cash out refi up to 65% of appraised value. This would give you the Capital needed for new projects and cash on hand to meet the 24 month reserve your lender needs upon Refinance. Costs are a bit higher for this type of loan (7.5%-10%) and usually incur origination fees of 1-3%. Even though it’s higher than a traditional mortgage, I’m sure the opportunity would make up for itself upon the refinance and acquisition of more properties. Send me a message if you’d like to talk more!

@Mary Ann Shlim Based on your experience and credit, I'd say the lower range is possible to secure. I have sources available to close in 5-7 days if you're interested, just let me know!

Private capital will always be the better source of financing if it's readily available. Most of the time it's interest only without points and origination fees or any stringent loan to value ratios that need to be met. From my experience, it's best to attend live real estate events and build trust in person to secure these types of funding sources.