All Forum Posts by: Rob Beeman

@Eli B. COVID created a mess in the lending world. Our short-term loans never missed a beat, however the long-term loans came to a screeching halt. We now have re-done our long-term loan for rental properties (1-4 unit) and offer 30 year financing with the property deeded in an LLC (members are the guarantors). We service 25 states. If we can help: leave me a PM.

We are a direct short-term lender to real estate investors and have borrowers seeking either a portfolio pack of SFR's (1-4 units)(prefer min. of 20 props in portfolio - bigger is better)(OK if they need updates) and/or Value add MFR (60+ unit). Areas will consider: parts of FL, GA, NC, SC, parts of TX. We will be the funder of the purchase/rehabs. My email: [email protected]

@Kevin Marquez

I have always tried to tie my deals to the use of 3 figures:

1.) Try to have the purchase price be no more than 50% of the ARV (ex: PP$50k, ARV = $100K+)(the purpose of this is so that you have room left in the calculation for rehab cost, carrying cost, exit cost, etc. whether flipping or refinancing to hold)

2.) Try to have the purchase price & rehab cost (these combined = cost) be no more than 70% of the ARV (the purpose of this is so that you have room left in the calculation for carrying cost, exit cost, etc. whether flipping and taking a profit or refinancing to hold and need the value spread)

3.) Assume that you will need to have roughly 35% of the costs (purchase price + rehab costs) in liquidity

These are not easy to accomplish - especially if buying from the MLS. Easier if buying off market properties. When I stick to these figures, the deal seems to work. So, using your liquidity of $70K with this formula you could target a purchase & rehab cost of up to $200K ($70K liquidity divided by .35 = $200K max). Try your best to accomplish figures #1 & #2, so that you have the room to earn a profit or to be able to refinance when the rehab is done and lease in hand.

Note: if refinancing, the long-term rental loan lender might want to see 6 months title seasoning (that 6 months has passed since you purchased it) in order to use the ARV as the value in their calculations. If less than 6 months title seasoning, then the lender may only use the purchase price and rehab costs to equate the value............that usually will not make the deal work. NOT ALL lenders have this stipulation, so ask your rental loan lender if they do (in advance) so you are prepared accordingly. The lease becomes very important in the refi process, as this determines the rental income to cover the mortgage and expenses, plus. Good luck!

@John Hilyard John, why not just start buying the properties in entities (LLC's)? The lenders will no longer use your personal income in determining the income underwriting. Instead they will use the rental income (lease) of the property being underwritten. Typically they will not even ask for personal tax returns, as the loan is supplied to the entity and you, as the member, are the guarantor. The rate might be a little higher, but nothing will appear on personal credit and you can have as many open loans as needed. Time to think about approaching commercial rental loan lenders and taking title in LLC's.

@Cale Delaney I have never had a second position note go down the right road. Not saying that it couldn't, just hasn't worked for me. The worst part is, in order to recover the funds, I had to buy out the first position! My take - only do the loan if you can live with the outcome if it goes wrong - or be able to buy out the first position if needed.

@Shawn Willard

Shawn, The answer depends on whether the property is deeded in YOUR name or an ENTITY (LLC). Local banks OR credit unions can be a great resource as they sometimes do not have a minimum loan OR minimum property value requirement.

But, if they are not an option, and it is either already deeded into an LLC or can be transferred to an LLC during the refi, then send me a PM, as I might be able to help. Typically the min. property value needs to be $110K and min. loan amount needs to be $75K for some regional/national rental loan lenders.

Shawn, 

@Stephan Bataillard

Select a rental loan lender (either regional or national). They will use the rental income of the properties (leases), not use your personal income to qualify. The property will need to be deeded in an entity (LLC), so if that is not currently the case it will have to be transferred into an entity during the refi (transfer fees probably apply). You, as the LLC member will be the guarantor on the loan. Make sure that ownership has been for at least 6 months in order to use the "current" value.

@Jenna Bamlet

Jenna, I agree with the 2 other comments posted - local or regional lending options are the best (whether the property is deeded in your name OR an entity (LLC), as they may be more lenient on leverage and lower on rates/fees. However, do not be surprised if they ask (or conduct research to discover) if the property has been listed for sale in the last 60-180 days. Many lenders seek this info, as they are concerned that if the property has been "listed" for sale within that time period, the borrower, at the last minute, may kill the loan and sell the property - hence all that loan underwriting work done, for no deal completed. If you had it for sale but NOT listed on the MLS, then there is typically not a way of knowing it was up for sale recently (unless its blasted all over the internet by the seller). Good luck.

@Rodrigo Orellana 

Options on refinancing the duplexes:

1.) Contact "local" banks and credit unions and ask if they loan on rental properties. IF you have the deeds in YOUR PERSONAL NAME, and want to keep it that way - then you would talk to a RESIDENTIAL loan officer. They WILL look at your personal income and personal debt and allow a percentage of the rental income from the property to be used in the total income. The upside = this will typically supply the lowest interest rate, maybe better loan leverage, perhaps title seasoning will not be a concern in determining current value. The downside = the loans WILL probably appear on your credit report (may negatively impact FICO scoring), they WILL use your income and expenses in determining overall DTI (debt to income).

IF you have the deeds IN AN ENTITY (LLC), or want to transfer them into an entity DURING the refi - then you would talk to a COMMERCIAL loan officer and ask if they offer rental loan financing on single family and 2-4 unit multifamily properties. The upside = they will typically NOT look at your personal income/expenses, but use the rental income (the lease) as the driving factor for debt repayment (they might not even ask for tax returns). It will typically NOT appear on your credit report, as the loan is supplied to the entity, and the member(s) of that entity are the guarantors (unless the loan goes into default - then it could appear on a guarantor's personal report). This seems to be the preferred method of most landlords as no matter how many loans they have open, their credit reports are not showing them. The downside = in order to use the current market value the lender may require at least 6 months title seasoning (ownership). If less than 6 months ownership then the value will be calculated by using the purchase price and rehab amount (this will usually not work well on BRRRR's, so make sure 6 month's ownership exists before refinancing). The rate will be higher (more likely in the 6's), term could be 20-30 years amortization depending on the lender. Loan leverage may be lower (up to 75% LTV)

2.) Contact regional or national long-term rental loan lenders. This type of lender will typically ONLY lend to the entity (so if the deeds are currently in your name you will probably have to transfer them (at a cost) to an entity during the refi closing. These lenders specialize in rental loans on 1-4 unit properties and use the income from the property (the lease) as the driving force for debt-to-income ratios (dscr) in their calculations. The dscr, along with the FICO score of the guarantor has an impact on what the loan to value (LTV) may be. Anticipate a loan term of 20-30 years, with possible adjustable rate (ARM) or interest only (IO) options, and rates in the 6's, with loan origination fees paid at closing.

In every case you will typically bear the cost of any appraisal or inspections ordered by the lender.  Good luck.

@Natalie Wells Natalie, you or your partner may be experiencing debt to income issues because you are approaching the lending process from a residential point of view, rather than commercial. Understand that the property is a 4-plex (residential zoning), but if you transfer title to an entity (like an LLC) during the refi process, you can then work with the commercial lending division of a bank or credit union where the income is the lease on the property, and the expenses are those tied to the property (taxes, utilities paid by the owner, insurance, etc.). By transferring the title to an entity, it is no longer a residential loan, but a commercial loan instead. Typically the lender will not look at personal income or debts, as the loan is supplied to the entity (however additionally secured by the principal(s) of that entity). They will use the income of the entity (the rent from the property in this case) and the expenses of the property to determine ample debt coverage for the loan (this is called debt service coverage ratio (DSCR) and replaces the debt to income ratio (DTI) on residential style loans.

Some local banks or credit unions that have a commercial lending division might be the best option for rates, if they offer financing of this type on 1-4 unit properties (some do, others do not). Another option might be a national landlord lender like Visio Lending or Silver Hill Financial (Google each). They have loan products to service 1-4 unit properties owned by an entity and use the income and expenses from the property (not the guarantors) for qualifying.  Hope this helps.