All Forum Posts by: Rob Beeman

@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.

@Scott Michael

Scott, first CONGRATS on the sale!!!!  Walking away from the closing table from the SALE with the proceeds check in hand (or wired to your account) is an awesome feeling..........isn't it?  Relish that moment, as usually a lot of time and some grief has gone into getting to this point.

As to your questions on profit, here is what I do:

As mentioned, use the HUD sheets from your purchase & sale only for the costs associated to the closing(s) (taxes, water/sewer bills, settlement agent fees, transfer fees, interest paid, etc.).

Calculate your COSTS, which could include: purchase cost, any closing fees associated with that purchase; carrying costs (utilities, taxes, insurance, mortgage interest, lender fees,); rehab costs and ANY other fees or costs associated either with that project OR in general that are split over multiple projects (cell phone, mailbox rental, legal fees, accounting fees, etc.) and fees associated with the sale of the property (transfer fees, bring-to-dates on water/sewer/taxes, realtor fees, etc.) All of these amounts combined should equal your total costs associated with the transaction.

Now, subtract that total amount from the sales price of the property.  The remaining figure should equal your pre-tax profit on the project. As for depreciation and other accounting deductions that might be applicable......I have always left that up to the accountants (they know the laws on that better than I).

By the way, this method of calculating profit is similar to the method that I use to place a bid to purchase a property. I work backwards from the sale price and deduct any/all costs tied to the project, and then deduct my targeted profit to get to a figure that would be my purchase & closing costs at purchase.  This way the profit is built into the calculation. If I buy at that targeted purchase price & closing costs, then I should come close to the targeted profit (unless there are expenses that arise that were not in the original plan, like rehab overruns, etc.) Hope this was helpful, and once again.....congrats!  Now go do another.

As a seasoned investor, I learned early on the POWER of Leverage (using other people's money). But, how do you get to it? Well, if you have plans to buy at least 4 or more properties in the next 12 months, then we should talk about our Line of Credit (LOC) to help you accomplish that plan.

The benefits:

Use of $1MM of our funds to buy and/or renovate single family and 2-4 unit properties in 28 states

Terms of each loan originated within the line are set for 24 months

Rapid closing (as fast as 5 business days)

Buy in multiple LLC's if desired

Loans do not appear on personal credit report

OK to have multiple loans open at the same time

Expand the line as needed to as high as $20MM

The catch:

Guarantor(s) of the loans must have a mid-FICO of 620+ if they have recent investing experience, and 680+ if they do not have recent investing experience

Guarantor(s) must show current liquidity of 8%-10% of the size of the line being created (Example: for a $1 Million line, must be liquid for at least $80K)

Small legal fee and line origination fee once approved for the line. $895 deposit collected at the commencement of processing the line of credit. This deposit is applied to the 3rd party costs of the first loan originated within the line. If never used - it is refunded.

What to do if you are interested in applying, or need additional info:

Schedule a time on my calendar to talk: Calendly.com/robdlp

Email me: [email protected]

If you are serious about scaling for growth, let's talk!

Yes, its a "good" problem, but STILL a problem.  We have way too much money in our accounts that is NOT on the street in loans. We are a private lender to real estate investors, offering short-term lending as leverage. Specialties:  Fix & Flip loans on 1-4 unit properties and bridge loans on 5+ unit multifamily properties.

We loan in 28 states, close quick, allow multiple loans open per borrower at the same time (opportunity to scale for growth), lend to experienced operators & newbies, and are mortgage broker friendly (you supply the borrower, we take it from there, you get paid on the HUD).

If you have a deal that needs short-term rehab style money, complete our app here (and select Robert Beeman as the Funding Specialist that you are working with): 

https://dlplending.com/apply-now/

My email: [email protected]

Direct: 215-913-1580

Your project and our funds............a perfect match.

@Quaeshun Ross  Congrats on the first purchase!  However, you have 2 hurdles to jump:

1.) Low cost - this is good & bad. Good, because the risk is lower and workable with cash available. Bad, because most national lenders have a minimum loan of $50K-$100K.

2.) Location - not all lenders will lend in Michigan (or Detroit), if in fact that is where the property is located

Always a good idea to build your business to be "lender friendly". That way IF you need to borrow, you can. Wise to buy where lenders will lend, and gear the numbers of the project to be within the guidelines of "most" lenders.

With these things being said, you have 2 possible options:

1.) Use local self directed IRA holders (or investors with savings) to fund your rehab since it is relatively small. You can have them place a lien on the property for collateral on the debt. You can sometimes locate these "investors" at local real estate investment club meetings (even virtual meetings), Facebook groups, or through current contacts (lawyers, doctors, church members, etc.)

2.) Talk to the "Commercial Lending Division" of the local banks & credit unions. You want the commercial division if the property is titled in an LLC (hopefully that is the case). Talking to a residential loan officer will not work and it is wise to keep investment properties titled in LLC's and "off" the credit report. Local banks & credit unions that offer rehab financing (or rental property long-term financing) sometimes will not have a minimum loan amount, and sometimes keep the loans as "house: loans (helping the community).

Hope this was helpful, and best of luck on your project.

@Anthony Barrueco A rehab style lender will help you accomplish the goal. The loan will be either a percentage of the purchase & rehab amounts OR a percentage of the ARV (after repaired value), whichever is less. Some lenders will go down to a $50K min. loan amount.

Things to keep in mind: 

If you are a first time investor, the lender may want to see a mid-FICO of 660-680+, so they know that you can qualify to refi into a long-term loan

Lenders love cash reserves. The more the better, especially in the current COVID market

Take title in an LLC on the short-term loan (purchase & rehab) and the long-term loan also. The rate will be a little higher, and the loan leverage a little lower than if you took title in your name, but it should keep the loan off your credit report

Dealing with contractors can be a challenge even when the project is local to you, but from a distance, even more so. Target a rehab project that will not be too extensive. More along the lines of cosmetics (kitchen cabinet replacement, vanity replacement, toilet replacement, carpet replacement, painting, etc.)  Try to stay away from new framing, new electrical, plumbing, heating, etc. Swapping parts should be the focus of the rehab.

Never pay contractors in advance for labor. Always get eyes on the progress before cutting checks.

Best of luck.