All Forum Posts by: John Cardinale

Quote from @John O'Leary:

@John Cardinale 

I meant that you can use a hard money lender that offers DSCR products, as traditional lenders do. Lenders will require the borrower to have the 15-20% down payment plus any reserve requirements for underwriting purposes.

Regarding your question: Are you asking if you need to have the 20% difference in cash to bring to the first mortgage closing and then have the seller lend it back to you right after closing? Or are you considering having the seller front the money for closing and then record the second mortgage immediately after?

I've seen both approaches. The seller may place the 20% in escrow, secured via a promissory note, and then record the second mortgage later. While the lender doesn't want a second position at closing, there's usually nothing preventing it afterward. It ultimately depends on the specific underwriting requirements of each lender.

 Got it! You answered my questions with the second paragraph. My understanding is that I'd need to have the 20% in cash for closing but could arrange for the seller to put the 20% I need for down payment in an escrow account until after the closing with the Hard money lender. Then a second closing of the owner financed loan could happen that would replace my personal cash in the deal. 

thanks for your help !

Quote from @Andrew Postell:

@Alex Jacobson this scenario continues to pop up. The solution is WAY simpler. I'm not sure who's out there teaching such a structure to real estate investing (I'm guessing someone is teaching it because this keeps coming up) but this scenario is a "normal" acquisition. Meaning, a normal Hard Money Loan will lend 70%-75% of the ARV....which is more than enough to purchase this property AND rehab it with $0 out of pocket. There's no need to use so many loan/lien positions that carry difficulties in structuring and require downpayment/money out of pocket. Keep your money. Keep it simple. Depending on your exit strategy you would execute as normal to flip or Refinance after Rehab with the BRRRR Method on this type of a property. I hope this makes sense as I am describing it but feel free to ask any questions on it.

 Hi Andrew, Is $0 down payment in this scenario a real thing? Is that only because Alex's description of it pencils out so nicely? If so can you provide a referral for this lender?

I've seen a lot of loans require at least 10% down to get into this deal (acquisition/renovation loan). If one is trying to exclusively use OPM then the value is there in letting the owner hold back a second mortgage. Even more so if the owner will offer a generous interest rate. I own a property right now where the owner holds back the down payment at 4% for 5 years and my local bank has first position at 7%. 

Quote from @John O'Leary:

Use the hard money to get 80-85% of the purchase price on a DSCR loan, (assuming this is turnkey) and use seller financing for the 20% down payment. Have the seller hold a silent 2nd until the 1st position lender records the mortgage than have them attach the second. You will need to show you have funds but this is a strategy regularly used.

Hey John, I have a question about your reply. In your first sentence you refer to hard money and a DSCR loan. In your example these are the same loans right? So just use a DSCR loan from a hard money lender to get to 80-85 LTV? And then for the last part of using seller financing... Can you explain this part a little clearer?

Are you saying you will actually need to possess the 20% difference in cash to bring to the first mortgage closing? and then have the seller lend you that back right right after the closing? Or if the seller is really trusting have them front the money for you to bring to closing and then record the 2nd mortgage right after?

Quote from @Joseph Chiofalo:

Hi John, 

Where is the property located?  Any specifics of the transaction you can share? 

JC

Hi Joseph, it’s in New Orleans, La. It’s 11 studio units and 1/2 of the units need renovation. I’ve seen a few adds for commercial property loans with a 30 year term for properties with 5-9 units. If I were to undertake a project like this, I would likely want to refinance into a mortgage with a longer term. 

Good afternoon, I'm looking to make contact with a lender who can help with a DSCR loan for an 11 unit property. feel free to dm me. thanks

Quote from @Beth Anderson:

I am so excited about what I've been learning from Pace. I'm consuming his content as fast as I can. I have purchased his book bundle from Bigger pockets, watched all of his podcasts on here, and I am so amazed! I have been stuck in a rut of thinking that we have to buy our first deal, a house hack, with traditional financing. I just realized tonight that if I can get a place on seller financing or subto, I don't HAVE to move my family into a multi-family for one year before we can move on and move up! So many doors are open to me now!! But I do have so many questions. Can anyone help me with these? I know I will find answers if I keep reading and exploring, but I have a potential deal going right now, so I need the answers sooner rather than later.

1. If I buy a place on seller finance and it needs rehab, where do I get the money for that rehab and how do I pay it back?

2. Should I still get a home inspection before I buy?

3. How do I find a title company that will know how to handle seller finance or subto?

Thank you for any advice! 

Beth

3. If you know any other investors or wholesalers, you could ask them about the best title companies around. Also ask in local meet ups like REIA meet us or the like about the best title companies to work with for investors. Finally, a realtor with a lot of
experience should be able to help you find a title company that can facilitate owner financing. 

Thank for your response Jay. I see you're a lender. Does your company offer any HELOC products for primary residence/house being hacked property?

my income in 2023 looks pretty tamed (on paper at least). I'll def. try what you said. Any particular larger national bank come to mind ? or do you have personal experience with any ? 

thanks for your reply! 

cheers,

john

Hello all! I'm in a little situation that's got me scratching my head. I've been house hacking since 2014 in a duplex that I have a 3.8 mortgage on with about $175,000 principal balance. I have an existing HELOC through a local bank with balance of $100,000. The value of the duplex is likely $450,000. My current HELOC matures 12/31/2024 and I'm thinking this bank will not want to renew the loan (I'll verify this of course) because I've accumulated rentals over the years, and now I have quite a few mortgages. So I'm assuming that if my DTI and other convention mortgage stats don't add up, they won't renew this HELOC. I'm looking for a new lender for this HELOC product and I see this as the only solution if I'm going to keep my low-rate, first position mortgage intact. If anyone has any lender contacts for a second position loan while house-hacking please forward them to me.

sincerely, 

john
 

I'm pretty sure you can get a HELOC on an investment property. Have you tried to contact using the BP lender finder link? There is an option for "Home equity loan (investment property)"

https://www.biggerpockets.com/business/finder/lenders