All Forum Posts by: Kevin Woodard

I would get a loan that is structured to do a fix and flip. I would expect to bring 20% to close and get the construction financed 100%. The way it stands now, you’ll get financing for the acquisition and be out of pocket for the construction for $31+rehab. 

Also what's the ARV?

Quote from @Anna Washburn:

Can someone explain the difference between HELCO and hard money? 

A HELOC is a home equity line of credit. The institution gives you a line of credit secured by the property. Hard money is a loan that the institution advances you the capital, just like traditional mortgage or car loan. 

I will send you a message, the numbers look promising.

The numbers given will leave cash in the deal considering a constant ARV and you can get 75% LTV on the refinance. Considering the current economic environment talking down the seller is definitely an option worth considering. Could you prioritize the scope of work to get an ARV at or near the target?

 Just like Alex said the line is becoming blurred but you’re best off meeting and becoming acquainted with both. Each will have a strong suit in given the particular situation. 

I am reading the book it’s a good piece of gear, I highly recommend it! 

Last part, I’d be more than happy to talk about what I see with investors and answer any questions you may have.

From investors I have seen all sorts of loan structuring from Hard Money Lenders. Some are very beneficial for the borrower. Others leave the borrower with a lot of put of pocket expenses. The issue with the latter structure is where are you sourcing this money? If you’re using credit cards and you are trying to refinance your credit score will most likely take a hit. 

This boils down to shopping around and comparing all aspects of the products presented to you. Be sure to compare apples to apples (e.g. money to close, out of pocket expenses for rehab, points, the term).

Last part is have a plan for your exit strategy although things will likely change in 6 months at least you can start planning for it now and try to anticipate shortfalls. 

If you are looking to just purchase the property than a DSCR loan is what you need, as previously mentioned. However, you mentioned hard money so are you looking to do renovations then refinance into a long term loan?

@Anthony J Ruma 

I understand the frustration. I would ask you to shift perspective for a moment. You have a lot of capital that you borrow at a low rate. Now you want to lend out that capital. A second position lien (HELOC) on a non-owner occupied property is a fairly risky place to be, compared to first and one position on a primary residence.

With regard to rent, if it’s a primary residence that you’re house hacking or renting out rooms if the rents haven’t been seasoned (e.g. you know with little doubt that the rent will continue to be generated moving forward as it has in the past) then it is very tough to prove. 

As for the mechanics of all this, if you're increasing the equity in the property with construction, the purpose of the refinance is to payoff the debt you took on to originally acquire and renovate the property (HML/HELOC).

Are the high rates preventing you from cash-flowing, or are you deducing that you probably won’t cash flow because of the rates? If that’s the case you have to adjust your underwriting to the current rate environment, or hope that rates drop by the you need to refinance. Historically speaking rates aren’t high enough that if you aren’t cash-flowing it’s a rate problem, when in fact, it’s a income problem. 

Below is a list of lenders/banks/CU that do HELOCs on NOO properties. It's 2.5 months old but worth calling around and seeing if you can get a higher limit on the investment property.

NOO HELOC List

Hope this helps. 

Outside of adjusting the terms you're offering. If you go the DSCR route you're looking at the ability of the property to cash flow. This removes the DTI and personal factors that could hinder obtaining the loan.