All Forum Posts by: Patsy Waldron

Hi @Nicholas Myers-

I would prefer not to have payments on two properties if I can avoid it. Plus interest rates and terms on HELOCs are not as favorable. I am pretty sure there are people who have cross-collateralized their properties to finance more properties, I am trying to see how I can use that. Thank you for your suggestion!

Here's what Fannie Mae has to say about eligibility:

https://www.fanniemae.com/content/guide/selling/b4...

You're welcome. Good luck!

Hello lenders and experienced BP investors out there....

How realistic is it to ask a conventional lender or private lender to use one property (a SFH owned free and clear), worth $75K, as collateral instead of a down payment (or maybe have a small down payment, but nothing close to 25%) for another property worth $130,000? Would lenders accept this arrangement? The second property has tenants in and rents would more than cover mortgage payments, and this collateral represents >50% of property value. Any thoughts, suggestions of where to look or other ways of going about this are very much appreciated!!!

@Adrian Chu

@Dmitriy Fomichenko has put together an excellent list of non-recourse lenders, available at this link. Call or e-mail several of them with details of your deal so you can compare the terms. Some have minimum loan amounts, the fees and interest rates vary quite a bit, not all lend all over the country, and some may not lend in a particular area or on a particular property. 

@Paul Saunders

Yes, I personally would, and compare my units to those other kinds in terms of size and layout to determine what rents I can reasonably expect.

Bump....

ANYONE?!?!?!

IMO, it depends on the size of each unit and layout of the multi. If they are quite big, I have seen them advertised as "apartment homes." Ditto townhouse style (vs. multistory).

Do you mean the partner has already bought the house and the title is in their name, and you would only be financing rehab costs?

Draw up a financing agreement that specifies how much money you are putting up, how long you are financing (you don't want your money to be tied up for years!), and what you will get at the sale of the house. Since you didn't finance the purchase of the house itself, it is likely that the partner will offer to pay you principal + interest rather than a share of the profit (at least that's what I would do). You'd draw up a promissory note for the amount you are putting up and specify the interest rate and time frame.

Gotcha. If I understand you correctly, someone approached you (online, it sounds like) and presented you with a joint venture deal where you put up the money and they do the work? I have heard of this being done quite a bit... Especially if the one financing has zero experience or interest in doing the rehab work, or want to get into REI, like yourself. It can be an excellent way to learn about real estate if you find the right partner. Pay close attention when you meet this person. What does your gut tell you?

The most important thing you want to do is vet the potential partner VERY thoroughly. You especially want to make sure the numbers they present are accurate- too often, rehab costs are under-estimated and ARVs are over-estimated by inexperienced (o r dishonest) rehabbers. Double-check their numbers with other experiences rehabbers, maybe even here on BP.  Ask them for examples of flips they have done before, as well as references. Any information you can get that will set your mind at ease about your money being in good hands!

You will want a contract that spells everything out in detail. Have this drawn up by a lawyer. You will want to specify the division of rights and responsibilities in the partnership (e.g. Will you just provide the money and then wait for your payday, or will you take a more active role in the rehab like participating in design decisions?), the division of profit, what happens if there are cost overruns or things don't get done in the agreed-upon timeframe (do you provide more money, or does your partner take the hit?), etc. You want to make sure you, and your money, are protected. If you are financing, the property should be in your name (or your LLC, if you choose that route).

These are a few things that come to mind. Hopefully others will chime in. Real estate is exciting and there are many ways to get in and be successful. Best of luck!