All Forum Posts by: Sean Blomquist

If your lender is covering 90% of purchase, then I would assume you are covering the other 10%.

With a buy and hold strategy, you typically refinance only the loan value.  To do any kind of cash out during the refinance you would have to hold for at least 6 months if doing a Fannie Mae refinance.  No issue with it being a financed purchase.

@Darren Nardo all good questions.  

Yes, get preapproved with the HML so you can use their letter to make offers. You want to know that you can work together before finding a property, because once you have it under contract, the clock is ticking.

It is not a cash offer.  You will still be making a financed offer, but can write in that it is Hard Money.

Get all your info from the HML before finding a deal, so you know what your costs will be and can then make a smart offer on property.

Good luck!

@Bhakti Mary what part of the country are you located?

@Timothy Edwards Jr then a HML won't touch it. Your only option would be a 203k loan if you are buying a property that needs rehab.

@Ruth P. you aren't getting the refinance, but they will give you a preapproval. The refinance will be based on many factors when you go to get it done. Things that can have a huge impact on your ability to refinance are: your financial picture (reserves, DTI, credit), value of the property when you get the appraisal done after repair, possibly if you have a lease in place.

When we have a client doing this strategy, we want to see that they are preapproved for the refinanced before funding, so we know they have the ability to get that done.  Otherwise they are going to be flipping the property.

The best advice I can give you is: Complete the work you said you were going to do, don't spend a bunch of your reserves or rack up a bunch of debt during the rehab and do your homework on the ARV.

Do those, and you should be ok.

@Timothy Edwards Jr the biggest thing is if this is an investment only or are you planning to live there?  A 203K loan is only for owner occupied property and you will have to live there for a specified amount of time before you can refinance or sell it.  

A HML on the other hand will not want you living at the property. You can use that loan to buy and renovate the property and once the rehab is done you can refinance out of that loan into a long term loan as an investment rental property to build up a portfolio much faster. This the what they are speaking of when you hear the term BRRRR (buy, rehab, rent, refinance, repeat).

@Cole Schlangen feel free to shoot me an email and I can send you some information and answer any questions you have.

If you plan on owner occupying, you can use either, but there are big difference between the two.

The 203k loan has to be owner occupied, so you will have to live there.  

Upside: Lower interest, lower down payment, etc.  

Downside is your dealing with the government and you can't refinance until you've lived there 1 year to pull your equity out.

Hard money loan is not owner occupied and you can't live there while you are in the HML loan. You can do the rehab to the property, get a tenant in the other unit and then refinance as soon as the rehab is done to pay off the HML.

Upside: get the money to rehab, might be low down payment if a good deal, don't need to hire a contractor for everything if you want to do some of the rehab.

Downside: higher interest, can't live there during the HML only after refinance, If you want to pull any equity out, you would have to wait 6 months.

Hopefully this helps.  Good luck.

That is an overlay on their part. The only reason you have to wait 6 months is if you are trying to do a cash out refinance to pull some of your equity out of the property. If you are only trying to refinance the HML, then you should be able to do it as soon as the rehab is done and you have tenants in place.

Try working with a direct to Fannie Mae lender that follows their guidelines and doesn't shrink the box for investors by adding overlays.

We've seen people refinance in as quick as 45 days with a second appraisal done by the refinance lender to use the ARV.

Hopefully that helps.

@Ladd Krestan you are correct that most lender's will want to see numbers based on a contractor doing the work.  There are two reasons for this.

1. If you aren't able to do the work for any reason, you will need to hire someone and they aren't going to do the work without labor figured in.

2. If you default on the loan for any reason and the lender has to take the property back unfinished, they will need to hire a contractor to finish the work.

Hopefully that helps.