All Forum Posts by: Seth Hayes

One approach you should consider is a commercial mortgage broker.

The downside to approaching banks is that it is time consuming, and more importantly, it may actually pigeonhole you into only investing one specific way. Many banks have their own requirements and limitations on what kind of investment activity they are willing to fund. You may come across a great deal, but the bank you have an established relationship with might not be willing to fund it because it is a square peg that won't fit in their round hole.

A mortgage broker has established relationships with multiple lending sources; big banks, small banks, hedge funds, private money lenders, etc... With a mortgage broker, you will be able to expand your investment strategies to meet your needs. They will be able to pair you up with a lender that can fund your specific transaction on a case by case basis. More flexibility will tend to provide you with more opportunities.

An ARM in commercial lending is pretty standard. There are other benefits to obtaining commercial loans to standard loans, but the rates typically aren't one of them.

Most investors look to improve the property value during the fixed period and either sell or do a cash out refi prior to the adjustment. This won't necessarily keep your rate from increasing, because the refi will be subject to the prevailing interest rates of the day. However, you will once again be able to lock in the new rate, and/or pull money out to fund a future deal.

Most commercial lenders require one year of seasoning for you to be able to pull out your money to fund the next purchase. Typically a lender will only do between 70% and 80% LTV. During the first year, they calculate the value being only what you put into purchase and rehab.

This can cause diminishing returns for you if you don't wait out the full seasoning period. Once you go past the one year point, they will base the value on the house on the market value which should yield you a higher cash out based on LTV.

Real estate loans below $50k are right up the alley for many private money lenders. They fit nicely in their Self Directed Roth IRA.

If you have as good a deal as you say, the numbers will speak for themselves and make the loan attractive to private money lenders. I highly recommend checking out your local REIA or any other networking groups to start fishing for private money.

Some banks will do 5 year balloons, but if you keep shopping around, you can get a better deal. Most of the lenders we use will do a 20 to 25 year full amort on a commercial loan. They do typically make it a 5/1 ARM, but that's far better than a 5 year balloon.

An app can work for a specific lender, but then you'd be subject to that lenders requirements. Everyone in Real Estate Investing knows that no two deals will work the same way, so a cookie cutter app will eliminate a lot of good deals because they don't know how to work with the investor.

You'd also have to download an app from each lender and fill out all the pertinent information/documentation for each one.

Mortgage Brokers have established relationships with multiple lending sources to include banks, hedge funds and private money lenders. Brokers will also help you structure your deals in such a manner to maximize your borrowing options with their stable of lenders. No app is going to be able to do that. It'll simply give you a thumbs up or thumbs down and let you figure it out on your own.

75% cash out is standard for commercial cash out lending. Without the seasoning, they will base that 75% on the purchase and rehab price that you have in. If you wait for the 12 months of seasoning, they will base the 75% cash out on the appraised value of the property, which should be higher than you have put into it.

Also, there is no need to get an appraisal. Any lender that you talk to will require another one to be done before they consider the loan.

They are most likely considering them commercial because they are owned by an LLC and are non-owner occupied investment properties. If you are trying to bundle them together for a loan, that would also explain it.

It's not difficult to do what you are looking for, but like Don Konipol recommended, a mortgage broker is the best way to go. They already have gone through the hard work of finding lenders that do what you are trying to do, and they can place you with the lenders that can best meet your needs.

If you sit down with a commercial mortgage broker, they will ask you questions to see exactly what kind of investing you are looking to do, what your current financial position is, as well as your long term/short term goals are. With that information, they can either provide you with lending sources that you would have been unaware of, or they can steer you in a better direction than you intended to head down.

Your better brokers are performance based, which means that they don't get paid until you close a loan, so any effort you put into picking their brains will be well spent, and can lead to a mutually beneficial arrangement.

Commercial loans typically require you to come up with at least 20% as well.

Your best bet is to partner up with someone and provide your knowledge/expertise and time while they provide the financial backing.

Another avenue is either owner financing a few deals using your $8k to show you have skin in the game, or find a private money lender that is willing to finance you on a short term loan with a balloon far enough out that you can season the property and get it refinanced before the balloon comes due.