All Forum Posts by: Sasha Mohammed

Mortgage broker here, I to do a ton of these loans. 10% down for rehab is totally do-able for acquisition, PLUS lender will lend up to 100% of reno. The reno part is in the form of a draw, so you would need some liquidity to get the project started, but yes, sub-20% initial capital investment is do-able. Most will cash-out refi to 75% of the new value once the project is done using DSCR lending and often can pull out their initial investment as well.

Hopefully you got an answer on this by now on another forum, but you'd have a couple options here. 

Since you have the equity to take out, i would certainly be looking at just doing a simple cash-out loan. whether thats a full-doc (qualifying with income) or a DSCR cash-out (using the cash-flow from the rental to qualify)... this would give you long term debt (30 year fixed) and likely be the most efficient answer.

there are fix and flip loans out there, but that doesnt seem like it would fit your needs on this scenario... unless you intend to renovate the property and then quickly pay off the $75k you borrowed. F&F/ reno lending typically does not have a prepayment penalty. 

sounds to me you might have to do this in 2 stages - first the rehab, and then the end goal is to rent for cash flow to support long term care expenses?

rehab or bridge loan (short term debt) to get the cash to reno, do the reno, put a tenant in, and then do a DSCR loan for long term debt.

if the property is in good enough condition and you can qualify using income instead of a renter, you could likely do a fannie/ freddie inv. loan and just dive right into a 30 year fixed without having 2 different transactions. this will save on transactional costs but it would have to pass appraisal (reads: the property has to be livable without health an safety issues). 

hope this helps

Structuring is easy -- set up a separate LLC with this group, allocate % of ownership on the LLC based on % of ownership in the properties, capital investments, etc. however you'd like. Use that LLC to buy/ hold/ finance the properties. Someone will have to be guarantor on the loan (unless you're buying cash).

Personally, I would be very clear and up front ab expectations ahead of time, in writing, so there's no confusion down the road to ruin relationships. 

BOL

To add to what @Patrick Roberts said, Fannie/ Freddie only allow for 10 financed properties. Interpretation of this guideline is subjective, I've seen lenders deny a loan if you OWN 10 (regardless of financing), own 10 FINANCED, and others allow if the financing isn't F/F financing. 

I think at some point the switch to investor-specific lending becomes necessary, but it sounds like you have some time before you run into this issue. 

In the mean-time, just play by the rules and you should be ok. FHA is probs not the move after your first w/ them, that 100 mile rule is a soul crusher. Conventional should be good, just don't mess w/ the occupancy fraud stuff its not worth it. Move in, cash in your year, on to the next.

Hey Austin, 

Both could work. Private money by definition is private, you can negotiate whatever terms you could negotiate, however, i would encourage you to make sure you trust your PM lender if you go this route. there are a lot of scammers and scumbags out there. 

DSCR through a traditional lender should work as well, and you'll get a bit more standardized terms. As @AJ Exner suggested, keep an eye on loan minimums. this could be your hurdle in St. Louis specifically, depending on your price point. 

I think one of the big appeals with the BRRRR strategy is that hopefully you have purchased the property under-market value (being that it needed renovations), did the renovations, and now significantly increased the value.

This forced-appreciation hopefully helps you at least take out your initial investment, and hopefully also increases the cash-flow of the property even with today's rates. 

If those numbers are not aligning, I would encourage you to revisit the initial investment strategy. Are you purchasing investment properties for appreciation? or cash-flow? Many move forward w/ BRRRR due to the hype without fully understanding the deal-flow, and whether or not it aligns with their goals.

I don't have a lender for 10% down directly for inv prop, but I do have one that will allow up to 90% CLTV - meaning if you can get the seller for example to do a 2nd behind them, you could accomplish your 10% down goal.

It is possible to put only 10% down, however, it may require a little creativity. 

State by state is going to vary, but general rule: if you still had contingencies intact, you should have every right to exercise those contingencies. OH is an escrow state, so i would have your agent reach out to the escrow officer and let them know you are cancelling the escrow, and which contingency you are exercising (whether it be appraisal, loan, or otherwise)... and ask when you can expect your EMD back in full. Disclaimer that I am not licensed in OH to give you any formal advice but I don't believe the seller has any say in the matter here regarding your EMD... this is the literal point of having a third party middle-man (escrow) in the mix.

Hi Alexis!

This isn't as hard-lined as many people think. You CAN get around the 2 year s/e history thing... Usually, the workaround stems from having previous job history (right before self employment) in the SAME LINE OF WORK. For example, if you were a CPA for a law firm, and then went on from there to open an accounting firm on your own, SOME lenders might be willing to look at this as a 2 year history, even though you're only 1 year into the self-employment piece. 

There are a lot of specifics pertaining to this and every lender is a little different in their interpretations of guidelines. I hate to admit it but a lot of people (loan officers) are lazy and would rather just tell you that you need 2 years needed so they don't have to put in the legwork to see, but it is possible. 

Im not a fan of seller financing unless that property is free and clear and the seller is offering reasonable terms NOT on money they have borrowed. just too many people get into this type of thing without understanding the whole picture, like title being moved into the buyer's name, due on sale clauses... etc. etc. 

also, just because its a very commonly overlooked guideline which makes financing on 3's and 4's a little challenging: FHA requires the property to self-sustain its own PITIMI by the rents. You may want to consider conventional 5% down if you decide on a 3 unit over a duplex.

Hope this was helpful.