All Forum Posts by: Drago Stanimirovic

Yes, it is possible to do a cash-out refinance on a hard money loan, but it can be a bit tricky. Not all traditional lenders will refinance a hard money loan due to the perceived risk, but many specialty or non-QM (non-qualified mortgage) lenders may be willing to work with you. These lenders are more flexible, especially if the property has equity and your credit and financial situation are solid.

Here’s what you can expect:

• LTV (Loan-to-Value): The lender will typically assess the property's current value and lend a percentage of that, often around 65-75% LTV for cash-out refinances.
• Requirements: Expect higher interest rates than conventional loans and potentially stricter terms, but it should still be better than the hard money loan.
• Timeline: Start the process early to avoid issues with your hard money loan coming due.

You should reach out to lenders who specialize in investment property refinancing. If you'd like assistance in finding a suitable option, I’d be happy to help!

Best,

Drago

Hi Mellisa,

You're on the right track with DSCR loans to leverage your rental properties for the remodel. DSCR loans are ideal when your debt-to-income ratio is a concern, as they focus on the property's cash flow rather than your personal financials. The terms like the 70% loan-to-value (LTV) ratio and 3% origination fee you were quoted are standard but can vary depending on the lender. Some may offer better terms if your properties are cash-flow positive, so it's worth shopping around.

A key advantage of DSCR loans is their flexibility with LLCs and Trusts. Unlike conventional loans, DSCR loans typically allow you to hold properties in an LLC or Trust, providing liability protection. You could form a single LLC for all properties, which is easier to manage but carries shared risk, or you can create an LLC for each property, which offers better protection at the cost of more administrative work. Additionally, transferring properties into a trust for estate planning purposes is possible if needed.

To maximize your leverage, I recommend exploring multiple DSCR lenders for better terms and working with a real estate attorney to structure your LLCs for both protection and lender compliance.

Let me know if you’d like more details or assistance with financing!

Best,

Drago

Hi Jennifer,

For reserve funds without tapping into your home equity, here are the best options:

1. Business Line of Credit (LOC): Flexible, revolving credit for your LLC. You borrow only what you need and pay interest on that amount. Ideal for unpredictable CapEx expenses.
2. LLC Business Loan: A lump-sum loan with a fixed payment schedule. It can provide immediate reserves, and the properties’ income may help qualify for the loan.
3. Bridge Loan: Short-term financing to cover immediate cash needs. Best for short-term use, as rates are higher.

Given your strong W2 income, excellent credit, and LLC structure, any of these should be feasible. Let me know if you'd like more details or assistance with financing options!

Best regards,

Drago

Sure Varika, we lend in 44 states. 

Let me know if you need any help! 

Best,

Drago

Hi Justin, 

you're off to a great start with this creative acquisition strategy, especially for someone new to real estate. Taking over the property subject-to (Subto) the existing mortgage is an advanced tactic and can be highly effective when cash flow or equity potential is strong. However, navigating the legal and financial complexities of Subto deals requires careful attention, so I’d recommend working with a real estate attorney to ensure everything is structured correctly.

Securing private money for the closing is a smart move, but ensure your terms allow for flexibility in case of unexpected repairs or delays in cash flow. Since you're new to this, building a reliable team of professionals, an experienced agent, a lender, and a property manager→ will be crucial for long-term success.

If you need assistance with financing or further guidance on scaling your portfolio, feel free to reach out. Happy to help!

Best,

Drago

Hi Logan,

It sounds like your clients executed a fantastic strategy with that property! By purchasing at $133,000, renovating, and renting it out for 5 years, they maximized both rental income and appreciation. The timing of the sale at $315,000 shows how combining a long-term hold with a flip can be a highly effective approach in the right market. Renting allowed them to cover costs and build equity, while selling in a hot market helped them capitalize on the home’s increased value.

Let me know if you’re interested in financing options for similar deals, happy to assist!

Best regards,

Drago

Hi Varika,

Both options have merit, but it depends on your goals. New construction in appreciating areas offers long-term value growth, minimal repairs, and potential tax benefits, but often comes with higher purchase prices and slimmer initial cash flow. Older properties typically offer better cash flow due to lower mortgages and rents that exceed expenses, but may require more maintenance and updates.

If you prioritize immediate cash flow, older properties might be better. If you’re looking for long-term appreciation and lower maintenance, new construction could be ideal. It’s key to balance both when building your portfolio.

Need help with financing? Let me know!

Best,

Drago

Congratulations, Kevin! Managing a duplex can be a smart way to start building your real estate portfolio. Here is some additional information to ensure success:

First, tenant screening is critical, focus on creditworthiness, rental history, and stable income. A reliable tenant minimizes issues and protects your cash flow. Next, maintain professional boundaries with clear communication and a strong lease agreement to set expectations upfront.

Proactive maintenance is essential. Regular inspections and preventative work can save you from costly repairs. Establish a solid reserve fund (3-6 months of rent) to cover unexpected expenses or vacancies, which are inevitable over time.

Make sure you're well-versed in local landlord-tenant laws to avoid legal complications. Automating rent collection is another smart move, it reduces headaches and ensures timely payments.

For future growth, having access to financing options will be crucial. Let me know if you need assistance with that or any other aspect of your investment journey, happy to help!

Best regards,

Drago

You’re absolutely right, Matthew!

While cash flow is often romanticized, equity and debt paydown are where real wealth is truly built. Investing in B-class properties in stable areas yields better long-term returns due to appreciation and higher-quality tenants. Chasing high cash flow in C-class properties often results in poor outcomes, especially when investors self-manage to save costs. Equity growth over time is what ultimately creates wealth, not chasing short-term cash flow.

On BRRRR Strategy..
BRRRR is indeed a powerful but complex strategy. As you pointed out, new investors often underestimate the skill required in areas like construction, market analysis, and financing. Even seasoned investors like yourself end up leaving 15-25% in the deal, which is a smart approach when you’ve mitigated risk with major upgrades. Expecting infinite returns is unrealistic→ equity is what drives long-term success.

If you ever need assistance with financing or structuring deals to maximize equity, I’m here to help! Best, Drago

Yes, using the equity in your paid-off rental as a down payment for another property is something many DSCR lenders can facilitate. This would typically involve taking a cash-out refinance or a home equity line of credit (HELOC) on your current rental to access the funds needed for the down payment on the new property.

Regarding the lender fees, having two mortgages, one for the cash-out refinance and another for the new property, could result in additional fees, but it's not necessarily double the cost. DSCR lenders might offer flexibility in fee structures, so it's worth exploring whether they can streamline costs if you're using the same lender for both transactions.

If you take out $50k for the down payment on the second house, you can always tap into the remaining equity in the future, but doing so later could result in additional fees, as you'd likely need to refinance or apply for a second HELOC. Many investors prefer to take out the full $100k upfront, even if they don't use it all right away, as it avoids extra costs down the line. In your case, this might be beneficial given the uncertainty of finding another deal in the near future. Having access to the funds without needing to refinance again could save on fees and give you flexibility when another opportunity arises.

However, if you're cautious about carrying extra debt with no immediate deal in sight, taking only what you need now might provide peace of mind. It's a balance between having immediate liquidity and avoiding unnecessary borrowing costs. Discussing this with your DSCR lender can help you determine the best strategy based on your financial situation and the market conditions.

If you need further guidance or help, feel free to reach out!

Regards,

Drago