All Forum Posts by: Steven Goldman

I think you are mixing apples and oranges. A HELOC is a home equity line of credit. Emphasis on Home. An investment property is a commercial property and therefore you are  really looking for a commercial line of credit. A commercial line of credit will only be granted by a company that does commercial lines of credit. They are not going to be at HELOC interest rates. They are not for owner occupied properties. You are going to use the money for a business purpose so it is a different animal. 

Their are commercial and private lenders who will extend you a line of credit. They usually do not want to exceed 50 percent of the value of the collateral. They want a first mortgage on something and often a second on your residence. The way to get equity out of your properties is to cash out refinance them. Many companies will do that for you. Some will extend a portfolio loan. None of them will be at fixed rates. Good luck

Quote from @Account Closed:

Quote from @Jonathan Soto:

need to do a commercial loan based on DSCR. debt service coverage ratio. would rents cover expenses on property.

 That was very informative Jonathan.  And you touched on the very things I'm concerned about.  I would need the lender to focus solely on the revenue.  But as you said, this may be difficult as its really in a residential area.  So it would need to be marketed as shared accommodation, but taken to the max.  And zoning laws would need to be respected.  Not sure how far one can push it.  There are some big families out there.  But they are related so rules may be much more flexible for them. 

It is odd that on one hand they are often clamouring to lower rental costs for the public yet seem to squash entrepreneurial attempts to solve the problem.  

I should mention this would be done by an owner living on the property.  Active management.  That is crucial.  Of course that means you can't scale upwards.  Well I guess you can just get/build a barn type property and turn it into more of a barracks than a residence!  THAT would sure raise the rental unit availability in whatever area it was implemented if done on a large scale!

 This sounds like a boarding house. Very few lenders will lend on a boarding house with shared bathrooms. The rent is not the problem it is the type of use. Also, the valuation could be problem tic as it will be comps not the income used to determine value. We have had numerous inquiries about these types of arrangements and they are very hard to place.  Good luck. 

Quote from @Matt Ternullo:

I have had the power of investment momentum pushing me to quickly multiply my portfolio (quick for me, relatively normal acceleration), went from 1 STR 2 years ago, to 3 units last month now close to units 4-7 hopefully in the next month or two. I see myself in the next year or so getting to that next level of investing of 10+ units but see a major road block, financing. I have been able to leverage friends and family as equity partners to date but see that drying out soon. Other than cash out refinancing or HELOC's, what have people done for down payment financing to get from the 1-10 unit level into the 10-100 unit level?

Matt: if you are going to raise funds than your will have to follow any federal or state regulations regarding the raising of capital for real estate investments. I built a go to relationship with a capital partner who was willing to join with us any time we found a good deal. You give away a portion of the equity but you can move faster and with confidence. 

If you are bank eligible than you can get a 10-20. Ten year adjustable 20 year term. So a single change date. Funding companies will do the 30 but their rates are increasing weekly. Good luck.

Quote from @Mike McCarthy:

@Nicolas Sanhueza one of my Philly properties had a reasonably new oil boiler, so it didn’t really make sense to replace it. The tenants paid for all utilities, including heat, but I kept control of the oil fillings.

I set up a payment schedule with the tenants. $250 for the cold months, going down to $100 for the shoulder months, and $0 for warmer months. They’d have a consistent payment, and then at the end of the heating season we’d even up. I’d give them copies of all the oil bills and what they paid and usually I set it up so I’d owe them a bit of money back. In the end, they were paying for their own usage, but didn’t have to stomach the $600 fill charge as it was only filled 2 or 3x over the season.

Lastly, I additionally gave them a $250 discount off the heating as oil is typically more expensive than gas. I don’t know if this was really necessary, but it was worth it to me to not get into arguments about the cost of gas vs oil.

And though you didn’t ask, I used Oil Patch for service and deliveries. Highly recommended.

 I think something like this is a creative solution to oil prices. However, you assume the risk of a spike in the oil prices. I would convert that boiler to gas if available and then have the tenant pay the gas. In Philadelphia you must be vigilant that the tenant is paying PGW or they will lien the property for tenant no=payment. They can only do that after notice to the landlord. Good luck!  

Quote from @Account Closed:

Hi, as a Canadian citizen living in Canada, I want to invest in U.S. properties. I like the BRRR method but thought of one potential hiccup... to buy the property, I'll use private money, but when I refinance, will a lender lend to a U.S. LLC held by a Canadian?

I appreciate your feedback. Thank you.

Good afternoon Deborah: Many lenders will lend to a foreign national who owns a domestic LLC. We recommend that you vet the refinance with a broker or lender before you buy the property and rehab it. This provides you with the necessary information to determine what you cash out will be. Good luck.

A few credit unions and local banks will do a cash out refinance at 80 percent for preferred, blue chip customers. Good luck.

Good Afternoon: There are a number of portfolio lenders in that area. You will need to supply more detail to your request to figure out which lender might be best for your project.

You should not have any problem finding financing for this project. 

As a broker I am disgusted to hear of such conduct by a lender. All of you should file complaints with the State Banking commissions where the properties are located. This is the type of conduct they were created to regulate. I hope that this experience does not deter you from being involved in future real estate investing. I encourage all borrowers to ask for references from a lender or broker. In addition always goggle and research the history and reputation of any lender you considering doing business with. One of our obligations as a broker is to vet the lenders we are brokering for because their conduct effects our reputation. 

Do not quit, learn from your experiences and be more effective on your next deal!