All Forum Posts by: Tal Simpson

Thanks Brent, that is the answer I was hoping for. For this first group of properties, the value off which our 80% loan is based will be closely aligned with the purchase price. Longer term we'll be able to force appreciation on these, but we aren't necessarily doing the BRRRR strategy on these. For this next group of houses, yes, we are planning on buying significantly below market value to give us a margin to gain equity through rehab before cashing out. This first group is giving us instant cash flow so we are a little better able to take on rehab projects on new acquisitions going forward.

We are about to do our first commercial mortgage on a portfolio of 7 SFRs on up to 80% LTV with a 20 amort / 5 yr balloon. We are inheriting tenants on 6 of the 7 and not planning significant rehab for the most part until the current leases expire over the course of the next 9 months, raising rents in the process. Our lender says the 80% LTV will be applied to the lesser of (1) appraised values or (2) actual costs of the houses.  We are doing this loan within weeks after closing.

For our next bundle of properties, we want to focus on the BRRRR method, maybe one house every 2-3 months if possible. By the end of a 12 month period or so, we'll have another bundle ready for a loan (and have been told by the bank they'll do another one with us). Will a commercial lender typically recognize the appreciated value after rehab irrespective of how low the property was purchased for, or is this a battle of valuation methods we need to prepare for?

Many thanks!

Most lenders will stick very closely to these guidelines on cash out refinance, so look here for your answers:  https://www.fanniemae.com/content/guide/selling/b2/1.2/03.html

@Nathaniel Vogel don't leave us hanging!  Show us the way!

@Account Closed I am fascinated with Option 3.  Have you used that maneuver before on a property purchase?  Does the refinance lender really not make you wait 6+ months to refinance if you effectively act as both mortgagor and mortgagee?

Really appreciate the info!

I have chewed on this exact question myself and I plan on financing in my (and/or my partner's) name and then quit claim deeding to the LLC once the loan is locked in. Best of both worlds, as long as the loan is something you're good having locked in long term and won't need to refinance anytime soon.

Have you considered looking in San Antonio? Should be more variety of affordable, cash flowing properties and you are still close enough to get down there to check on things if needed.

My understanding is that the key difference between delayed financing, through which the 6-month seasoning period is waived, and "regular" cash out refinancing is that with the former, the total amount of the loan is capped at your out of pocket costs to purchase the property, which does not include post-purchase repairs (although you can roll into your mortgage your closing costs of the refinance as long as you are still under the LTV limit). In other words, there are 2 limits in play - what you paid for the property, and the max LTV (75% for SFRs).

With the latter, while you must wait at least 6 months before cashing out, there is only 1 limit - the 75% LTV maximum - meaning that you can theoretically pull out more cash than you put in if your repairs have boosted the value high enough.

Does anyone have a home inspector (in Bham) that they would recommend?

Thanks for the warm welcome and info, errybody!  

Hello, just wanted to reach out to my fellow Birminghamians (AL) as a newbie to BP and somewhat new to real estate investment (although we used to hack our first house and have now worked up to a tear-down new-build in Crestline by our third house). My wife and I are looking for our first deal as investors and would be interested in a partnership with another local investor. We are prequalified based on a couple of good w2 incomes, have a decent chunk of capital saved up, and are actively looking :)

Thanks,

Tal