Being rejected by lender

[Thao Kieu]

Have you ever being told by lender that you have high debt ratio so you not qualify for another mortgage? The feeling being rejected is not fun & that is how I feel right now.

I have one single home in DE currently on Airbnb for short term rental for people who travel for work, my mortgage is $1000 as I do 15 years term & income range from $1000-$2000 depend on good month & not so good month & another single home in NJ as my primary. Since the short term rental works out so well, I would love to continue to investing in real estate & being 'one night landlord'. But I hit roadblock at the moment, bank door pretty much closes to me, hard money lender won't talk to me neither cause I don't have 'skin in the game' so what do I do?

Shut my computer & rest as my husband keeps telling me in last few days cause I am sick, fever & sore throat knock me down but I could not hand off my computer & stop digging on MLS for a good deal.

I won't give up & I refuse to give up, I will crack the code & find a way that will work. How? I don't know yet, I will keep BP posted once I buy my 3rd property.

I came from Hanoi, Vietnam who being tenant for most of my life there, the room size was as big as a king size bed here, friend not allow, get home before 10PM (gate closes) if not I am on my own rule drove me nut & especially rat running on the ceiling as soon as people turn off the light, one night they bite through the ceiling & fall down to the floor, I woke up because of that noise, at the moment I told myself, if I ever become a landlord, I will be a cool one, my tenant will never have to wake up because of rat.

Many years later I did become a landlord in US provide short term rental for my guests & I am proud of myself. This journey is extremely incredible, met a lot of amazing people who still leave a good impact on me till now. 

Who faced the same issue with financing on your journey of RE investing? Please share your story & let people how you overcome it? 

If you did, congrats.

If you still trying to figure it out don't give up, I know you will overcome it like I always believe in myself, if I set my heart into something I will be success. Just a matter of time.

Thao Kieu

[Jonathan Twombly]

@Thao Kieu  The first deal I tried to do was for 110 units in Houma, Louisiana.  It was a C-minus property with 10 down units, but it cash flowed like crazy and we were going to do a value add that would bring the down units back on line and add $60,000+ to our bottom line each year.  We found a lender who was all set to do the deal.

We were under contract, hired lawyers, incurred that expense.

We paid lender fees, to cover third party reports, etc.

Between me and my partner we were into this property for at least $20,000 each, all things considered.

Just before the loan rate locked, the lender sent down its junior underwriter to look at the deal and do final approval.  This is generally pretty much a formality.

A couple days later, the mortgage broker called and said the lender wasn't going to do the deal.

Guess why?

Well, here were their "reasons."

The breezeways were dirty.  (Yes, we planned to power wash them.)

There were ten down units  (Yes, the lender already knew that from our documents; we were getting $100,000 back from the seller in the deal to repair them and our contractor estimates were for $60,000 to do the work; that was the value-add in the deal!)

The underwriter found that a golf ball had come in through a window in a down unit.  (I remember seeing the broken window and golf ball when we walked the units.  But, seriously?  A $5 pane of glass would break a $3,000,000 deal?!)

Clearly, the lender was looking for reasons to get out of the deal.  Maybe they did not like Louisiana.  Maybe they were still skittish after the crash.  (This was 2011.).  I don't know what the reason is, but every banker I have ever told this story to said it was ridiculous and the bank was just looking for excuses to back out.

We were able to get our deposits back, because we were still able to get financing contingencies back then.  But we were out all our costs - as I said, about $20,000 each.  At a time when I was making no money and living out of savings to try to make it as a full-time multifamily investor.

So, don't worry.  This stuff happens.  You'll get through it and you will be better and stronger for it!

Good luck - though I don't think you'll need it.  You seem pretty determined.