Niche and Strategy

[Charlie Jones]

Hello all, I am new to RI and I am well into the 7 Steps of Getting into RI. I have increased my knowledge base exponentially since I've begun. I have learned many different strategies and I am trying to nail down one or two that I can focus on and master before I move on to more innovative and savvy techniques. I want to focus on Fix and Hold being that Cash Flow is my goal.

With that being said I wanted to know if the following strategy would work as I understand it. Sometimes the idea works in your head and not on paper. Can you guys weigh in on this strategy and tell me if it will work:

Purchase properties using Hard Money Lenders. Upon rehab completion, refinance into a 30 year fixed using the equity in the property to act as my leverage. Pay off the Hard Money Lender. Cash Flow the property with Renters. Then use the rental income in the Gain column instead of the Loss Column to Repeat the steps to qualify for another 30 Year loan on the next property. Rinse and Repeat.

Is there a limit to how many times I can do this with Freddie and Fannie each year? I have a very good credit score and very little credit card debt so my credit is good. Will I be able to qualify for the loans at such a high frequency of acquiring several properties throughout the year using this strategy throughout the year or will I get stuck with the property and my Exit Strategy wont work?

Thanks everyone!!!

[Brett Russell]

Charlie Jones, Brandon is definitely right. I would like to follow this same path, but am still trying to find the right lender. There are a few problems I, and others in similar situations, have come across. Conventional lenders won't refinance for more than your purchase price for 6-12 months... it doesn't matter that you may have completely rehabbed the property and have receipts to prove it. Also, for the best, long term residential financing, they don't seem receptive to properties titled to LLCs if you were considering that. Also, you will definitely run into restrictions on number of loans and debt to income ratio. Again, conventional lenders are pretty strict and I have been told they won't consider the rental income as income until I show 2 years of tax returns, and even then they'll only credit 70%. So, you could easily run into a roadblock or two there.
Moral of the story: make sure the financing will be possible. I'm realizing I probably need to work with a portfolio lender who isn't looking to sell the loan to Fannie/Freddie, but probably won't give as good of terms.