Having Trouble Understanding how to Scale using Private Money

[Matthew John]

Hey guys, 

Over the past month I've purchased 2 properties, one SFH for me to live in and one Duplex where I can rent out both units.

I financed both properties through Chase. The SFH I had to had my mother cosign since I do not have seasoned income and the other was purchased in my girlfriend's name who works part time.

Both of my properties were great deals & I'm seeking to do more. Problem is, I don't have money left to keep funding these myself. 

I do, however, have access to private money that would be interested in working together alongside me. 

I'm seeking some clarity on how I can continue to build up my rental portfolio while working with a private money lender. 

My from understanding, I get enough money from them to fund the deal + rehab, then I cash out refinance and pull the money back out to pay back the private lender?

Would a bank or traditional lender work with me even though I don't have seasoned income?

I'm confused on how you go from getting money from the private lender to returning their money + interest and getting into a regular loan. 

If you have experience with this, would you mind walking me through some of the steps?

Would a bank or lender allow me to cash out refinance even if I don't have seasoned income?

[Rick Pozos]

Very simple example. You buy a property for 60k, you put 15k rehab into it. All of this money is borrowed from the private lender. Now the house is in great condition. It is worth 100k. 

You refinance with your local bank(you are not able to do that yet) for the 75k. Your private lender gets paid off, you have a lower interest rate loan for 25 or 30 years. Do the same thing again. The problem is when you dont have enough income to qualify for the refinance loan. You might be able to get a couple or a few loans, then you are tapped out.

Having the refinance piece is critical. If you are NOT able to refinance when the time comes, you will get foreclosed on because the private lender will want their money.

If you can get a lender who will lend you with a longer balloon payment, that should work. If your balloon is in 5 years, you should be fine. By then you should have provable income. If you dont, you could just sell the property with plenty of time to figure something out. It is when your loan is due in a year that things will be a little tougher.