Need Advice - Hard Money Lender for 1st property - 4plex

[Alex Khojainov]

Hi BP, thanks for clicking on this thread, hopefully I can get some advice on this deal.

I found a nice 4-plex in a C+/B- area in Washington DC that is being gentrified. 1BR 1 BA in each unit, renovations have begun (demolition has been completed, new drywall (unfinished) is up, new windows are installed). I'd say the property is 50% complete, need to finish drywall, cabinets, sand and stain flooring.

I'm 25, have 4 years of residential construction experience, all necessary tools and truck from working for a contractor. I am comfortable with the scope of the that needs to be done and have other 'staff' that I can bring on to assist with completion.

My main issue is financing. I have about $20K in a buisiness account, another $25K available in credit cards. No debt. I currently rent and subsidize my rent by renting out the parking spots behind our house so my main expense is about $300 a month in rent.

I went to a bank to see about a mortgage, but since I've been paid as a 1099 at my previous job I can't use my tax returns to get conventional financing.

Should I look for a hard money lender? I found several that offer 6-month, 12-month and 18-month balloon notes for multi-unit/income producing properties in the area, up to 60% LTV of ARV.

I found a comp. 5 unit building selling for $425,000.

Asking price is $199,000
1BR/1BA units rent for $990 in the area.

I want to get an HML for the ARV, fill the units, and then re-fi with a conventional lender.

At 100% occupancy the property is chugging out about 4k a month, which would be enough to cover the $1200 mortgage on a conventional loan.

Am I going to run into the same problem showing proof of income when I go to refi? What do you guys think about this deal? Any and all advice would be greatly appreciated. DC RE is coming up and I know it's time to take the plunge. Thanks in advance!

[Will Barnard]

Yes, you will have same problem when u try to refi into conventional loan. Best bet is to partner with someone or find private money more long term, like 3 years minimum. Get your income up so that you can get financing down the road. You can also fix and flip this type of deal with the hard money, then use the profits along with your current capital to buy another using very low leverage which will make it easier to get.