Long time investor AMA

[Brandon Logan]

I've been investing and selling for 16 years. Currently, I own 95 units and my clients have 360 in escrow. I buy and sell. I sell to support my rental habit. I don't know it all but I'm willing to share any knowledge I may or may not have. =-)  Ask away. I'll do my best to respond in timely manner. 

[Brandon Logan]

Originally posted by @Dan Rothwell:

"I went to smaller local banks and asked them each to give me one rental loan so I can prove myself. I was able to convince three smaller banks to lend me one deal at a time. I didn't have the cash so I used future value appraisals and sweat equity to minimize my cash needed for each deal. These loans are the best way imho to leverage funds into more deals."

Would you mind elaborating?  Specifically, what you mean by rental loan and future value appraisals.  

Dan, 

Great question. Sorry for the delay my day got away from me. This loan was extremely important for me while trying to leverage my lack of funds into multiple properties. Typically, banks will lend up to 75-80% loan to value. This is why most investors put down 20%. In the beginning I didn't have 20% so I knew I wouldn't get far going the traditional route. I started using future value appraisals. How this works is fairly simple. First and foremost, when approaching a bank you tell them this is the type of loan you want. Do not offer 20% down. that's not an option. I've found smaller local banks to be much easier to deal with regards to these loans. Local banks are more connected to RE in their area and understand values better. They also often have better appraiser which is the key to this approach. I'll give you a brief example of how this works. Depending on your PFS and financial background will determine the banks comfortably in your LTV. I started getting 70-75% but now I get 80%.

So here is the approach. I'll go to my banker with deal in hand ( I'll use round numbers for this example so its more clear)

I have a contract to purchase a house at $50,000. I tell my banker I want to put 30k into the property and once I do the comps show its worth 100k. I'll give the banker a detailed list of my rehab. They order a future value appraisal based on that rehab. This is why going to local bank makes all the difference. They have local appraisers. I always meet the appraisers and tell them my plan and show them comps of 100k. If it appraises at 100k the bank will lend me 80k. I'm in the house with zero down. I've done this loan probably 500 times throughout my career ( I use to flip a lot) . It's the best way imo of using leverage and not bringing in partners who bring nothing to the table except down monies. Let me know if you have any other questions. Happy to help