Bummed out about BRRRR in Baltimore, Maryland

[Michael Washington]

I just finished my first flip here in Baltimore and it was an AWESOME experience. I bought the property for $31k, put in $65 had the work done in two months and a tenant signed up before the job was complete. It was appraised for $140,000. I "thought" I would be able to do a cash-out refinance at 80% LTV based on a local bank who said that they could do this back in 2016.

Lo and behold the board changed their tune and now I can only get 75% of PURCHASE AND CONSTRUCTION cost!!! Not LTV!!!! And they want $30k minimum in equity to boot if held for less than 2 years. This is the same story for multiple banks I have reached out to if the house is owned in an LLC, which is the case for me.

Needless to say, my first BRRRR endeavor is not going well.

To my BP community in Baltimore (or elsewhere), I have a few questions that would help me (and others):

1. What are your thoughts on changing the ownership from an LLC to my personal name to get the cash-out refinance? Any suggested strategies?

2. I am really looking for a financial partner (i.e. bank) who has NO problem doing a cash-out refinance at no lower than 75% LTV with a standard 30 year loan. Is there one you recommend?

3. Has anyone else experienced this? Is it due to a change in the market? How have you gotten around this to execute your BRRRR strategy?

[Ned Carey]

@Michael Washington "Lenders are Liars" OK not true in all cases but like in any endeavor there are those that will over promise when they are not sure they can deliver just to get the business.

Many lenders change terms over time. This can happen for many reasons including bank regulators putting pressure on. The fact is you can get  refinancing now. 2-3 years ago there was NONE to be had at any terms. 

It is typical for investment /commercial loans to be at 75% LTV. And until a property has been "Seasoned" for 1 or even two years, lenders don't want to give cash out. These terms are what you should expect and if you can do better great.

The trick is to keep in contact with many lenders and keep trying until you find one that will do want you want. Small local banks are going to be your best be. I wouldn't waist my time walking into Bank of America or Well Fargo for example.  There are numerous banks in the Baltimore region with 1-10 branches. that is the kind of lender to look for.

It will always be harder to finance in an LLC. Some buy or transfer to personal name then transfer back to the LLC. You have risk of the loan being called because of Due on Sale clause and you will likely loose your title insurance unless you buy a new policy.