BRRRR refinancing w/o seasoning

[Michael Blakeney]

We are in the greater Philadelphia area. Closed on first two BRRRR deals- looking for lender , any recommendations of someone who can do lower loan amounts without seasoning.

Bought two properties cash in October 2018. $41,000 and $52,500- fixed them up and put tenants in. Tenants in both houses are paying $1200/mo and signed two year contracts. Just had houses appraised and they came in at $80,000 and $75,000. Id love to find a lender that would do a loan for us ( these are in an LLC) immediately not requiring seasoning and can use the new appraised values. Found one lender that can do it at 6 months but was hoping sooner.

Who can you recommend that you know can get this done?

[Scott D Burrows]

@Michael Blakeney

I agree with @Corby Goade . While the temptation to "speed" things up is definitely real, be careful to not erase gains with higher interest rates, even if it seems like a "no-brainer". Interest rates can eat up the little cash flow that you might be receiving with the additional purchase, and wipe away most gains that you receive from the initial properties. Also, in the market that we are in, over-leveraging can be a mistake. However, these are not hard-and-fast rules.

Also, what you are going to want to look for is a local, community bank or credit union that does portfolio or commercial lending. However, they will want a basic business plan(summary maybe) or to know you fairly well-may not require either, but good chance they will want some type of projection/plan of a strategy. If you are going to go this route, make a personal financial statement, have two years of tax returns (they will want to see schedule E- shows rental income) and three months of bank statements. In addition, they will want your properties to be in an LLC, so that they have some type of recourse if you default.

Keep in mind, that commercial lending is much more tricky and designed for well-informed investors. If you are not careful, it would be easy to get yourself into something that adjusts up at a time when you are barely skating by, causing an issue for cash flow and liquidity. Again, anything is possible, just make sure you are self-educating like crazy.

Conventional is ALWAYS the way to go, in terms of the best cash flow and rates/terms. However, I am well aware that it does not provide the most flexibility and that cash is king. 

What might work better, if you are looking to accelerate things, get into flipping and use the profits to fund acquisitions in cash. Many lenders exist that offer a lot of flexibility for very little in return. A private lender that I recommend is RCD Capital. Even at a rate of 8-20%, if it is only for a year or six months, really nothing compared to closing costs ($3-$5K min) and the delay in purchasing that a bank offers-all designed to suck all the money out of your deal in the interest of the bank. 

Another example ( you buy a home with hard/private money at 10% on a short year term, it's purchase price was $150K, appraisal about $450 and holding costs are $7500). You flip it, make 20% profit at a selling price of $225K and pay the realtor 4% commission ($9K), notice the realtors commission is more than hard money lender/private money....a little crazy in my view, but whatever...I digress...let say that the repairs cost 15% of ARV of $225K ($33,750) By the way USE A BUSINESS CREDIT CARD!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!! (CHASE INK/AMEX- do NOT use Capital One's Business Credit cards... it will report in your personal name and you will destroy your credit, if you can't pay back quickly-by throwing off your Credit Utilization %...a TRUE BUSINESS CREDIT CARD does NOT report under your social security number) to fund your expenses, you can even pay labor if you don't paying 2.5% (I use either VENMO or PLASTIQ)...total left over would equal $24,300.

Hope you found some value in this and they are offered from experience based on my screw ups :)

If you have to go commercial, look for a bank that has under 8 locations. More than likely, this will be the sweet spot for what you are trying to locate. 

Congrats on your great first deals. 

Good luck and hope you succeed.

Scott