How do I know I will be able to Refinance a Quadplex

Question

I am considering purchasing a quadplex in Florida that needs approximately 20K-30K in renovation to bring its rent up to the standards of the area (800/month). I can get a hard money loan for the property but i am concerned with what all will be needed in terms of upgrades to the unit to make the property fit the requirements of a conventional loan. For example do the units need to have an HVAC system or are window units acceptable?

Can i just pay for a general property inspection and that will tell me what is needed for a typical financing?

I just do not want to get stuck paying a 13% interest rate for to long and go bust before i even get started.

I appreciate any input. I am new to real estate investing so any advice is much appreciated.

Tom

Mike Roy · Answer

@Tom Knox - I would talk to a local bank about habitability requirements for a conventional loan.  I would also talk to a local insurance broker about their underwriting requirements.  A general property inspection will not tell you what improvements you need to make to satisfy mortgage and insurance underwriting.

Since you are new to real estate investing, I would make friends with a local investor or two and maybe even bring them with you on a walk through of the property.  You don't want to miss on the reno budget, as that is indeed a way to get behind very quickly.

Tom Knox · Answer

@Mike Roy Thank you that is good advice. I just wasn't sure where to start in terms of finding out the requirements for a conventional loan. I will try and meet some local investors in my area and pick their brains.

Shaun Weekes · Answer

First you need to figure out if you want to live in one unit and do an FHA 203 K or put down 20% with a hard money lender.  If you choose to do the latter 20% down will allow you to refinance into a conventional loan if your income qualifies. I would put down 25 or more just in case your appraisal comes in lower to give you a cushion. So, make sure that you consult a loan officer or broker to go over what you can afford based of real numbers.

I hope this helps and have a good one.

Stephanie P. · Answer

@Tom Knox

Some Realtors won't have anything to do with homeowners and driving people all over God's creation to see one more beige family room and others just got their license to do investor properties.  Still others got their license because their Mom and Dad were Realtors and that's all they know.  You have to find the Realtors that work for you.  Go to meetups and REIA's and mingle. The right one is out there.

True confession:

This whole company, US Commercial, was started because my husband is no good at "A" paper retail loan origination, we needed an alternative and the market provided it.  In truth, if he had to do one more loan for a homeowner, he'd rather be a Lyft driver.  Thankfully, we found our niche.

Tom Knox · Answer

@Stephanie P. Are there realators that strictly focus on investment properties or are they one in the same as a general realator for a typical single family home

Stephanie P. · Answer

Tom,

You're going to need a team in place to do real estate investing.

• You'll need access to MLS or a solid Realtor to help you with comps and valuations.  
• You'll need a good GC for the construction
• You'll need an estimator or inspector for initial screening of properties
• You'll need a hard  money lender for acquisition and renovation and then another lender for the long term financing
• Not to mention, an investor friendly title company and solid hazard insurance company and then once you're up and running a property management company.

I would go to local REIA's or Meetups and network, find these people and create my team before I took one more step forward.

Stephanie

Tom Knox · Answer

@Chris Mason Great idea. I would rather be certain about my refinance than unsure and it seems like the best methodology would be to order an appraisal and inspection before i close on the purchase.

Thanks for all of the input

Chris Mason · Answer

The ONLY thing you can do to be certain is pay for an appraisal ordered through a lender before you close on the purchase. I'll spare you all the internal details, but we basically initiate a refi on a home that you do not yet own -- disclosures and compliance paperwork and all -- and get it going.

Everything else is a waste of time, if certainty is what you're after. I'm in the SF Bay Area, you will want to find someone local to you in Florida.

Tom Knox · Answer

@Carl Crump I would like to discuss some conventional options you might have at your convenience.

My biggest hurdle seems to find out what the ARV should be

Carl Crump · Answer

@Tom Knox Mike is right generally if it is habitable and no serious safety or health concerns conventional will lend on it.  Depending on how much equity is left in the property once rehab is done you can pull out up to 80% with a conventional loan and 85% with and FHA refi.  Make sure the after repair value you have is good and maybe verify with a realtor and/or local investor.  Same goes for the repairs as there can be unforeseen issues needing attention.

For the loan our company does loans in FL and I would be happy to help determine if you qualify with your income.  We are a brokerage and work with many different lenders.  There are even some out of the box options but of course they will come with higher rates.   Let me know if you have any questions or need anything

How do I know I will be able to Refinance a Quadplex

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