Hard Money Lender and Business Credit Lines

Memphis, Tennessee
Creative Real Estate Financing
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Hard Money Lender and Business Credit Lines

Jordi Valado
Member since 2021 · 37 posts · 14 votes

Hello, 

I am new to real estate and would like some help on funding for section 8 rentals. Back story, I live in NJ and the barrier to entry is pretty high for a home here and I am low on cash for a down payment. I am very interested in the idea of section 8 investing in the South East, specifically Memphis, TN. How I plan on funding these projects (at least the first deal), is using a hard money lender for the purchase price and rehab and forcing the appreciation to refinance with the bank. I understand the HML will still require 20% down and I plan on using a business credit line for the gap funding. I am looking for some advice on this strategy, I know there are some holes but I wanted to keep the post short and sweet.

Thank you!!
 

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Robin SimonBusiness Member
Lender · Austin, TX · Member since 2022 · 5k+ posts · 4k+ votes
3y
Quote from @Jordi Valado:

Hello, 

I am new to real estate and would like some help on funding for section 8 rentals. Back story, I live in NJ and the barrier to entry is pretty high for a home here and I am low on cash for a down payment. I am very interested in the idea of section 8 investing in the South East, specifically Memphis, TN. How I plan on funding these projects (at least the first deal), is using a hard money lender for the purchase price and rehab and forcing the appreciation to refinance with the bank. I understand the HML will still require 20% down and I plan on using a business credit line for the gap funding. I am looking for some advice on this strategy, I know there are some holes but I wanted to keep the post short and sweet.

Thank you!!
 


 Could certainly be a good strategy and plan but generally should be conservative and have "skin in the game" especially when starting out.  Looking to be 100% with "OPM" (other people's money) and skipping ahead before you save some capital for cushion/your own costs, then its potentially a recipe for trouble

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  • Robin SimonBusiness Member
    Lender · Austin, TX · Member since 2022 · 5k+ posts · 4k+ votes
    3y
    Quote from @Jordi Valado:

    Hello, 

    I am new to real estate and would like some help on funding for section 8 rentals. Back story, I live in NJ and the barrier to entry is pretty high for a home here and I am low on cash for a down payment. I am very interested in the idea of section 8 investing in the South East, specifically Memphis, TN. How I plan on funding these projects (at least the first deal), is using a hard money lender for the purchase price and rehab and forcing the appreciation to refinance with the bank. I understand the HML will still require 20% down and I plan on using a business credit line for the gap funding. I am looking for some advice on this strategy, I know there are some holes but I wanted to keep the post short and sweet.

    Thank you!!
     


     Could certainly be a good strategy and plan but generally should be conservative and have "skin in the game" especially when starting out.  Looking to be 100% with "OPM" (other people's money) and skipping ahead before you save some capital for cushion/your own costs, then its potentially a recipe for trouble

    [email protected]
    Harpoon Capital514 Reviews
    WebsiteView Page
    2Reply
  • Doug Smith
    Lender · Tampa, FL · Member since 2013 · 2k+ posts · 2k+ votes
    3y

    As a lender, we know the default rates is exponentially higher for those that don't use their own funds as the down payment. Lenders tend to frown on borrowed down payments. You'll also want to be mindful of a "seasoning" period for a refi. What I mean by that is that lenders will use the lesser of the purchase price + rehab costs or the appraised value for a period of time. For DSCR loans, that is usually about 6 months. If you try to refi before that 6 month mark, then they will not give you credit for the appreciation...after that you can use the new appraised value. That seasoning period is going to change from lender to lender, so be mindful of that. Regarding the down payment amount, lenders usually look at your last 2 months of bank statements to "source" the money for down payment, closing costs, and reserves. If we see a big deposit, we'll ask where that is coming from. If it's borrowed, most lenders are going to not allow that. I wish you well in your investment journey!

    2Reply
  • Erik EstradaBusiness Member
    Lender · Member since 2022 · 6k+ posts · 1k+ votes
    3y

    Be careful about being over leveraged. I have seen it over and over where investors have no equity and when they want to refinance they have to come out of pocket. 

    There is a lot that can happen. Always prepare for the worst case scenario 

    [email protected]818-269-7983
    LuxePrivate Investments LLC 572 Reviews
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  • Chris Barrett
    Investor · Madison WI · Member since 2021 · 140 posts · 103 votes
    3y
    Also keep in mind on conventional loans, the seasoning period is 12 months for a refinance if you purchased with financing that put a lien on the property (pretty much any lender besides private money).  That makes doing BRRRR way more difficult.
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