Haste makes waste? When to wait and when to secure financing?

Question

I'm at a crossroad. I currently have 3 multi family properties, 2 that have positive cash flow. The other breaks even (personal reason, covering expenses of an immediate family member. This isnt going to change in the short term.)

I'm looking to pull out equity from 1 property to join a business partner and start Brrrr'ing.

I have two options currently, or 3 rather. I can move one of my investment properties back into my name (currently in an LLC for asset protection) and apply for a HELOC. I've called about 15 banks/credit unions/regional banks and none so far will do a HELOC on an investment property that is being held in an LLC.

I also have the option of a Cash-Out refi without income verification at about 6.5% (I have a High DTI because of my investment properties). This option will kill the cashflow on one of my properties leaving me with only 1 cash flowing property.

Last option is to take a Hard Money Loan to start Brrrr'ing. Very risky in my opinion.

Any suggestions? I have an idea of what I should do, just not sure. Also, there is no immediate deal waiting for me and my partner. We planned don waiting to secure financing first.

Stephanie P. · Answer

@Pier Cas

It's really a math problem.  If you refinance and hurt your current cash flow, will the new property make up for it or will it be a drain.  Once the numbers are clear, make your decision.  Numbers don't lie.

Stephanie

Pier Cas · Answer

After speaking with multiple professionals who have been in the field 20+ years they have never seen a Due on Sale clause. These men out here in New York have done thousands of transactions. So long as the Mortgages get paid, it's usually not an issue.

Going forward, I have scheduled salary increases that will shift my DTI significantly into my favor.

The other option is the no-income verification non traditional loans.

Either way, just need to figure out this small hump.

David M. · Answer

@Pier Cas

Not sure of your risk tolerance and amounts being protected, but taking one property of LLC should be reasonable.  Just get insurance including umbrella policy

Just be careful of Due on Sale Clause, it appears to be rare, but does happen from what I’ve heard.  And advisable to get new title insurance policy

But let me ask you... if your are doing brrrr, what is your plan to refinance these next deals??

Coral Hernandez · Answer

Hey Pier,

I like where your mind is at. The more questions you ask the more you will learn.

It's good to look at ways to use other people's money, with your own money, to purchase and invest in properties you normally would not have been able to, or would have had to wait substanillay longer before aquiring it.

I believe as in Investor doing Fix and Flips/BRRR, is important he amount of houses you can put through that process in a given time frame, will directly affect how successful you will be at it. Depending the type of lending you recieve, will determine how many properties you can purchase in a year and at what cost. Everyone's end game is different.

Hard Mon3y Loans definitely takes your Investment game to the next level. Increasing your purchasing power and opening a variety of other deal, that you otherwise would not have been able to purchase. If you have the right Lender,  and you factor in the correct cost, it's really not that scary at all.

Its important to know what your goals are for Now and in the future so you can best plan each strategy you look to deploy.