BRRRR refi issue: now what?

[Teresa M.]

Hey everyone, I am trying to do a cash-out refi on my first BRRRR deal and am having serious issues...as in, "no." A lot of it is COVID-19 related, but how do you guys get financing for these if they are your first one and lenders are looking at DTI? Also...this may help you in answering my question...it's an up down duplex. Upstairs is a well-performing AirBnB (which some lenders are not so cool with, but they make a great return) the downstairs is not rented but will be after this is all over. Before all of this happened Visio was lined up to finance it and now a lot of non QM lenders aren't lending and if they are, their terms are not good. Should I wait it out until lending calms down? My PML's % rates are killing me! Thanks in advance:)

[Aaron Hollingshead]

@Teresa M. - If I was you, I'd definitely get a long-term renter in there first of all.  I think that with what's happening now, the security of that would be appealing.  Also, when you talk to lenders, having that income helps an awful lot.  

Second, I'd talk to community banks.  When I first heard people mention community banks and credit unions, I thought of them as being the same.  I then approached 4-5 credit unions only to discover that their rules seemed to be just as strict as the big banks/lenders.  Finally I tried a community bank (2 total branches, the president greets me with a handshake, everybody on a first name basis, etc) and everything became so much easier!  

You might not get the most competitive rates in the world, but some of the benefits make it worth while in my opinion. For instance, I have a quad that brings in 2,000 monIy with a loan of 90k through this bank. Terms are 6% interest 20 year term with a 3 year call. Might not seem to be the best terms in the world, however you have to bear in mind that my loan origination fee was less than 100 dollars as opposed to 5k-10k through a lender, there are very few questions asked, relationships are what count. Also, later on, you can always refinance in a traditional loan if you want to. I could go on forever about the benefits of working with a small local bank. Also in my case, once I built a relationship with them they ended up lending on 3 of my brrrr deals at once while providing 75-80% of the projected ARV. In other words if I buy a house for 60k that needs 30k of work that I'll sell for 120k, they will typically lend me the entire 90k needed. Finding the right bank made all the difference. Best of luck!