Cash-out Refi in Charlotte?

Question

Hello everyone, I'm a new investor in the Charlotte area. I have three properties--two rented, one being rehabbed--and I'm exploring ways to build up my real estate portfolio. One of the methods that's been most attractive to me is the BRRRR method; however, it's been difficult finding a lender who will do the cash-out refinances necessary for the method to work. At best, I've found lenders who require a 1+ year seasoning period before doing the refinance.

I'm currently working my way through the list of banks and credit unions in town, but it would help to have a little direction. Does anyone know any lenders who have a 6-month or shorter seasoning period (or who would lend more than the purchase price on cash deals)?

Thank you!

Souvik G. · Answer

An upvote on my original post made 9 months back made me come back here. I wanted to add one more 'conventional' lender to the thread for individuals:

John Kotrides - Atlantic Bay Mortgage - 704.4613734

I just finished my 4th BRRR with him and got very competitive rates and superlative service. He actually helped me beat the first appraisal (appraisals working in your favor are a big part of BRRR) from a xenophobic appraiser(topic for another post - I am not Caucasian, neither are my renters) - the 1st appraiser appraised a 150K house for 105K, using 3 comps which were fixer-uppers and almost a year old. John lobbied with his bosses to get a 2nd appraisal done at his own cost which came much closer to the ARV.

Non-conventional lenders targeting LLCs/Inc's book Commercial Loans. My bank, First Citizens, makes those loans as soon as I have renters in place ~ 1 month. But the initial points and separate insurance company commercial premiums(3x) have always made me 'quit claim' title to my personal name, and wait 4.5 month before i mortgage-shop around to finish my BRRR. i know that needs to change after the 10th property...but i'm still 2 years out to that target. And at the 7th property mark, i will anyway go 'portfolio'. FACO has good program with low interest rates for that inflection point.

BTW, for those of you who are rolling your eyes at the suggestion of moving rental property from an LLC back to my personal name, my research tells me - liability protection for regular investors, thru' an LLC is overrated and over-priced. If you need proof, Just google some one like Clint Coons and talk to him and learn about his company's elaborate plan to keep the landlord safe. Looks good on paper, doesn't work in real life, and the yearly fees is mind-boggling. Then again, go back to google to see what I just said about fees vs. LLC protection not working and it has nothing to do with protecting the 'corporate veil' - (i know, topic for another post). Tort Liabilty is real guys and LLCs dont help. What helps is:

1. Primarily, take good care of your rental properties to avoid problems - physically change the air filter personally every 2-3 months and during that time inspect the property for water leaks, pests, damages, etc. Proactively fix problems, before they snowball.

2. Your renters are just ordinary folks like you and me. Treat them like you would want someone else to treat you.

3. Leave chocolate, or may be a champagne at the door during Christmas.

4. Pet their pets, compliment them on their decorating choices. "Tenant Painting wall" posts are overrated. Let them make your house their home - and stay longer(you would anyway repaint the whole house after long-term tenants leave)

5. Give them some rent credit if they took care of a problem on their own, especially on a Sunday. Toilet overflowing...pipes frozen, Circuit breaker tripped. its just not cost of physically getting their, time is money.

6. Screen your renters before giving them the keys. 1 to 5 will not work with not-normals, or as Stephen Colbert calls it -"deplorables"

If you liked this post, please up-vote so more people benefit. If you are in Charlotte and surrounding, I would love to buy you lunch and exchange ideas.

Stephanie P. · Answer

@Jason Lecker and @Souvik G.

Title seasoning is often a hot topic on BP.  There are a number of lenders that will do your loans without seasoning, but you won't be paying conventional rates.

6 months is the Fannie Mae seasoning requirement with no overlays, so you won't find a conventional lender that will go below that.  Once you hit your max of 10 (many cap at 6 financed properties and the cash out rules differ after 6) you'll get into more flexible money, but with flexibility comes higher cost.  For the most part, they don't require tax returns, don't care about the seasoning of title, must fund in an entity, will go off the appraised value and only care about the property's value and your credit.

Rates on loans that you're going to be looking for are generally ARM's in the 7's with 30 year amortizations.  They have prepayment penalties, cost points (anywhere from 2-4 depending on the loan size) and will max out at 75% ltv depending on your credit.

Many investors use these loans to free up cash to buy other properties and factor the additional cost into the rents.

Hope this helps,

Stephanie

Chris Ayers · Answer

Good detailed post.

I would agree with you that Clint Coons is way overpriced and almost "scammy."  He has booths at Rich Dad, Poor Dad seminars so that should tell you all you need to know.

I still think an LLC is a good protection strategy. I had one crated for me and it was only $150-200 from what I remember which cost just as much as 1 year of umbrella insurance. Having good insurance might work out in the beginning when you don't have much, but if you're looking to grow fast, then its better to do it up front to avoid a refinancing nightmare later. To avoid piercing the veil, if you treat it like a business then it will be appeared as one. Get your business banking accounts set up and do things properly.

I've read some cases where a guy who owned over a million in RE was sued because his teenage son was in a really bad car accident while on the dad's insurance - now they are going after the dad's assets. Your 6 points above (which they are good suggestions in general) won't stop every lawsuit. Just being a good landlord doesn't protect against things like that.

Souvik G. · Answer

None of the lenders I have spoken to will do cash-out refinances before the 6-month hardening period. In my similar search, I have found the following four who will do it after six-months.

1. Allied First Bank - get in touch with @Bob Cannon

2. Ridge Capital

3. Cardinal Financial

4. Believe it or not, Wells Fargo does cash-out refinances after the 6 month seasoning period as well, with a full appraisal.

There will be more as my search ended with number 4 with a rate lock.

Angel Rodriguez · Answer

I'm a little late on this post but try Daniel Molina at corevest for cash out refi on sfr. I believe it's only a 3 month seasoning. Good luck.

Kerry Boyle · Answer

@Stephanie Potter is absolutely right. As a hard money lender, I can say that there are plenty of "non-agency" lenders that will not have any seasoning requirements if you look hard enough, which would be at the cost of a couple points and usually a pre-payment penalty and get at most 75% out.

Assuming this scenario: You have a 133.3k property and you want to take cash-out to fund an opportunity that you just found and won't be on the market for long.

Appraises for 133.3k, you have great credit and can get 100k out. This will cost you (averaging to 3 points up front and a 12% interest for a minimum of four months on a 6 month term) 7% of the refi or 7k in this scenario. Throw the cost into your calculations and see if you will still be ahead if you did buy the new property!

There are definitely cases where it make sense to lose 7% to gain more on another project, just do some math!

Souvik G. · Answer

...and yes, I have a couple of millions in my LLC general liability coverage and my umbrella. 98.6% Tort Claims with lanlord-tenants are settled out of courts. I don't anticipate I will be a 1% outlier even if push comes to shove...

Will Gaston · Answer

@Jason Lecker Did you ever find anybody to do this? I've got a contact at a Credit Union in Columbia that will do it. No seasoning requirements at all.

Chris Ayers · Answer

Are these portfolio lenders you were speaking to them about or Conventional?

Buddy Holmes · Answer

@Jason Lecker,

Not sure what his requirements might be on your situation, but I would recommend giving Jason Rosenthal in Charleston a call. might tell him "Buddy" Holmes, recommended you call.  He is a mortgage broker but has always met my needs in buy and hold and we have talked about a refi on my next buy.

Cash-out Refi in Charlotte?

Most Popular Reply