All Forum Posts by: Aaron Junck

Not to sure. I know when I purchased my 1st home , it was one that I used as a personal residence. I wish I would have purchased a rental property first due to the fact that when I went to get funding for a rental they kept bringing up the debt to income issue due to my mortgage. I have yet to go try and get new funding lately, but I converted my 1st home into a rental. From what I am hearing and reading is that banks will allow you up to 80% of the rents collected to use to to service debt and expenses. So with that being said if your properties are cashflowing well I would think that debt to income would go hand and hand with what you collect. Does that make sense?

Rich Weese Thanks for replying to my post!

I look forward to reading your book when it comes!

I have cash as collateral, however not enough to fund the project entirely. Therefore, I would assume that any private money would want a secure interest in the property, as I would myself if I was funding a project for someone else. When you have built them with all cash and then went to refi them.. what time frame are you saying??? as soon as the project is complete or did you wait 6 months, a year etc.? ..

A different idea was if I built a property and had an agreement with a private individual/company to purchase the property for the appraised value( which allows me to get all my potential equity out) and then do a wrap around mortgage ..or maybe its a double close... and repurchase it back from them and allowing them to profit for being the middle man. I wonder if this would be allowed or if a bank would require them to hold the property for a period of time 1st?

~Aaron

I was hoping that if I used Private Money other than a conventional bank that I would build it for 300k and then for an exit strategy I would refinance to conventional lending and in this case wouldn't they not know anything about the construction? they would just use my income and expense reports along with the rental income for the property and then require me to get a new appraisal to base the LTV off of?

Yes, I understand that it has to be costs directly related to the property aka materials and labor. Not sure if I previously mentioned it or not but I am a General Contractor/Builder and would use my own crew for doing a lot of the work. My thinking is if I would bill out as if I would be building the property as a presold for another investor then with the total expenses paid out I would have the 25% cash sitting there to use as a downpayment.
I dont know if I am explaining this correctly or not... Say you came to me and said I want you to build me this 4plex. I wouldn't sell it to you for 300K when I would lose all my profit from doing everything from dirt work, to framing, to finishing. I would sell it for 400k to you. I understand banks are extremely tight and only want to lend 80% of the cost to build or the of the appraised value, whichever is less. My question if I just paid out all the expenses aka the 400k amount then I would be able to say here is 100k for a down payment..
I have ran into this with doing other presold projects the only difference here is that I am the builder and the owner so when I build a property and not take out ANY profit and then have to add an additional 20% on top of that I would have a property in this case with a loan of 240k which I could sell for 400k, thats 60% LTV.

I havent had to do it but I have heard of others doing this... If you want someone out and they aren't willing to get out, offer them a little bit of cash... yes cash .. if you go and say here is a few hundred bucks to help with your moving costs. 1 they will think they hit the lottery, 2 they will more than likely be shocked and move out, 3 odds are they wont damage the property to move out. key thing is to give them the money once they have vacated and not before they do. Just a thought.

Bill G.

Thanks for the info. I have ran into this issue with building some single family homes as well when you say that banks are only wanting to lend based off the cost to build or appraised value, whichever is less. My question on that is would you recommend that I just bill out the entire property and have the cash set aside to use as the 25-30% down payment??? Would this be a way to get around having a property valued at 400k and only have 300k in monies due, since I would have my crews build it from the ground up...

I am in the process of putting together a 4 plex project in which my company will be building. The goal is to have between 25-30% equity in the project when all said and done. I then plan on adding this property to my portfolio as a rental property. My questions for you all is:1) have any of you recently done a project like this and if so how did it turn out for you, 2) I am planning on funding this by Private Money(PM), with all your expertise what should I expect to pay for borrowing funds, 3) as for an exit strategy from PM how long would I typically have to wait to convert this to conventional financing, given that I will have 25-30% equity in the property. If I have the property fully leased for 6 months and it is cashflowing strong would that be suitable or would I be more realistic with a 1-2 year of rents collected? Thanks ahead of time for all your replies.