All Forum Posts by: AJ Exner

Quote from @Dominic Richardson:

I’m looking for recommendations on hard money lenders that are willing to finance properties purchased at auction.

I've encountered some challenges, as certain lenders require interior photos, but many auctions do not permit entry. Any suggestions on how to navigate this process and successfully close on these types of properties would be greatly appreciated.

Additionally, would a bridge loan be a viable option to help me close the transaction and then transition to a fix-and-flip loan when I have access to the interior?

Thank you for your assistance!

Dominic,

Auctions can be pretty tricky here. So I would argue that it has less to do with knowing the lender's requirements (bring on a broker or flexible group) and more to do with what the auction company requires. 

From my experience, the biggest factor is how the auction company works. It is very regional and differs by group, but some would say that you can't have interior access but you can have 30 days to close (quite a few lenders can do this), while others would allow interior access but you only have a week or less to have the funds (or same day in some instances). 

I would get to know the auction company first and what they will allow, and then work with either a couple of programs that would work or use a broker. 

The other option (if you have the capital) is to utilize an 'Unseasoned Refinance' or a 'Delayed Purchase' to essentially purchase in cash and then recoup those funds with a second closing. You won't get the full seasoned-ARV, but you can free up some capital after you purchase it and utilize a rehab-escrow to do the work. Not every lender does it, but it give you the bargaining power of cash while still maintaining some liquidity.

Good luck, happy to help where I can!

Quote from @Jay Hinrichs:

Geez I would be talking to your HML right now as I doubt they want to take it over.

and try to get a workout with them ASAP.. sounds like its going to be  a loss anyway you cut it and I have to think you put up cash for a down payment as well.

maybe someone else will have some pearls for you.

Wholesaler is going to low ball you for sure.

Absolutely 2nd Jay on this one, reach out to them and talk to them about the situation. They might request to re-process some aspect of the loan or to show some proof of some things, but most lenders don't want to deal with all of the back-end stuff on something like that. 

Unfortunately, it is likely a loss if you were planning on keeping it, but hopefully it won't be a true loss for you.

Good luck!

Quote from @Corey Crowley:

I am new to Bigger Pockets and this is my first post, so I apologize if these questions may seem very basic to some.

I own 7 single family homes and 2 duplexes which are all paid and have no outstanding loans. I have not purchased a property in a few years, but I am closing on a new single-family house this Friday that I am paying cash for. I am thinking about actively trying to grow my investment portfolio and use my existing properties as leverage to acquire more properties. I have a couple of questions about ownership structure and a couple about possible cash out finance options for my existing properties.

Right now, all of these homes are in personal name, and I realize how much of a mistake this is and I plan to move them into LLC's before the end of 2024. If I am about to search for some kind of cash out refinancing options, is it best to keep the properties in my personal name for now or should I move them into LLC's before searching for financing options?

My next question is about financing options. If I am looking to pull money out of a total of 10 properties to make new investments, what are the options here? Are there loans that I can take out against the entire 10 property portfolio, or do people usually get a single loan per property? If these are both options what are the pros and cons to each of these financing options?

Any advice or personal experience that you can share would be greatly appreciated.

Corey

Corey,

Sounds like you are in great position right now. Honestly, the conversations I've had with my clients that are debating the portfolio v. single asset refinances have landed on how much do you value flexibility. I would recommend doing a "reduced" (~60%-70%) leverage refinance which would help drive your rate down as much as possible and hopefully still maintain the cash flow that you would like to have, especially since they are free and clear.

If you were to go the portfolio route, I would confirm with the lender you use what their 'occupancy requirement' is. If you have a property or two that are currently vacant, you might run into some issues there. You will also need to keep a close eye on the price per property requirement that any lender would require to make sure that one (or two) don't get bounced. The appraisal costs on something like that would be pretty high as well.

If you go the single asset route, you might get a nice little discount on fees by doing multiple at once. Make sure that they only check credit once (or soft inquiries) to make sure you are not hit with 10 different hard inquiries all at once. That would take quite a bit of time to repair on the back end if that happens.

Happy to help where I can, and good luck!

Quote from @Jason Smith:

@AJ Exner. Many of the loans I have are DSCR loans. Since my business is structured as an LLC the taxes have them all reported together as LLCs are a pass through tax structure.
So what I am finding is that when lenders see this they lump all the debit and not all the income. It’s crazy!

Yeah, that is on the nose with how they function. You will get all the 'credit' for the debt that they incur but not of the income. So unfortunately, as you scale, finding creative solutions like my colleagues above have suggested will be the name of the game. 

Personally, I tend to see it more with my clients when they are buying vehicles as they are scaling (crushes DTI/FICO in the short term), but that sucks that its impacting what you can do with your family. Of your 10 properties, what would you say is the ratio you have of conventional vs. non-conventional/DSCR?

Hey Jason,

Sounds like it is time for you to refinance your properties into DSCR loans. The idea of funneling debt towards an LLC will help alleviate the DTI on your personal name and free you up to buy the home that you are wanting.

Good luck in taking a look, its a fun problem to have. Great job up to this point!

Quote from @Lisa Sluss:

Hi all -

I have a house on the market that is not selling.  It’s priced below value, but people aren’t fond of the area, low walkability score, near a bus stop, etc.

I’m nearing the end of a hard money loan and I’m wondering if it’s possible to do a cash out refinance on a HARD MONEY loan.  Will someone lend me money to pay off another hard money loan?

For sure, I would recommend a ‘bridge to sell’ loan that would be based on the new ARV that could buy you some time. 

Just to prepare you though, they will see what you tried to sell it for and, whatever your original ARV might have been, they will likely base refinancing numbers on the most recent sale price, if not even a little lower. This is because by not selling, it effectively showed that it is not worth that. 

Good luck! Happy to help where I can. 

Hey Micah,

There are certainly lenders that can help with something like that, but I think you are going to run into some issues with your values. 

Setting up a refinance with an escrow would be fine, but if your ARV is only 75k, then most groups would do 70% of ARV, which after your 7500 payoff and closing costs, puts you with an escrow around that 40k mark.

It would be tight for a lot of groups, plus refinancing at 75k could be a challenge as well.

I think I know of a few that could help, would be happy to connect and see how we could help

Good luck!

Hey John,

Some DSCR lenders would only require 90 days of seasoning and you could refinance it at that point, which would do the same as a Quit Claim in getting it under your LLC.

You would essentially shift the ownership on title from your individual name into your LLC via the refinance and save some additional closing costs, though minimal they may be, by not closing a QC and a Refi back to back.

Good luck! Happy to help where I can

Quote from @Clint Miller:

Hey BiggerPockets Community!

I’m curious to hear about how everyone here is financing their fix & flip projects. Whether you're a seasoned investor or just getting started, finding the right financing can make or break a deal.

Would love to hear your experiences, tips, and any questions you might have about securing financing for flips. Let’s share insights and help each other out!

Hey Clint,

So 1,000% Biased, but each HML is going to have some kind of a 'buy box' that their investors are asking deals to be within. Whether it is experience requirements, leverage requirements, minimum property values, ARV ratio, FICO requirements, and even specific regions that they will/won't lend to, its important to know what those are for the lender you are inquiring with.

If you are planning to do a few of them or even just a couple a year, it might be good to check in with a broker that is familiar with the space and has the connections and knowledge to help get you what you need. 

Hope that helps, happy to point you in the right direction if you are looking for some help.

Good luck!

Jerome,

Yes, there are some lenders that would take ABNB/VRBO income reports to show income, but there are alot that don’t. How many months of trailing income can you show? 

Some would take those, 1007 market rents, or even AirDNA, so knowing which ones is important as you start your refinance(?, I’m guessing) 

Good luck! Happy to connect if you are still needing help