All Forum Posts by: AJ Exner

Quote from @David Johnston:

Hello! I am excited to learn a lot from you all! I am very new to REI and have a question regarding an LLC. Is it best to open an LLC in Wyoming or in my home state (WI)? Also, how do you buy a property under your LLC or move a property you already own into your LLC? I talked with a lender and they said they would not do a conventional mortgage to an LLC, so I am wondering how it is done with multiple properties. Thank you!

Yeah, most conventional lenders don't like doing an LLC, but LLCs can provide some flexibility. Like, if you wanted to do a 50-50 JV within an LLC where one guarantor has a better FICO and the other has more experience, there are some means where that would be beneficial.

There are some lenders that actually only lend to LLCs (or some kind of business entities), but it does really depend on what you are going after and your general growth strategy how you would want to go about it.

Quote from @Nicholas L.:

two (?) words - DSCR loan

call The One Brokerage - David Greene's company

not affiliated - just a happy customer

good luck

Hey @Clay White

Yeah, DSCR is definitely the way to go. The issue is going to be that even if you find a conventional lender that can do it now, you will run into it DTI issues on the next one, or the one after that. So the best way to scale, is to get set up with a DSCR lender now and just continue to BRRRR.

Quote from @Thomas B.:

Investment Info:

Small multi-family (2-4 units) buy & hold investment.

Purchase price: $99,000
Cash invested: $130,000

1947 SFH 2/1, previous owner converted the single car garage into 1/1 apartment and a portion of detached 2 car garage into an efficiency. Extensive renovations mostly complete, just needing interior finishes. Plan to rent through Sec-8 due to neighborhood demographics, proximity to bus line, etc.

What made you interested in investing in this type of deal?

Cashflow.

How did you find this deal and how did you negotiate it?

Bank-Owned property. Previous owner passed away. In retrospect, I should have stuck to my initial offer of 60K, knowing it needed foundation, roof, and electrical. Got emotional when they said there were other offers higher than mine. I think realtors are out-right lying when they use this line... If not, I'll still stick to my guns next time.

How did you finance this deal?

All cash, using funds from a HELOC on my primary residence. I retrospect, this was a mistake since I am now in a cash crunch at the end of renovations. Next time I'll use Hard money lending for the initial purchase.

How did you add value to the deal?

New roof, foundation repair, and updated the electrical. Extensive renovation.
Bought as SFH, going to rent out as tri-plex. Sec-8 rents beat open market rates and the waiting list for prospective tenants is huge.

Hey Thomas,

Have you considered doing a refinance/rehab? Since you've got it with cash/Heloc, you should be eligible for either a cash out/rehab or even some delayed financing to help relieve the cash crunch and get set up with a rehab escrow, which could be really helpful given the extent of the rehab.

Quote from @Stephanie Cortez:

Hey all! I am still learning and trying to figure out the best way to finance buy and holds and eventually flips. I love bigger pockets and how much I have been able to learn from others. Something that I see a lot is using hard money lenders and OPM to finance projects. However, I have a property that I own free and clear with an appraised value of 160k. I would like to do a cash out refinance and complete the brrrr method and hopefully repeat the process. My question: what are the benefits of using a cash out refinance vs hard money? Can you use hard money or OPM without any of your own money down? Anyone willing to teach me the process and or let me watch them work a project?!  I would be open to property management/ administrative tasks in exchange of learning the ropes. 

Awesome, and sounds like you've got a great start.

So Hard Money lenders can actually help you on both the flip side (the bridge) and the DSCR (the long term). The advantage of doing everything through a hard money lender is keeping everything through a business entity of some kind and keeping it off of your personal credit and debt-to-income.

Experience will be the biggest factor to what kind of terms you can find on those "flip" bridge loans (the 'BR' of the BRRRR). If you have a property that can rent out and cash flow, then it would pass what lenders call the Debt Service Coverage Ratio (DSCR), ie it cash flows monthly. If you can show them that a property cash flows, and you have decent credit, then you will be able to find a lender who is technically HM that will offer a 30 year fixed loan.

Is your property in Philly? I am seeing A LOT of movement up there so it seems like a great market and a great opportunity. Especially as rates are starting to trickle down and put yourself in a good position to snag a property or two in the spring.

Great to hear! Let me know if you have any issues, I know our processors like them but there are a few more. I just happen to be wearing some of their swag today so your question came at the right time.

Have you checked with who the lender suggests? Often times when I work with my clients, its easier to take who the lender suggests because it might streamline the processing a bit more.

Otherwise, maybe check with Obie? We like to utilize them.

Quote from @Shane Gaude:

I’ve purchased a investment rental about a 1 1/2 yrs ago. I used a Heloc to purchase the property and do some needed renovations over the past year. I’ve raised rent slowly for long term tenant that has been there for 5 yrs or so. Long story short. Purchase price was 80,000. Put 20,000 down from Heloc.  Spent roughly 8000 on AC and other exterior repairs. Is my loan seasoned enough to refinance,  to get access to my Heloc for next deal? Should I use a different lender for this? Considering bigger pockets for that?  Other similar properties in area are listed for 120,000-130,000. Have not renovated interior, was waiting for tenant to move do renovations would be easier. Thanks for anyones feedback.

Hey Shane,

120k-130 is well within the ballpark of most lenders for minimum property values. I know a few of my clients that work with lenders that go down to 75k on property value, so it sounds like you should be good. 

It seems that you have two options at this point. You could do a refinance/rehab based on the existing property value and needed renovations, as long as the ARV makes sense. Or you could use the tenant that is in place and just do a 75% cash out refinance and secure it under a long-term DSCR loan.

Options are a blessing and a curse sometimes. Feel free to reach out if you need to talk through it.

Quote from @William Silva:

Hello BiggerPockets,

Thank you in advance for any input you might have.

I plan on purchasing a distressed property with hard money. 

2 questions.... 

1) How can I obtain 100% financing for the down payment as well as the rehab costs?

2) If I close under a LLC, once the home is fixed and rented, can I cash out refinance into a conventional loan (for better terms)? Following that Refi, I'd like to switch the deed back over to the LLC.

Is this all attainable, or am I living in a fairy tale? 

Hey Will,

Hope you got an answer to this that you needed. The initial loan at 100% would certainly be tricky, but there are a couple HML that I know of that kind of blend the line between HM and Conventional Underwriting conditions that make 100% possible. However, it can still be tricky, which is why the next question I would ask is if you know anyone that would be willing to do a JV with an 'experience partner' that could jump on the LLC for the rehab?

And it does seem like DSCR would be the way to go. Rates are starting to creep down, so hopefully you find a group with a good seasoning requirement and you are well on your way to a solid BRRRR home.

I guess it all depends on what type of 'value add' there is with the repairs. 

If its similar to other off-market deals that I see, the ARV could really come more into play with just the 'actual' value is of the property vs. what you are getting it for. If that is the case, the I could see where utilizing a bridge, or even a 'stabilized' bridge to just purchase it, wait ~3 months for seasoning (potentially taking a hit on monthly cash flow), and then do a 75% of the "new" value which would help your JV partner and get it cash flowing.

Does that make sense? If not, feel free to reach out and I would be happy to try to explain it on the phone!

@Taz Zettergren

I have no idea but I wanted to make a note and both wish you luck, but also follow this post to see what people say. 

I work with a few lenders that will do a whole park, but for a single MH too many lenders see them as 'personal property' and so they won't even consider it. 

Here's to hoping!