All Forum Posts by: Andrew Postell

@Haven Garber thanks for the post!  Generally speaking, if we need something local...be it an electrician, plumber, contractor, title company, etc....we should reach out to local investors.  I know you are out of state at this point but try some "Michigan Real Estate Investor" groups (or some combination of those words) on Facebook.  Join all of them if you like and just post this in there. Some of those facebook groups have thousands of members. I mean, nothing is foolproof but asking a local person is the right move here. That’s the best bet.

@Simon Asselin what you are looking for is sometimes called "portfolio lending" and sometimes called a "blanket loan".  But the best course of action here is two fold:

1. Visit your local REI groups. There are many groups that meet across the country. Some post here on the Bigger Pockets Marketplace. Many post on meetup.com. Even facebook will have some. Networking is always a great practice and you never know who you might meet there and what good information they have to share. Would certainly recommend visiting if one is close to you. If you don't live in Washington then join all the "Washington/Seattle Real Estate Investor Groups" on Facebook and ask this question in each one.
2. Calling - and then there's this option. Which is what I had to do. I had to call about 200 lenders (no exaggeration) to learn of 4 lenders who did this and I have some tips. First, when calling banks target the smallest most community based banks you can first. If you have never heard of them, and they have one location - that's a good candidate. No big, national, publicly traded banks will do this loan type. Second, try to ask for "LINES OF CREDIT" instead of HELOCs. I know it sounds like I'm splitting hairs but some banks write HELOCs in their residential department....which won't write Investment Properties. And that residential department will often not speak to the commercial department. So, they'll just say "sorry, we don't do it"....not even knowing that they really do! So, if you ask for a "line of credit on an investment property" that should get you to the COMMERCIAL division. That's the section of the bank we want. Now, most of these smaller banks may only have 12 employees or so. So, don't get frustrated if they don't return your call or aren't in the office. Just call back and be friendly. Maybe play dumb a little "I don't know if I'm in the right place..." "I'm sorry to disturb you, you may not be the right person for this....", etc. Maybe someone can get you to the right person. Again, be prepared to call A LOT.  

Anyways, hope that helps some with your search.

@Jonathan Davis while there MIGHT be some people who can help with this here...we are mostly a real estate group.  So, farming, gas stations, crypto, solar, and lots of other investment methods would likely need to go elsewhere.  You can certainly keep asking here...I would suggest the commercial forum...but I do think that finding other groups would be the right course of action.  On facebook, search for "Texas Land Investors" or "Texas Tree Farms" or some combination of that and join the groups that seem most appropriate. And then ask in there for what you need.  I think that would probably be the best step to take for something like this.  

@Patrick Shep I would absolutely encourage you to apply without any co-signor.  When someone else is on ownership (or deed/title) then they would need to sign a couple of things at closing to give permission for a lien to be applied to the property they own - but that doesn't mean that HAVE to be on the loan.  Ownership is different than who's in debt.  Now, I have seen some lenders get really annoying about this and require a spouse to be on the loan...so IF YOU CAN find a lender that will allow just you, then that's the route we want to go.

Hope that makes sense.

@Andrew M. yeah, if you opened a HELOC while you opened while living there then it's likely that they don't want to extend that current product. Now, some of these answers will depend on what state that property is in, how much equity you have, and a couple of other factors...but you can certainly seek out other lenders about a Line of Credit on an investment property. Those products do exist.

Here's some tips on how to find lenders that write this in Texas and for everyone else just in case it get's researched.

1. Texas - Cash out loans of any type are pretty challenging here in Texas. Because of this many lenders won't do these loans at all. Finding a lender that does investment property "Lines of Credit" is hard in any state...but here it's even harder. I know 3 that write them locally in DFW...and only one of those will do it state wide. But am certainly willing to share any information if you just PM me. No problem.

2. For everyone else....a small, local lender will be your HIGHEST probability of success when trying to find "Line of Credit" lenders on investment properties. The unfortunate thing here is that investment properties foreclose at a higher rate than primary homes so many banks just don't want the exposure to this. But it is 100% possible to find but you have to put in the time or at least know someone that ALREADY has the connection. Here's my 2 suggestions:

1. Visit your local REI groups. There are many groups that meet across the country. Some post here on the Bigger Pockets Marketplace. Many post on meetup.com. Even facebook will have some. Networking is always a great practice and you never know who you might meet there and what good information they have to share. Would certainly recommend visiting if one is close to you.
2. Calling - and then there's this option. Which is what I had to do. I had to call about 200 lenders (no exaggeration) to learn of 4 lenders who did this and I have some tips. First, when calling banks target the smallest most community based banks you can first. If you have never heard of them, and they have one location - that's a good candidate. No big, national, publicly traded banks will do this loan type. Second, try to ask for "LINES OF CREDIT" instead of "HELOC". I know it sounds like I'm splitting hairs but some banks write HELOCs in their residential department....which won't write Investment Properties. And that residential department will often not speak to the commercial department. So they'll just say "sorry, we don't do it"....not even knowing that they really do! So if you ask for a "line of credit on an investment property" that should get you to the COMMERCIAL division. That's the section of the bank we want. Now, most of these smaller banks may only have 12 employees or so. So don't get frustrated if they don't return your call or aren't in the office. Just call back and be friendly. Maybe play dumb a little "I don't know if I'm in the right place..." "I'm sorry to disturb you, you may not be the right person for this....", etc. Maybe someone can get you to the right person. Again, be prepared to call A LOT

Got my recent flip that is now LIVE in Weatherford, Texas.  Check out the listing HERE   Weatherford is a suburb of the Dallas/Fort Worth Metro Area and is a large peach producer, and was named "Peach Capital of Texas".  The peach is celebrated each year at the Parker County Peach Festival which is Weatherford's largest event and one of the best-attended festivals in Texas.  Also, described as the "cutting horse capital of the world" and headquarters the National Snaffle Bit Association (and equestrian organization).

So, this town supports an easy commute into the 4th largest metro of the country but has enough remote living that you can still get a Texas sized culture with some leg room.  

The compelling pitch to this home - we recently had it appraised for $251,000...and we have it for sale for much less.  Get some built in equity!

This home is located less than 1 mile from downtown Weatherford and can make a great rental or first home.

@Kent Ford there's a few layers to your post.  I mean, Texas is still a great state because of the amount of jobs, the pay that comes with those jobs, and the cost of housing here as opposed to other places around the country.

However, that key word "affordable" actually has a definition to it - and that's 30% of the income shouldn't go towards housing.  And that's not happening so much here.  And then there's the layers of 30% of income to home ownership vs. 30% of income to rent.  

Again, a few layers.  However, if you analyze what we have vs. what other states have there are numerous reasons why we are a great state to invest in.

I hope all of that makes sense but feel free to ask anything additional.  Thanks!

@Maleshia Gilcrease thanks for the post!  Always great to hear from a fellow Texan.  I do write these loans and have many posts about them.  Reach out if you want to talk any specifics.  Here's the general outline for them:

Renovation loan programs can finance the purchase and renovation of a home in one loan. When the transaction closes, the purchase is funded, and we set aside additional funds in an escrow account to pay predetermined professionals to make any required or desired repairs or upgrades to a property AFTER the buyers settle on the purchase transaction. The loans are fixed rate programs, and the additional renovation financing is included into the one loan. The down payment is based off the total adjusted acquisition cost – the purchase price plus the cost of renovations. The down payment on owner occupied properties can be as little as 3% on owner occupied properties. These loans allow buyers to purchase a property “AS IS, WHERE IS”.

Renovation loans are available in 30, 20- and 15-year fixed rate terms and can be used to purchase owner occupied, second home and investment properties.

By time the renovations are completed, the home needs to be in move-in, live-in condition and conceptually ready to be resold without repair issues.

Other Important Items to Know about “Conventional” Renovation Loans

Maximum – Minimum Purchase/Upgrade Amounts:

Maximum: Limited to 75% of the “after improved” value

Occupancy: Primary, Second Homes, Investment Properties

Renovation Term:

• The renovation term for this program is a maximum of 180 days.
• The Borrower(s) is responsible for the work being completed within the escrow period. If the work is not 100% complete by the end of the Escrow period, may implement a .50% (on total loan balance) extension fee that will cover an additional construction term of 60 days. Borrowers will be provided an upfront disclosure detailing this information.

Contractor(s) Acceptance:

• Ø does not “approve” contractors or refer contractors. A borrower must choose his or her own contractors to perform the needed renovation.
• Ø All Contractors participating in the HomeStyle Renovation Program must complete a Contractor Profile Report. All Contractors are subject to the lender’s determination that the contractors are qualified and experienced, have all appropriate credentials required by the state, are financially able to perform the duties necessary to complete the renovation work in a timely manner, and agree to indemnify the borrower for all property losses or damages caused by its employees or subcontractors.

Multiple Specialized Contractors:

• Ø Since this is a limited repair/renovation program, no General Contractor is required. However, A General Contractor will be required on all renovation projects over $25,000. Borrowers are not allowed to complete any of the work themselves as sweat equity.

Loan to Value Calculations:

The original principal amount of the mortgage may not exceed Fannie Mae’s maximum allowable mortgage amount for a conventional first mortgage.

• Purchase: For a purchase money transaction, the LTV is determined by dividing the loan amount by the lesser of the "as completed" appraised value of the property or the sum of the purchase price of the property and the total rehabilitation costs.
• Refinance Transactions: For a refinance transaction, the LTV is determined by dividing the original loan amount by the "as completed" appraised value of the property.

Eligible Renovation:

• There are no required improvements or restrictions on the types of repairs allowed. However, repairs or improvements must be permanently affixed and add value to the real property.

Costs and Escrow Accounts

• The costs of the renovations will be based on the plans and specifications for the work and on the Construction contract for all of the work requested by the borrower. The renovation costs may include a contingency reserve and renovation-related costs.

Contingency Reserves:

• Contingency reserves 10 % required for any unforeseen cost overruns that may occur during construction.
• Unused contingency reserves that were financed into the loan will be applied to the principal balance of the loan. If the contingency reserves were paid in cash, they may be refunded to the borrower.
• The contingency reserve may be considered as part of the total renovation costs or the borrower may fund it separately. The contingency reserve may be released only if required, necessary, and unforeseen repairs or deficiencies are discovered during the renovation. Unused contingency funds, unless they were received directly from the borrower, must be used to reduce the outstanding balance of the renovation mortgage after all of the renovation work has been completed and the certification of completion has been obtained.
• The loan is not re-amortized.

Draw Schedule:

• The HomeStyle program has a maximum 4 draw process.
• The initial draw can be up to 50% of the total project and can be for materials for the project.
• The final draw will be at least 10% of the total project as retainage and funds will be released upon receipt and approval of final inspection, Certificate of Completion from Appraiser, signed All Bills Paid Affidavits and Lien Waivers.

Additional Draw Information:

• Ø Signed Draw Request by borrower and contractor
• Ø Signed All Bills Paid Affidavit
• Ø GMG review and approve the draw request and will release funds for disbursement
• Ø A check will be issued in the name of the borrower and contractor and delivered to borrower via USPS
• Ø An inspection of work to date will be performed at 50% complete

Final Draw Information:

• Ø Signed Draw Request
• Ø Final inspection/Completion Certificate will be required for release of final funds
• Ø A Title Update showing property free from lien or encumbrance
• Ø General Contractor’s Lien Waiver Affidavit
• Ø Affidavit of Completion GR will review and approve the draw request and will release a check in the name of the borrower and contractor.

Change Orders and Cost Overruns:

• Changes to the initial plan are not permitted unless prior approval by Guaranteed Rate. Any work outside the scope of the initial plan is not permitted as the loan amount cannot be increased.
• If the project encounters cost overruns, those cost overruns will be the responsibility of the borrower to pay.

Renovation Term Extension Fee:

• .50% of the total loan balance. This is a post-closing penalty charged by the Escrow Administrator to extend the renovation period beyond the maximum renovation term of 180 days in the event renovation is not completed within agreed upon terms.

Other Important Items to know about FHA Renovation Loans

A FHA option to roll renovation/repair work into the loan. Down payment is based on the total of the purchase price + renovation costs. Loan can go slightly over appraised value if the need were to arise.

1. “Streamline Option” – or “Limited Repair Program”
   1. Total financed rehabilitation costs cannot exceed $35,000
2. Maximum Sub-Contracts is 3
   • If more than 3 are needed then a General Contractor will be required
3. Repairs are limited to cosmetic repair only. Structural repairs are not allowed, such as room additions, foundation repairs, etc. Pools are also not permitted with Streamline Option

1. Full Repair Option
   1. Minimum of $5,000 in improvements
2. 203k Consultant is required

FHA Approved Single Family "construction manager" who oversees and inspects the rehabilitation work from start to finish

1. Nearly any type of repairs is allowed (luxury items are not). Pools are permitted.

Contractor Approval

• Contractor must be accepted by Renovation Department prior to final approval and be responsible for the entire project. Multiple sub contractors with multiple separate contracts are not allowed..
• Repairs/Improvements must be completed by licensed contractor(s) as required by local/state municipalities
• Repairs cannot be completed by a related or interested party (i.e. relative, real estate agent, seller, broker, etc.)
• Borrower selects contractor

Contingency Reserves

• Minimum 10% is required. Can be financed.
• With “Full” version – 20% reserves if renovation is major – foundation, room additions

Draw Requests

• “Draws” are funds paid to the contractor after work is completed.
• For “Streamline” – pictures of completed work is permitted
• For “Full” – Consultant inspects work
• Work must be completed within 6 months of loan closing
• No upfront draws permitted

VA RENOVATION LOAN

Contractor certified by VA

HUD Consultant is required

15% contingency

$50,000 renovation max

So with the 15% contingency…that means about $42,000 renovation max because of the 15% contingency

@Faris Wright NACA is one of many down payment assistance programs that exist. NACA specifically does target "underserved" communities but there are other options out there as well. With NACA, you have to pay to take their course and that's the only way to gain access to their program. Other programs don't have that requirement. You can simply google NACA and find their website and information to learn more about it.

@Stuart Cairns this should be pretty easy.  We just have to get you in the right place.  Bigger Pockets is a great resource but if you need a plumber, electrician, title company...or even lender - then we need local expertise.  Try some local real estate meetup groups. Meetup.com is a good resource for those but some of the groups will also post here on Bigger Pockets Marketplace too. You have several in Ohio.  Even facebook might have some good local groups for you. Some of those facebook groups have thousands of members. Eventbrite too. But post locally for this. That’s the best bet.