All Forum Posts by: Brian Cauldwell

Hi @Kenneth Schuster!

Some conventional loans will close under an LLC, but definitely not all. Whereas a DSCR loan will prefer to close under an LLC. You could refinance those properties through a DSCR loan and close under the LLC, so it does not show up on your personal credit.

Or if you are looking to buy more properties, use a DSCR lender/conventional lender that will close under the LLC.

Hi @Jeff Rogers!

There is one program that we work with that will do 30-year fixed loans on properties with purchase price for $75,000 or higher. 

Most lenders are at $100,000+, and I have not ran across any that will do a long-term loan for less than $75,000+. 

 Depends on the lender of course, but typically going from the standard 5 year penalty, a 3 year penalty adds anywhere from 0.1%-0.25% to the rate. For anything less, the rate could be 0.5%-1% higher and/or more fees. I have seen 1.5 points + higher interest, and I have also seen just 0.5% to the interest rate for no prepayment penalty. 

Hi @Hyeseong Park!

A lot of my clients prefer going with a three-year prepayment penalty (3-2-1). Less fees if you do want to refinance, but it also doesn't change the rate dramatically. 

The issue with most lenders less than a three-year prepayment penalty is either the rate is much higher, they make you buy out the prepayment penalty, or both.

Personally, I think the three-year prepay is a great option because it gives you more flexibility, you aren't paying too much for it, and gives you the stability of a long-term loan if rates don't fall. 

Hi @Robdrell Gentry!

I have several clients in Detroit that have been in your exact situation. Your best solution to find the ARV is to talk to a local realtor to give you an idea of what it would appraise for once the property is fixed up.

However, it is an estimate and the only real way is to get an appraisal on the property. There are lenders who will lend on this, the numbers have to make sense though, for them and for you. 

Hi @Dan Creed!

I have worked with a couple of clients looking to pull equity out of a property in a trust this year. 

If you are looking to get a loan for the property, most likely any lender will want to put a mortgage on the property or use it as collateral. The only other way would be to get a personal loan. However, getting a personal loan for $375,000 is tough, so I could see why they are wanting the property as collateral. 

If you went with a rehab loan you should be able to base the loan off of the after-repair value instead of the current value of the property. They would base the loan on the current value, rehab budget, and after-repair value for the property. 

Hi @Justin M Lippold!

Do you know based on square footage if the property is primarily residential or commercial? 

I have seen a lot of these deals, and that is going to determine a lot of things when it comes to lending. If the property is primarily commercial, there are going to be a lot less options, and from what I have seen the leverage is not great for those as well. 

Hi @Damon Robles!

I tell a lot of my clients that if you are going to get into this space your goal should be at least 5 properties. There are a lot of people who have bought one or two, and those become headaches. If a big-ticket item pops up that you need to repair, the cash flow from one or two properties will most likely mean you will need to dip into our own savings to pay to get that done. 

If you are okay with that, buying rent ready properties can be less risky and less fees. 

If you do want to buy more, try and get to that number as quick as possible, and the best way to do that is BRRRR. While you may not be able to pull money out when you refinance, you should be putting less down to acquire the property. Also, if you find the right property you should be able to pull out some money to help fund the next project. That does not work every time, but once you have done it once or twice you will know more about what to look for.

Hi @Jim P.!

Another thing to think about for an 8-unit apartment building is cash flow. If your goal is to sell, you will have more borrowers be approved if the property is showing great cash flow. So, vacancies, and rents below market rent can affect the loan for potential buyers. 

In the DSCR space, most lenders look at current rents and the trailing 12 months to determine cash flow, so if there are vacancies that could hurt the cash flow, which would lower the loan amount, and less people can buy the property. Especially if the goal is to sell it for as much as possible.

Hi @Lilah Myers!

A lot of my clients are looking for different thigs when it comes to what kind of hard money/fix and flip loan. 

A couple of things to consider when looking for loan options. Leverage, interest rate, interest type, fees, what kind of appraisal, and speed. When you do talk to someone, make sure you are asking those.