All Forum Posts by: Bryan Buckingham

Quote from @Richard Arakelian:

Can you build an ADU on your current property, then rent it out and just stay in your current house?

Or move your family into the ADU and rent out the main house?

You can even do Airbnb on either so as not to commit to a full rental.

Can you buy a cheaper lot to build and live on for a couple of years and then rert that out or sell it, then get the 800K lot and do it all overt again?

I’ve actually already built a legal ADU on the same lot. The reason we want to move is to have a larger lot for our kids. Unfortunately the lot we may buy is from family members and therefore time sensitive and price is fixed. We have offered on the land 700k contingent the sale of our current home/duplex. I have 1 year should they accept to sell or come up with funds in some other way. 

Quote from @Dan M.:

@Bryan Buckingham So your short 50k then? 

No, I have 500k of debt on current home now, and can only borrow a total of 750k between the 2 properties. I need 800k for the new property. Therefore I’m short about 500k let’s say. My DSCR lender says I can sell my home to an entity that I create, but must rent it out in full. (Both units).

Quote from @Dan M.:

Without doing possibly illegal activity, why don't you just refinance your primary home and pull out about 800. My math at .75 of value minus the 500 you owe should get you there. Your making crazy money apparently so you can raise the difference as you work and your homes being built. Generally speaking you don't lump sum the entire build to a builder at once.  Then rent it and make that cash flow after the fact.  

Another alternative, though I hear its a nightmare, is doing a construction loan on the new build. 

What if you financed the house from the builder themselves? Some builders offer this as they make money on both ends and don't have to deal with Realtor fees this way. 

Hi Dan, DTI only allows us to borrow a total of 750k based on my wife. I am the builder and self employed, therefore no Additional DTI from my income because I've been self employed less than 2 years. I will be the builder of the new house and I built this home as well.

I am hoping that someone knows of a solution that would allow me to hold a home that I own. 

I have lived in my home 2 years. Its value is 1.7 million. Debt on the mortgage is 500k. I built the home and would love to keep it. It would cash flow a few thousand per month. However, my family is looking to buy another vacant lot as a permanent home. I need 800k to purchase the lot and build it out as a residence. My priority is a place for my family so I have to come up with 800k. Are there any other options but to sell? Banks will lend us only a total of 700k because I am newly self employed. Which means I can borrow another 200-250k before being forced to sell our old home. 

Please do comment if you have an idea on this. Selling to an entity that I created crossed my mind, the business would hold a DSCR loan on the properties debt. And our DTI would be free to borrow 700k. However I'm not sure if that's possible with all of the lending rules. Any ideas or insight would be appreciated.

That would significantly reduce the margin of error for me too. I think that I can refi my current home or get a land loan and cover the vacant land from my end and the permitting. I basically would only need the private money on the home build at that point. I could easily get through with a 18 month private loan at 350-400k at that point. (extra 6 months added in as buffer for refinancing or sale of property.)

Since you do brokering, are these private money or construction loans secured by a deed of trust and promissory note or another method? If I refinance another property and use proceeds for the vacant lot, there would be no liens on the lot. Therefore the collateral would be the lot itself valued at 400-450k. LTV is 90 -100% on the construction portion.

I'm not seeing 10% return yields in LTRs right now in my area. Whether it be a Brrrr or new construction. The fact that you have cash will allow you to be able to make a yield on the property or multiple properties depending on how much you choose to borrow per deal. When you are not actively contributing to the management or asset improvement I do not see profits on borrowed money at this time in LTR. You may be able to get a good return in STR, they are much less consistent and management intensive.

People like me are always looking for private money for our real estate projects though, a true passive 10-12% yield. That could be a good choice for you. Management of real estate is much more hands on than most think. It seems like the appreciation of the capital is your primary goal though so even if you cannot find much return it could align with your goals to be an active investor in real estate. My area is extremely supply constrained and getting any kind of yield/cashflow here is difficult if you borrow. I hope your area is better! Best of luck Eric.

Much appreciated advice Doug. I’m new to private money so rate advice is appreciated. The 3 year period is land acquisition, permitting, build and refinance time. My last home build took 10 months but financing it took 8. Permitting took 6, I don’t have any idea when my offer would be accepted on a vacant lot either so 3 years is an expected timeframe with the inventory and slow financing here in this state.

If I assume interest only payments during the 3 years does that make it more likely to find a loan product? Limited number of projects in recent years being a major constraint. 

Are there any loan products for new construction for a contractor with only one completion in the past 3 years?

I am a contractor and building new homes is my best margin in my area for me. Vacant lots are 400k to 1 Million in my area as well. My problem has been that I have only built one ground breaking to completion project in the past 3 years. Most new construction lenders require 2-3. Further, payments during construction are not preferred on my end. I have been looking into private money loans from individuals and that seems possible if I can find 4 or 5 investors at 100k. My inclination is that 100k investment and in 3 years repayment in full of 130k 8% reinvested yields. No payments. 

That being said there is a lot to private money and I would prefer a loan product that could work for me. Ideally these homes are converted to a DSCR in 3 years or the home is sold depending on rate environment. I need to purchase the vacant lot or get seller finance on it (funding covers down payment) then I need to fund the build at the same time (450k). I am looking at a purchase time 1 year from now so I have time to consider any options before then. Also I can likely Contribute up to 500k into the project myself but I would prefer less to retain liquidity incase of an investor needing to cash out.

If anyone here knows of a loan product or private loan program that fits my scenario please let me know. My interest 8% rate is an estimate of what I expect private money rates to be one year from now. I realize its a little low right now.