All Forum Posts by: Chris Pohlson

Hey guys. I'm in the refinance stage of my 4th BRRRR and I'm shopping commercial banking relationships. I'm running into a small obstacle. Most of the bankers I talk to want to make ARV the lesser of either my total costs into the property or appraised value. In this case I have $145k into the property and appraisal will be around $175k (not my best BRRRR but what do you do)

I've printed them the deal analysis using the BRRRR calculator here on BP (you know, the nice pdf and all), I've provided them market comps that support my cause...nothing seems to work. Policy is policy right?

At the end of the day it's a difference of like $24k cash back in my pocket.  Depending on your perspective, that's either a lot of money or a little.  I go back and forth.  I mean I could do a LOT of direct mail with that money.  On the other hand I understand I'm unproven to each person I sit in front of and I find myself asking what the relationship is worth.

I'm curious if some of the more experienced buy and hold investors had the same problem when first establishing their commercial relationships.

Do I just need to suck it up and establish the relationship at the lesser valuation?  Or do I push and search my *** off for a lender that will take the appraised value?  I see huge value in establishing a relationship with a local commercial banking partner sooner than later.

Thanks all. Always appreciate the insights.

@Emanuel Cavallin I work with an agent that HUSTLES.  She follows up, she has fantastic communication skills (always available), she has a thorough knowledge of the local market, she has a great team in place to help her, and it's obvious she has a passion for what she does.  If she doesn't know an answer, she finds out and IMMEDIATELY let's me know.  And the best thing about her is that she's CONSISTENT in all of these categories. 

She does not know what makes a good rental.  She is not a savvy investor.  Those are sacrifices I accept because her work ethic is impeccable and I have other sources for the skills she lacks.

If you can be all of the above PLUS have the investment knowledge, you'll do well.

Hope that helps.  Good luck!

@Ethan S. As long as you're under $250k it absolutely makes sense.  Can't lose it and you get a better return...no brainer.

We did the same thing you're talking about (I was a branch manager for our credit union and still opened the online savings). 

It has worked out great for us.

@Jessica G. *

@Jessica G. There is no way to make sure you get paid for birddogging.  You give an investor a lead and if they follow up and eventually close on the property you point out, you hope they throw you a bone.  If they don't, you don't give them any more leads.  It's pretty simple.

@Matt Sears Why do you want to start an LLC for that property?

You can transfer existing title to your LLC but your mortgagor won't like it if they find out. It would probably trigger a due on sale clause.

You could xfer to an LLC when you refi but then you would likely be looking at a commercial loan-not a traditional 30 year fixed mortgage.

If you're setting the LLC up for liability reasons, check into an umbrella policy with your insurer. Might be a better option.

Good luck!

@James Newkirk Keep educating yourself. What you see on Zillow or Auction.com are REO's...bank owned properties that have gone through foreclosure and are now being sold by the bank. If you're relying on Zillow's "Zestimate" for an accurate value of those properties in their current condition (or even ARV), stop. No one is listing properties on the MLS at fifty cents on the dollar. Get a local realtor to walk them and give you comps.

Auctions on the courthouse steps are a different beast altogether.  You need to look for liens, tax liens, judgements, back taxes, 2nd mortgages [why? because:)], and more...

In my state auction is at 11 am and payment is expected in full by 3 pm.  There is no way an FI can put a lien on a property in that short amount of time so financing is not an option unless you have a prior commercial relationship with your FI.  It's a cash game.

I'll keep answering your Q's and let you know in my state the right of redemption is 6 months.  Basically that means when I buy a foreclosure, I can't touch it for 6 months unless I get with the mortgagee that was foreclosed on and work out a deal.  They have the right to redeem (meaning paying me back in full) within that 6 month period.   On the last foreclosure I bought, I then couldn't take out a traditional mortgage until the 6 month seasoning period was up after taking possession which was 6 months after the right of redemption (so 1 full year after purchase).

This is a lot of sh*t to understand. Don't get discouraged.  Don't let your eyes glaze over.  Stay focused.  Keep learning.  GO TO A COURTHOUSE STEP FORECLOSURE AUCTION IN YOUR AREA...even if you have no chance of buying a property.  The networking opportunities are as good as anywhere for a new real estate investor.

Good luck investing.  Thank you for your service.  PM if you have more Q's and we can connect.

Hi guys. I'm hoping wiser minds can help me think through a few things.  

My goal is to get to 500 units. I own 7 units (3 houses and a 4 plex) and I'm getting ready to sign my first commercial loan to complete a BRRRR. So far my purchases have looked like this:

Buy with cash

Rehab with cash

Go to the bank for a refi

When I do that, I find that I either severely restrict or stop my marketing because most of my resources are tied up in my deal(s). That in turn limits me to about 1-3 deals a year while I wait for equity to build. I would like to be doing 1-3 deals a month. There has to be a better way.

I was thinking of asking my commercial banker for a $500k line (to start with) that's frozen until I come in to the bank with a purchase agreement. Using easy numbers it would look like this: I find a home with an ARV of $200k. I purchase for $100k with the bank lending $80k off that line and I kick in $20k. Rehab costs $50k and again I kick in 20% with the bank financing $40k from said line. After an appraisal, refi into a 20 year vanilla commercial loan, pay my line and myself back, and repeat.

Instead of being all in for $150k, I'm only in for $30k and the bank is never over 80% LTV and their money is always secured.

Has anyone else started similarly or employed that strategy?  

Is it a reasonable request to bring to a commercial banker? 

Other than partnering and syndication (exploring both), what financing strategies have you found successful in helping scale your rental business?  

I should mention I can't find a hard money lender that lends in my state to save my life.  I've contacted about 20 and all say no dice-they can't even look at the deal.  Sooooo...if you have a solution there, I'd love to talk.

Thanks guys and gals!

@Val J. If your numbers are accurate, buy it.  I have bought similar deals in a different area and my thoughts are:

rehab estimate seems low for a house sitting empty for years

Insurance estimate may be a little high

Property taxes seem reasonable

Did you walk it with a contractor and have a realtor pull comps?

Get good with the 1% and 2% stuff :)

Good luck!

@Johnoson Crutchfield Have you considered what you could be doing to your credit score? About 30% of your FICO is determined by your debt to credit ratio on all your open (revolving) credit lines.  Rule of thumb is you want to keep that ratio below 35% for a positive impact on your FICO.  Your score could start dropping if you are consistently over 50% month to month.  That means you'd need at least $50,000 in available but unused revolving credit lines to keep that score up if you decide to keep the 25% credit card debt.  Something to think about early in the game when you're looking at traditional mortgage financing...

I would not do this again.  Partner instead.