All Forum Posts by: Colin Newton

Hey Hsiang,

I have not seen it where the title company is not able to handle this. They just need to be directed on how to properly do so and you will need to see the final HUD statement before moving forward to make sure it was done properly. In the past, our lender reviews the final HUD to make sure everything looks good for them to handle the refi in the future prior to us moving forward with closing.

Hey BP,

We own a 7 unit zoned multi family that we run as a boutique hotel/STR property. We purchased it 9 months ago with hard money, rehabbed all units, have been operating for about 6 months and are looking to cash out refinance into long term debt.

We are looking to see if anyone has experience with a property like this and what type of financing options they have seen knowing it is somewhat of a unique property being a multi family/STR mix. Any term specific insights such as LTV, rates, length, length of shown revenue needed, specific lenders that have a product for this and most importantly how they valued the property.

Obviously we do not have LT leases in place to show guaranteed revenue for the year but will have a T12 to show proof of concept at a high NOI. Using other multi familys in the area based on their LT rent revenue would under value the property dramatically. We have heard some lenders say they would go this route to calculate our LTV value & we have been told that some apprisers would use our NOI & a slightly higher Cap rate then the LT multi family cap in the area to evaluate.

If anyone has any experience or thoughts on this type of property in general & more specifically the financing side that would be greatly appreciated!

Thank you,
Colin

Feel free to reach out to me directly if you have any more questions.

Hey Denver & Haiang, 

see my responses below based on our experience with this. 

1) Yes, have to wire entirety at closing. You need to have clear communication for them to send you the 30k check & not the GC. If you don’t say anything they will likely send the full amount to the GC, which is obviously not good. If it is a non trust worthy GC you may never see that money again & in less drastic terms you simply want to pay for work as it is finished like you mentioned. 

2) You can control them because the 30k will be returned to you & then you will disbursement Payment to the GC in standard fashion. 

3) If the rehab costs less you do not have to pay the overage to the GC & do not loose this money. You normally want to aim high on the rehab hab estimate in general but even more so here as the total you put on the final HUD (PP + rehab) will be the Max you can cash out when you refi in the future. Only negative of over estimating is having to have more capital to put down at closing.

Hope this helps! 

What market are yall in/investing in?

Hey @Ashraf Syed, 

You need to let them know to add a rehab cost line under the Misc section on the final HUD statement. This line should include the total amount of rehab you are budgeting for. The final HUD statement will then show a total including both PP & Rehab costs thus allowing you to pull that total out at the Refi stage. I would definitely connect with your refi lender prior to closing to make sure they understand the process and will be able to help complete it when it comes time. They need to understand the process as well so there aren't any surprises when you go to refi. If you want to you can shoot me a DM and we can connect over the phone to clarify further if needed. Security National is who I use.

Hey Gary,

Sorry for the delayed response, somehow I missed the notification from your tag.

Yes, we have used this strategy on 4 SFH last year. Incredibly enough it seems that so many people (lenders, agents, investors) are either miss informed or completely unaware this strategy exists.

With the right lender we have found it to be a fairly simple process. It must be a cash purchase & the rehab costs must be a line item on the final settlement statement. After closing, rehabbing and entering the cash out refi phase you are than able to pull out up to the amount that was on the final settlement statement (PP + Rehab costs listed). There is no seasoning period and our lender is at 75% ARV as well.

Let me know if that add any clarity. I would be happy to connect if you would like to discuss further.

Thanks,

Colin

Hey BP,

I have read and heard mixed things on Delayed Financing. Initially I was told that when using delayed financing that you were only able to pull back out the original PP amount; obviously not the goal when using the BRRRR strategy. I than spoke to someone (@House_Hustle) who was using Delayed Financing but was able to not only pull their original purchase amount out but also their rehab costs all before the standard 6 month seasoning period. They did this by adding the Rehab cost amount into their escrow closing statement.

I was planning to use this financing strategy on my next deal I am currently negotiating however the lender I spoke to today told me this is no longer possible as of a few months ago. He mentioned he has done this strategy a lot in the past with multiple investor but as of late he has had to let them know a new rule has passed that no longer allows us to add rehab costs to the escrow closing statement.

Has anyone else heard this? Or is anyone else still using this method of financing with no issues or change?

Thanks a lot!

Colin