All Forum Posts by: Darrell Essex

Looks like to me you need to do a turn key or almost turn key. You can get preapproved for a lot but your starting capital is a little small. At least for anything that involves anything more than a very small cosmetic rehab. Like paint, maybe some new countertops, minor wall repairs.

im a huge fan of the brrrr method but with like 30k to start it’s just not feasible because you will need about 40-50k in cash to pull it off. 

what I’d really recommend is house hacking with what you have. If you can va loan even better. But some type of refi strategy probably won’t work. Especially if you want some type of conventional loan product which right now is 12 months seasoning on a cash out refi. You can find a 3-6 month dscr but they are expensive loans and again you are running on a small actual cash budget. 

So I’d say either house hack or save up some more and brrrr. 

Quote from @Nick Belsky:

@Darrell Essex

Tough spot. Honestly, this is a prime reason so many don't use Fannie/Freddie for purchase loans if doing rehab... Most will use the fix and flip to put less down and have their rehab costs financed so they stay more liquid. Once completed, they either sell for profit or cash out refinance to hold long term. This way they recoup most of, if not excess, of their initial investment as well. You can refi to perm via Conventional (must first QCD to your personal name)with a rate and term or DSCR (can stay in entity) with a cash out. As you noted, conventional is 12 months seasoning to cash out. DSCR cash outs can be in as little as 3 months; most are 6 months, and a few are 12 months.

Working through your financial planning prior to diving in could have helped prevent the situation you are in now. Always plan with the end in mind. Since you appear to not be wanting to use HELOC or Cash Outs, cross collateralizing may be the only way to keep your business running. I work with a few lenders who will cross collateralize, but they also have seasoning requirements to cross them.

Cheers!

You just literally said what I said lol. Problem is I start the project the rules are 1 way I finish and the rules changed. My problem is finding the 3 month after the rules changed. I find 6 and 12 no problem it’s the 3 month I’m having difficulty finding. 

Quote from @Jay Hurst:

Quote from @Darrell Essex:

I’m still new and I kind of understand what you are saying but not fully. Not sure I understand the turn around in 30-45 days to complete the rate/term refi into the conventional loan. 

I am understanding it as you give me the cash out portion and then refinance the whole thing in 30-45 days. Is that correct?

yes, we do the cash out loan with our funds. (our money, our rules) then turn around and refi that cash out loan into a rate/term conv 30 yr fixed using the same appraisal within 30-45 days.

I sent an inquiry through your website. 

Quote from @Veronica Grimes:

Hey Darrell. I don't believe there is a 6 month seasoning period with my referral partners. I will send you a direct message but also verify with them that it's the case. 

Great thank you 

I’m still new and I kind of understand what you are saying but not fully. Not sure I understand the turn around in 30-45 days to complete the rate/term refi into the conventional loan. 

I am understanding it as you give me the cash out portion and then refinance the whole thing in 30-45 days. Is that correct?

Quote from @Erik Estrada:

I am a little confused on your paragraph. 

But on a DSCR loan if you are not looking to take any cash out, (only pay off fix and flip loan) There is no seasoning requirement.

You may also do a delayed purchase refi, and can do 75% of the PP, Rehab, and Closing Costs. no seasoning requirement on that as well

 I’m looking for cash out refi. Rate and term will only get me my initial loan back not my equity that I need back to get to the next project. I have a loan of 108k and 30k of my own funds in the house. Trying to get the 30k back not just switch the 108 from 12 to 360 months. The rehab funds I used that I can get back from the fix and flip loan draws I can buy the next project but I need that other 30 that’s in equity on the loan that’s being seasoned I need to fund the next projects rehab. 

Hello all,

so I'm a couple BRRRRs with a lease options in and the issue I'm having is Fannie Mae and Freddie Mac both need a 12 month seasoning period and so-far all the DSCR 30 yr I've found do 6-12 months seasoning. I've gotten both my houses rehabbed and rented in 2 months leaving me and my contractors waiting 4 months for the next project since I'm waiting to cash out to get the initial down payment back. Just need an infusion of cash to fund rehab costs while my initial funds are locked in equity until seasoning is done. I'd be able to acquire fix and flip loans from the money I used to rehab previous properties from the fix and flip loan reimbursements. Does anyone have a solution on a type of line of credit that's not a heloc, or a dscr cash out refinance that is maybe 3 months seasoning so I can keep the train moving in the express lane instead of making a ton of stops. I looked into small business lines of credit today but they will lend 10-15% of annual revenue which where I'm at now is only 68k so obviously I can't do much with a 6k line of credit to fund some rehab phases. Just trying to see if anyone has any creative options I haven't heard of yet. Can't find out what's out there if you don't ask for solutions to problems lol.

Quote from @John Warren:

@Darrell Essex I think you are going to find out that the agents in the other states where you are looking also know how to price properties, and that no one is looking to sell properties at a 30-40% discount in this market. Doing a BRRRR in your area is already very risky, and then doing one out of state is adding an insane amount of risk to most people.

I do these types of deals as an investor, and I am at the buildings almost every day checking in on the construction. We also manage the buildings at the other end, so I am pretty hands on. I literally cannot imagine doing this out of state. 

I already found that out which is why I said what I said. When I say Indiana that’s an hour from my house and same with Wisconsin. Missouri my daughter is there. 

Yes but they each pay to the one above so I get paid from wy, and down the line. For you wy still represents you. So all your llc’s would pay wy and wy pays you. 

Quote from @Raj Chacko:

Quote from @Darrell Essex:

You should talk to your tax guy but I have my wy company that owns my IL purchase/rehab properties and that is a series llc and each property is individually held in a series leg when everything is completed and refinanced. For tax purposes all the LLC's pass through to me and my wife. Not saying it's correct but it's the structure I have right now. I get issues with financing sometimes but I make it work.

Darrell, does everything flow to your WY LLC and then to you? or Do you register an EIN with every series leg (or master llc) and have the WY LLC purely for holding?

 They all have their own ein. Lenders require them to have ein’s.  Wyoming just owns and everything flows through it. Main llc in IL I purchase my brrrr projects and hold it in there while it’s being rehabbed so need ein for that to get the loan, then when I cash out refinance I put it into its own series leg and lender needs that to have an ein for that loan. Good thing the ein’s are free but they all pass through to my wife and I as the wy represents us if that makes sense. But I’m not doing str and ltr so may need to possibly have a main IL llc that owns the Str llc and ltr llc. Series may be beneficial especially since you want to be taxed differently for those 2 things. Yeah definitely talk to a tax professional that specializes in real estate and knows all those and maybe even an asset protection attorney who understands the ins and outs of setting up the structures. There’s so many laws and loopholes that you don’t want to mess this up.