All Forum Posts by: Gustavo Juarez

@Gustavo Juarez

First,  find another lender. If your dad's income has not changed and he has not added more debts such as credit card debts or car loan etc lately, then theoretically, if he can get the cash out loan, he should be qualified for new rental property loan AS LONG AS the new property will be cash flow positive or at least break even.   Most lenders will use 75% of projected rental income to calculate your cash flow.  For example,  if projected monthly rent is $1000, they will use $750 income to calculate the cash flow. So your borrowing power is indefinite as long as you can keep your portfolio cash flow positive or at least break even.  Unfortunately, not all lenders take projected income, so try to find lenders who can take the projected rental as income and there are lots of them.  I am always amazed that lots of lenders even do not know how to calculate rental income. So be sure to find investor-friendly lenders.

Second, as some people have already mentioned. It is very difficult, or almost impossible to get conventional loans for BRRRR method because to get conventional loans the properties need to be in nearly move-in conditions, while for BRRRR to work the properties need to be in bad conditions. These twos contradict each other. Your dad can either use the $80k or borrow more hard money to BRRRR, or use them as downplay to buy properties in good condition with conventional loans.

Thanks for the advice. I definitely wasn't expecting them to deny me financing. I am looking at other lenders.





   

@Gustavo Juarez I wouldn't get into buying properties all cash or super cheap ones either, especially until you have explored other options.  Here are other options:

• Hard money lenders (that can convert to a commercial note)
• Commercial lenders
• Portfolio lenders (banks that keep their own notes)
• Seller financing
• Partnerships
• Private money lenders (especially those private investors who want a note or two in their IRA account)
• Then there is going through the mechanics of lowering his DTI. Which is worthwhile if he is retirement... lower the expenses.

Consider a cheaper property and build small. Aim small, miss small. Don't give up!

@Gustavo Juarez

You typically wouldn't get conventional loans on a true BRRRR anyway so I don't think that's an issue necessarily. Have you ever BRRRR'd a property before? With that $80k you should be all-in for 75% of the ARV, so with 80k total it needs to appraise for at least $107k. Can you find something to buy AND renovate with $80k total, including a 10% margin to over estimate repairs?

Hi Andrew,

No, this will be our first BRRRR hence my confusion/apprehension as to how to proceed. I have identified properties in the 35-50k range with rehab costs of 20-30k. I believe these houses can then appraise for around 90-100k. At that point I would refinance (hopefully get all or most of my money out) and repeat the process.

However I am now wondering if I should continue looking for financing so that I can buy higher quality houses by putting down 20% instead of using up all of my capital to buy and rehab one less expensive property at a time?? Again these would be higher quality homes in the 80-90k range that still need some light rehab so that I can then add value and refinance later.

What I do like about buying a cheaper house with all cash is that I would potentially be able to pull out my money back fairly soon and re-use it, all without the hassle of a bank loan.

Again, our goal is to acquire enough rentals to create a significant passive income stream. I imagine anywhere from 10-15 properties. I now see the many strategies that are possible and it seems a little daunting to me but I am determined to take the next step. 

@Gustavo Juarez hi Gustavo, I have found that most conventional lenders are not investor friendly, especially without w2 income. Try reaching out to local banks and credit unions, try commercial lenders, and if all else fails look into hard money or private lenders. Good luck!

Hi Gustavo, 

I hate to hear that you guys have ran into a hurdle to keep growing your guys rentals. I am not sure if you have though about maybe cosigning on the loans with him. Once you get to a good amount, you could be able to move them into a commercial loan later.