All Forum Posts by: Heith Reade

@Robin Simon has it right. You'd likely need a NQM loan with a 10 year I/O and maybe you can get a 40 year term to keep the payment down. But also, like @Caroline Gerardo is alluding, refinancing may not even be the best option at this stage given you likely have a rate you couldn't touch with an I/O loan. 

Quote from @Peter Beebe:

My business partner and I are looking to leverage a few of our rental properties using a line of credit from their equity. The problem we are having trouble finding banks will to do a line of credit on an investment property. Does anyone have preferred lenders willing to do these lines of credit? 

 HELOCs are available on investment properties as well as HELOANs. They operate the same in that both are 2nd mortgage products. HELOCs typically have variable interest rates, payments are interest only, and they typically have limited use periods known as Draw Periods. A typical draw period is between 5-10 years. HELOANs are fixed installment type loans similar to a traditional fixed mortgage. They are not revolving so once the funds are disbursed and spent you'd have to do another which would likely mean paying  additional fees. For this reason HELOCs tend to be a favored lending product for investors looking  to use and reuse capital. Hope this helps :)

Quote from @Jay VanOrden:

Thanks. I am the investor looking for financing. All three are already under contract to be sold once completed.

 Hey Jay, I sent you a message yesterday. Let me know what you think :) 

Quote from @Dustin Seager:

I'm having a difficult time finding lenders who will finance a single-wide mobile home on 2.5 acres in Land O' Lakes, FL. It's a recently fully renovated home in excellent condition. The property will be used as a rental and the loan will be used to pay off the debt accrued during the renovation which is now complete.

 Hey Dustin, as you've seen from the comments financing single wide mfr rentals is extremely difficult just due to the inherent risk they present as collateral. However, financing does exist for these. If you're still in need of a lender to finance a cash out on this, I'm happy to connect and share what I offer.

Hey Jimmy, DSCR has become a popular product over the past couple years so finding a lender offering them is not difficult. What you will find difficult is that with the current high rate environment, rents are not covering the mortgage. The nature of a DSCR loan is that the market rent analysis (which is done using recorded lease agreements in the past 12 months for similar properties) aren't covering the mortgage payment resulting in a negative Debt Service Coverage Ratio (DSCR). Most lenders will ask that you make a larger down payment to either get positive or 1:1 ratio, or lower the LTV to reduce the risk from a negative ratio.

I say that to say, I have other alt. financing options that I've been using with my clients that I'd be happy to share with you as well in case it is were something that could help. 

Quote from @Bradyn Melser:

Hey community. I've been investing for a little while in rentals. I've done a couple methods (including the BRRR). I now have 4 cash flowing rentals and am loving investing, but I have a problem. I hit my DTI with the acquisition of my last 2 properties (I did them in one go). How do I keep acquiring properties and getting them under a mortgage?? No one seems to answer this for me.

Other helpful information:
My income isn't huge, but I've got enough to continue to scale for now. The only debt outstanding I have are these 4 rental properties. 2 I have amazing rates on (3% and 3.5%) and have a decent amount of equity now. 

Hey Bradyn, as many have mentioned there are alt. income financing methods such as DSCR. The only issue I'm seeing personally with DSCR in this market is that the market rent analysis (typically done using recorded lease agreements in the past 12 months) isn't covering the the mortgage payment due to the higher rates, thus causing a negative DSCR.

The only answer in this case for most lenders is to have you put more money down. I have other alt. income products that I've been using with my clients to help avoid that trouble. I'm happy to connect if you'd like. Best wishes.

Hey Juan, just adding my 2 cents. There are other means to get financing that use alt. income that are not DSCR, and if the rate is that high you should be able to do it with no prepay. I'd be happy to discuss with you if you'd like.

Quote from @Shawn Choi:

Hello,

I have owned a Duplex in Los Angeles County since 2019, and looked into accessing my equity for another purchase.

However, as I have never lived in the property, and the property is under an LLC, I was informed by a lender that I would not be able to pull a HELOC on the property.

Is this the case? - Are there lenders that you recommend that would be able to provide a HELOC in this type of scenario?

What are my options as far as being able to use the equity that has built up in the property?

Thank you very much for your help!

Hey Shawn, I do offer HELOCs on investment properties but not on anything bigger than a 1 unit SFR. Similar to what Alex Hunt offers, I do have 2nd position HELOANs on investment properties with more flexibility. Hopefully, between Alex and I you've got your question answered.

I'd have to 2nd Asia on this. Are either of them charging points?

Quote from @Jay Hinrichs:

Quote from @Heith Reade:

I would personally want a strong equity position for the client, depending on their FICO at least 30% equity, for a 6 month loan I'd be charging at least 3 points up front because you're not going to make much by way of interest. Again depending on parameters at least 10% but likely 12% in interest. You could write as a 30 year due in 6 months loan. That way they have a smaller payment but due in full in 6, a balloon payment. 

 Short term loans like these are never amortized they are ALWAYS interest only.   Just sayin.. in my 30 years of lending Hard money I have never seen one written over 25 years due in 6 months with principal and interest payments..  

I did not say full P&I, to calc an I/O payment you still need a payment amortization. That's awesome you've been lending your own money 30 years. I broker to investors that do hard money, I/O, bridge financing amort over 30. It's nice to know there are different ways that people conduct their business, even after 30 years ;) Best wishes,