All Forum Posts by: Jesse Lynch

Hey Allen!

There are quite a bit of Main Street bailouts on the way!  And no, it's not just a $1200 check.  There is FEDERAL unemployment that will be offered on top of the state's offering, which in my opinion will be a lifesaver for most citizens and landlords, but it won't come for a little bit. Which brings me to this point:

Have you looked into mortgage forbearance from your lender?  Mine is doing 3 months to start(yes, it's all due at the end), but I think you should do your best to treat your tenants a similar way.  For now, you won't evict them (because you can't).  Your lenders won't foreclose on you (because they can't). So, let them know you will work with them while this is going on.

And for the love of god, educate your tenants about unemployment.  If they had work, and are now laid off(which they must have been or COVID wouldn't be your issue), they need to apply and they will get benefits, and really ought to be able to afford rent, or at the very least a good portion of it.

Additionally there is A LOT of information available on the internet right now about Small Business Disaster Relief loans, which can be used for different things and can even be forgiven if used for the right things.  Look into those and you might just be the part of Main Street that's getting bailed out.

We'll get through this! Don't stop fighting for what you've made.

Talk to a credit union or mortgage lender about a Home Equity Line of Credit(HELOC) OR a Cash Out Refinance! If you have more than 20% equity in the homes, you should be able to take out an interest-only line of credit against that additional equity, which basically sits in an account without accruing any interest until it's used. Credit unions tend to have great rates and lower closing costs/fees, so I'd try that first. In the Twin Cities a really great credit union is Trustone Financial, but I'm sure you know your area better!

Hope that's helpful!

Hey @Mike Marino!

Welcome to the game!

I would definitely have a relationship with a bank/lender before I bought something expecting to refi it by any point, especially if you're using hard money on the first one.  If you renovate it to rent, and can't get it refinanced, you'll feel the pain of that hard money loan.  Even if you just spend a few extra months trying to secure financing, the interest could really be a bummer.  And even worse would be that you renovate it for rentals, can't refinance for credit issues, and then end up needing to sell it, but the renovations aren't in line with other flips and it doesn't sell or can't sell for enough.  Knowing your primary exit strategy is important.

Here in the Twin Cities, hard money lenders will typically use an ARV (After repair value) approach to their financing, which I would say generally applies to both the acquisition and the rehab loans (sometimes they're the wrapped up into the same loan). A Minneapolis lender, Pine Financial uses a 70% loan-to-ARV method, (for simplicity) if the projected value of the home after it is fixed up is $100k, they would lend 70% of that ($70k) for both acquisition and rehab. So, if it needed $20k in renovation, and you could find the property for $50k, they'd fund the whole thing. Anything over 70% of ARV is on you, and is due at closing.

Additionally, you'll need a decent amount of liquid funds available to carry interest on the Hard Money, and also pay contractors at certain stages.  That exact amount of liquidity depends on the deal.

So once you buy and rehab the property, and you're looking to refinance, you'll have to find a bank/lender who will finance an investment property. They will look at your ability to afford it--having a rental lease in place helps your financial picture, which is why BRRRR advocates have the "Rent" before "Refinance," and they will typically do something like 80% Loan to Value (LTV). So in the same house as above, if you have $70k into it, it's worth $100k, they'll finance $80k, and then $10k can hopefully cover your interest costs and any cash you have into the deal is back in your pocket to do the final "R," which is "repeat!"

Hope that was helpful!

I will add this caveat:  If it's a larger building with professional management, I wouldn't want a completely empty apartment building that I have to fill (or it would definitely affect the purchase price/game plan).

Yeah, I'd say vacant all day long.  I inherited a tenant in my Rochester, MN duplex that definitely wasn't "trained" the way I would have.  Not a nightmare, but definitely got away with A LOT with her old landlord, and now I seem like the bad guy because her expectations were set by somebody else.

It probably goes without saying, but it depends hugely on the market, and as a rule, the worst run airbnbs will be the quickest to move to LTR (or get sold).  

Vacation areas probably won't see that change, since they exist largely for STR purposes and couldn't be profitable at long term rates. But, I believe urban areas, like Minneapolis/Saint Paul where I am, will see a large temporary loss of STR inventory, and most of that loss will be from the bottom of the barrel, because they aren't profitable enough to justify the risk, but the highest performing STRs will of course stick around, because they're doubling or tripling income from LTR.

I also own a duplex in Rochester, MN a few blocks from Mayo Clinic, that I'll be putting half of onto airbnb when it's done (I wish it was ready so I could help some healthcare folks out).

I think it's like most industries though, the most robust and efficient businesses will withstand this crisis, while the weaker, unfortunately, might not.

Just to predict, I think across the airbnb platform we'll see a temporary (maybe up to a year after the crisis comes to an end) drop of inventory around 10-15%, but I think bookings will drop by less than that amount (after the quarantines stop).

I believe the main issue is that most LLCs have no real credit. I have heard it is a very common tactic to refinance into a personal name, and then move the loan under the LLC name, and while there is almost always an acceleration clause involved in a mortgage, they are rarely called due, because the lenders only care or are even alerted when the mortgage goes into default. I don't work in banking and I am not a lawyer, but I have been told that the acceleration clause being activated is an extremely rare event.

If the LLC has a solid credit history, it's a different situation, but you might be looking at a commercial loan with higher interest rates, etc.  At that point, I would assume it would be a matter of calling around and finding the right lender!

Hey @Mike Juliff!

Keep in mind there are other ways of getting into a MFH than an FHA or conventional loan. You could certainly use Hard money and a BRRR method for your next one! @Sean Blomquist at Pine Financial has a 70% of ARV Loan, so if you find a good enough deal of a rehab multi-family, you could potentially get into it for $0 out of pocket!

Hey Christopher!

Welcome to the game and Bigger Pockets.  SO MUCH knowledge here.  I love that you're devouring information as you begin to wrap your head around it!  There are so many moving parts to investing--It's why it's challenging, but also why it's so powerful!  I'm an investor and agent based out of Northeast, Minneapolis!  The house hack is such a powerful thing and if you can leverage a 203k successfully, it's pretty amazing tool--not without it's challenges though!

Hey @Matt Bergstrom!

Welcome to BP!!  I am an investor and agent (I love working with investors) based in the twin cities, with a duplex in Rochester.  I work with an excellent lender, Mike Spindler at AMEC Homes loans, and also think @Sean Blomquist at Pine Financial is an excellent source for hard money loans - and his meetups are very informative for how it all works.