All Forum Posts by: Jeremy England

This is the topic I wanted to discuss here.  Refinancing and seasoning etc.  So I bought a rental in cash, paid for the rehab in cash, 2 months later, now I have a tenant.  

I tried talking with several banks about refinancing, local, national etc. The best terms I could find are 6pct apr, 20 year amoritized, 5 year balloon notes, at 70% LTV.

This isn't sustainable as a strategy.  The debt service would be too high for maximum cash flow.  I suppose I could refinance out of that loan after the seasoning period, but now I'm looking at triple closing costs (buy, refi, refi)

Is the brrr strategy pie in the sky?  Or is everyone just watiing the 6 months?  if so, how are you scaling, if it takes 6 months after renting to get your money in order to do it again?  I'll be a senior citizen by the time I was able to aquire enough for financial freedom.  

Thought I'd update everyone here on this property.  So just signed a lease with a tenant today.  This was after a few verbal commitments that applied but never followed through, and one couple that applied, put a deposit, then decided not to rent the place.  

Anyway, new tenant has great references, great credit score, and good income. 

So some of the challenges I faced on this property

1. Going over budget on the rehab.  I've been over this.  But overall the project cost me about 81000 including the purchase, holding and rehab costs.  Appraisal came in at 100k (this was expected) .  Rent is 1000/mo.  So I didn't do great but ok.  

2.  Cash out refinance.  So it turns out the bank that told me they could refi me with no seasoning, really couldnt'.  They never told me i would be limitted to what I purchased the property for.  They would not even add the rehab costs to the delayed financing amount.  It was bank of the internet.  So beware.  I learned this after I paid the 575 dollars for an appraisal.  Yea I realize that is high but I accepted the high amount because I was getting a loan with the bank when no one else woould.  Turns out they wouldn't either.   I do have an option of cashout refi in a commercial portfolio loan witha local lender but the terms are not what I am looking for.  6pct, 5 year balloon, 20 yr amortiization and only 70pct ltv.    That would mean I only get a 70000 loan and leave 12000 in the property.  Plus I'd have to refnance out of it in 5 years.  Means even more costs.  

So I've decided to just pay the payments on the personal loan until the seasoning period is up in feb or march.  This equates to 7950 in payments on the loan, but about 4500 of that will be off the principal.  Plus I'm paying back 16000 in a lump sum today So in march the loan balance should be 77778, or there abouts.  If I do a cashout refi then I will get more favorable terms.   I should be able to use the appraisal I just paid for so that'll save money there.  I'll refinance and pay the personal loan completely off.  

This should mean my only cash that I paid of my own money will be the payments before the refi.  Collecting 1000/mo from the tenant which has no mortgage balance.  Taxes and insurance are already paid.  Ideally I won't have any maintenance costs during the first 6 months.  

I could get permanent financing and only have 2-3k of my own money in it after all is said.  

The question then is, how does one scale?  I don't see how that is done if no one will cashout refi before seasoning.  I guess unless you just pay a higher payment witha  portfolio loan and also have to get out of it before the balloon?  

I have my business checking with Penair federal credit union.  No fees was the biggest attraction.  Pretty simple.  But as far as loans go, you may want to start an account with institutions that offer a commercial portfolio loan.  The First is an option there.  

 Moot point now. Just approved an applicant today and received his deposit. Thanks for the input. And youre right. I probably could have got 11 or 1200 out of this place wirh the response i had. I looked at what was renting near by and went 50 bucks higher. Live and learn. Ill be raising the rent after first lease

And buying more in the neighborhood.  After refi. Ill have about 8k of my own money in the place.  Not bad for one month purchase, rehab and rent.  1k/mo and a 25k equity position

 Yes the rent may be too low. But it is one of the higher in the neighborhood and it only has 1 bath.  

Not sure how much higher my standards could be. No evictions, no judgements, good rental history, no felonies, 

Credit score is only think I’m fexible on. Below 600 req twice the security deposit. 

 Yes. Their credit check revealed a low credit score which I will accept with double the security deposit. They couldn’t come up with 3k to move in.  

so I just finished a rehab on a new acquisition and posted my ad to Zillow for 1000/mo which I thought was ambitious.  I got blown up with tenant requests and had an agreement in a day.  However they were not able to come up with the required security deposit so I reposted it to Zillow and again am getting a lot of response

Now I’m faced with tenants asking me to hold the property for them. Good tenants coming from out of town.  Military town.  I’ve been telling them that I can’t hold it due to demand and my need to place a tenant now.  Its only been one day since I reposted it.  Got two coming to look today. One for a second time but they say they can’t occupy til October. How does the community deal with the holding issue?

for anyone who's been following this, so I found a lender who will cash out finance the property.  Its a commercial loan.  This will increase the monthly payment however which decreases the cashflow of the loan.  The terms are 5 year balloon amoritized at 20 years at 6pct with 1/2 pct origination.  That would put my payment at 537.  add in insurance and taxes and there would be about 250 left if I got 80pct out.  If I got 75pct out there would be about 300 left after piti.  

Question for anyone who can answer. They say I can finance this property in my LLC but witha personal guarantee. This sounds good, however I'm thinking of 3 or 5 years from now. If it's in my LLC's name, then a mortgage on the property is out of the question I think right? Like a traditional refinance into a 30 year at a lower rate?

I'd like to hear anyone's thoughts on it.  Thanks

You need to talk witha  commercial lender and you will need to give a personal guarantee.  The loans will be in your business name, but you will be personally responsible for them in case of default.  I'm going through this process right now

Welcome Steve, I'm local to the market and can refer you to different resources should you need one.  Let me know