All Forum Posts by: John Wanberg

Yep - I also did a cash out, 30 year fixed loan on my SFR. There was a 6 month seasoning period after I bought it, but not a problem. I believe that once you have a certain number of conventional loans, which can be re-sold on the secondary market, then banks will not lend to you with convenational mortgages. If you have more than 10 (you can check the Fannie standards yourself)... then you would have to switch to portfolio products, which rarely offer 30 year fixed loans. See this other thread:

https://www.biggerpockets.com/forums/49/topics/80920-please-clarify-rule-on-max-number-of-mortgages

Ok, so I have a small commercial property under contract for $900k in the Denver metro area. With a conservative rental estimate of $10/ft NNN (there are some unique features, indoor paint booth, tons of yard space), it works out to be a 10% cap rate. I won't get into the details of the deal, because my question is more about the financing.

Right now, however, I am trying to put together the financing, and I am exploring a few options. First, the current owner had a carryback loan with the previous owner, who would be willing to lend me up to $450k at 4.5% on a 30 yr amortization, with a 10 year balloon.  This is a good option to take as a 2nd on the property - although I have yet to get a hard commitment. 

Next, I have a two, 4-plex property (so 8 units total) that I own free and clear, which I think is probably worth about $8-900k.  I can do a loan on this property, get a lower multi-family rate (as opposed to commercial loan) and borrow $500k.  When shopping for the multi family loan, I have checked with two banks:

1. Chase Bank, but in the week since the election, they raised the rates from 4% on a 30yr to 4.5% on a 30 yr, but they are accepting a better NOI on the property by excluding a number of significant capital improvements (i.e. electrical service upgrades).

2. Bank of the West, where the underwriter is ONLY willing to go off of the NOI claimed on my tax return from last year, where I had a significant number of capital improvements, and went through a renovation and tenant upgrade (also raised rents from $750 to $925/month)!

So here is what I am looking for... Does anyone have a suggestion of where to go in the Denver area to get a good multi-family loan, where the underwriters really understand how to fairly value a property, and people are not freaking out about the election? 

Does it seem like a good strategy to take out a loan on the multi-family property to buy this commercial deal, and then do a 2nd with the private lender?

Great - thank you all for the comments.  Really useful.

Thank you all for the thoughts, this is really useful. To answer some of the questions posed, this would be an existing property, 1890s construction, with a detached 1 car garage in back. It is U-RH-3A zoning, which in the code says allows an accessory dwelling. I took this to mean that as long as I met the setback requirements, I could demo the detached 1 car garage and build a new accessory dwelling behind the existing SFH. @Bill S., based on your post, it sounds like this would be a no-go... although re-reading the city code the apartment corner requirement is by no means clear.

@Aaron Koski, thank you for the insight into building plan approval times in Denver, that is definitely a big risk factor.  I would also love to hear any recommendations you have for an architect/engineer.  I would leave the primary dwelling, but would need to make structural repairs.  For permit times - is there a difference between a GC applying, and an owner applying for the permit? Thanks!

Hi all, I am looking to potentially buy a property from a homeowner, where the property was uninsured, and a tree fell on it.  So it has a big hole in the roof right now that would need to be repaired immediately.  Does anyone have experience trying to get a property insured while it is in bad condition?  If so, any advice?

That is because HMLs are usually trying to maximize their ROI by shortening the terms of the loan. If they make 2 points up front, then their preference is that the amount of time you hold their money tends towards zero.

I might pitch an owner carry-back to the seller, and match the terms of the loan to replace their cash-flow.  That way you can raise rents at 3% per year, get a marginal cash flow, and get the tax and principle paydown benefits.  Are you looking to hold for forever? Or short term (less than 2 yrs)?

In my investing - I have typically sought after buy and hold properties.  If I am honest, I don't really understand how most wholesalers operate, because it seems like they pass by so many opportunities to build HUGE amounts of equity on the front end through finding good deals - then building cash flow through holding.  @Steve Vaughan seems right on the money (haha!) to jab at wholesalers who don't skim deals off the top to build passive income because they are under-capitalized. 

Look into the BRRRR strategy for buying real-estate. You can go to a HML or private equity if the deal is right, buy a property for 2 points + 10% interest on the loan, carry the financing for six months while you renovate (and then cash-flow by renting it), then do a cash out refinance based on a new appraisal into a longer term, favorable interest loan with a bank. At that point, the property will cash flow even more! I don't think it is a far out question at all!

@Thanarat Phuvapaisalkij, I am not actually the best person to ask about hard money lending.  I have never used it myself... I would recommend searching the forums though, because there is a lot of discussion on that topic. 

@Kreighton Reed, could you explain the SDIRA and Solo 401k for people who are not familiar?  Those are not really conventional financing vehicles. 

Colin, the answer to your question depends on a lot of different factors... so you might need to clarify your assumptions. Based on your question, it is not just the LTV of the property you are purchasing, but its intended use, your personal credit, your debt to income ratio, and how your structure the deal.

For instance, if you own your current residence, and are looking to buy a new primary residence (and if your current mortgage + projected 2nd mortgage is less than 45% of your current income), then you can get a conventional mortgage. In some cases, you can get a 95% LTV and pay a mortgage insurance premium. If you buy it as a rental (and still want a conventional mortgage), then it is usually 75% LTV max if you go through a bank.

If you want to blow past all of these and buy a rental - you can put together private investors (who usually don't have hard requirements on an LTV...). The problem with the question that you are asking is that it is not about an actual deal. If you were looking to buy a house for $100k that was actually worth $500k (an absurd deal!), then structure the financing to maximize your own equity. The bank will only loan you $75k... because it is not tethered to the value of the property, but the purchase price. If you bought the property with a hard money lender (which would cost you $2000 and $10k/yr), but found someone who was willing to give you a 100% loan of the purchase price secured with the note of the property... you could hold on to it for 1 year and do a cash out refinance at a 75% LTV. So you could easily pull out $400k of equity to go do more deals!

Could you clarify your assumptions?

I am doing some due diligence on a deal to buy a SFR in U-RH-3 zoning in Denver. This allows for an auxiliary structure (so potential to turn the detached garage into a carriage house... permitting dependent). At the moment it is being rented as three interior units, with one contract per floor. RH zoning mandates that each "unit" has a front facing entrance. So I have a few questions:

1. Does anyone have experience building an additional carriage-house in Denver, and if so, did you have issues with permitting?

2. Should I be worried about the zoning requirements for RH relative to the current configuration of the building? (at present, the front hall is open, each "unit" has a separate locked door, stairway is open).

3. If I am worried about construction permitting and zoning, what is the best way to reduce risk during my inspection period?

Any advice appreciated.  Thank you!